-----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, RzCsuA3LDoUkNo//2Id1JUcYahDHiQHpTp86vvNLGriLe2TGMUmhmOsNCNDKUInf MyFop7HAydbQP8B1zv1OaQ== 0000892569-96-001432.txt : 19960807 0000892569-96-001432.hdr.sgml : 19960807 ACCESSION NUMBER: 0000892569-96-001432 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960524 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960806 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CERPLEX GROUP INC CENTRAL INDEX KEY: 0000915870 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 330411354 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-23602 FILM NUMBER: 96604601 BUSINESS ADDRESS: STREET 1: 1382 BELL AVE CITY: TUSTIN STATE: CA ZIP: 92680 BUSINESS PHONE: 7142585600 MAIL ADDRESS: STREET 1: 1382 BELL AVENUE CITY: TUSTIN STATE: CA ZIP: 92680 8-K/A 1 FORM 8-K/A FOR DATE OF REPORT: MAY 24, 1996 1 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): May 24, 1996 THE CERPLEX GROUP, INC. - ----------------------------------------------------------------------------- (Exact name of registrant as specified in charter) DELAWARE 0-23602 33-0411354 - ----------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 1382 BELL AVENUE, TUSTIN, CALIFORNIA 92780 - ----------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (714) 258-5600 - ----------------------------------------------------------------------------- (Registrant's telephone number including area code) NOT APPLICABLE - ----------------------------------------------------------------------------- (Former name or former address, if changed since last report.) 2 ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. Attached are the financial statements for Cerplex S.A.S., a French company ("Cerplex S.A.S."), the business acquired by the Registrant and its wholly-owned subsidiary, Cerplex Limited, an English company ("Cerplex Limited"), from Rank Xerox - The Document Company, SA, a French company and Rank Xerox Limited, an English company. (B) UNAUDITED PRO FORMA FINANCIAL INFORMATION. Attached is the pro forma financial information with respect to the acquisition by the Registrant and Cerplex Limited of one hundred percent (100%) of the shares of Cerplex S.A.S. [SIGNATURE PAGE TO FORM 8-K/A FOLLOWS] 2 3 SIGNATURES 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 thereunto duly authorized. Date: August 5, 1996 THE CERPLEX GROUP, INC. By: /s/ JAMES R. ECKSTAEDT ------------------------------- James R. Eckstaedt Chief Financial Officer 3 4 [BEFEC-PRICE WATERHOUSE LETTERHEAD] To the Board of Directors of the Cerplex Group, Inc. We agree to the inclusion in the Form 8-K/A of The Cerplex Group, Inc. relating to the acquisition of Cerplex S.A.S., of our report, dated July 31, 1996, on our audit of the financial statements of Rank Xerox et Compagnie (now Cerplex S.A.S.) as of, and for the years ended, December 31, 1995 and December 31, 1994. Befec-Price Waterhouse /s/ BRIAN TOWHILL - ------------------------- Brian Towhill Partner Paris, France August 2, 1996 5 RANK XEROX ET COMPAGNIE SNC FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994 6 RANK XEROX ET COMPAGNIE SNC BALANCE SHEETS
(FF in thousands) March 22, December 31, -------------------------------------- 1996 1995 1994 -------------------------------------- (Unaudited) ASSETS Cash and cash equivalents 2 17 43 Advances to Xerox Group companies - 90 107 61 414 Due from Xerox Group companies 173 148 69 614 83 797 Inventories 4 920 5 425 2 532 Prepaid expenses and other current assets 2 595 8 960 6 057 ------- ------- ------- TOTAL CURRENT ASSETS 180 665 174 123 153 843 ------- ------- ------- Plant and equipment, net 53 286 54 444 70 798 Other assets 6 806 1 784 2 871 ------- ------- ------- TOTAL ASSETS 240 757 230 351 227 512 ======= ======= ======= LIABILITIES Trade accounts payable 63 213 46 843 62 117 Current portion of long-term lease obligations 3 807 3 710 - Accrued liabilities and other current liabilities 97 597 50 087 37 734 ------- ------- ------- TOTAL CURRENT LIABILITIES 164 617 100 640 99 851 ------- ------- ------- Long-term lease obligations 3 074 4 099 - Other long-term liabilities 21 100 21 100 19 831 ------- ------- ------- TOTAL LIABILITIES 188 791 125 839 119 682 ------- ------- ------- Commitments and Contingencies (see Note 12) STOCKHOLDERS' EQUITY Common stock 29 000 84 400 84 400 Par value FF 100, 844 000 shares issued authorized and outstanding during 1995 and 1994 22 966 20 112 23 430 ------- ------- ------- Retained earnings TOTAL STOCKHOLDERS' EQUITY 51 996 104 512 107 830 ------- ------- ------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 240 757 230 351 227 512 ======= ======= =======
The accompanying notes are an integral part of these Financial Statements. 7 RANK XEROX ET COMPAGNIE SNC STATEMENTS OF INCOME
(FF in thousands) Three months ended Year ended ----------------------------------------------------- March 22, March 24, December 31, 1996 1995 1995 1994 ----------------------------------------------------- (Unaudited) (Unaudited) Net sales - Xerox Group Companies 75 335 56 877 289 779 269 201 - Third parties 1 193 892 5 353 93 ------ ------ ------- ------- 76 528 57 769 295 132 269 294 Cost of sales 68 722 50 070 273 288 233 303 ------ ------ ------- ------- GROSS PROFIT 7 806 7 699 21 844 35 991 Sales, general and administrative expenses 5 859 5 453 22 568 27 287 Non recurring items (see Note 14) - - 7 000 8 974 ------ ------ ------- ------- Operating Profit/(Loss) 1 947 2 246 (7 724) (270) Interest income 1 061 944 5 612 4 290 Interest expense (154) (112) (1 206) (170) ------ ------ ------- ------- NET INCOME (LOSS) 2 854 3 078 (3 318) 3 850 ====== ====== ======= =======
The accompanying notes are an integral part of these Financial Statements 8 RANK XEROX ET COMPAGNIE SNC STATEMENTS OF STOCKHOLDERS' EQUITY
(FF IN THOUSANDS EXCEPT SHARES) TOTAL COMMON RETAINED STOCKHOLDERS' SHARES STOCK EARNINGS EQUITY --------------------------------------------------------- Balance at December 31, 1993 844 000 84 400 19 580 103 980 Net income for the period - 3 850 3 850 -------- ------- ------ ------- Balance at December 31, 1994 844 000 84 400 23 430 107 830 Net loss for the period - (3 318) (3 318) -------- ------- ------ ------- Balance at December 31, 1995 844 000 84 400 20 112 104 512 Reduction in Capital (see Note 15) (554 000) (55 400) - (55 400) Net income for the period (unaudited) - - 2 854 2 854 -------- ------- ------ ------- Balance at March 22, 1996 (unaudited) 290 000 29 000 22 966 51 996 ======== ======= ====== =======
The accompanying notes are an integral part of these Financial Statements 9 RANK XEROX ET COMPAGNIE SNC STATEMENTS OF CASH FLOWS
(FF in thousands) Three months ended Year ended ------------------------------------------------ March 22, March 24, December 31, 1996 1995 1995 1994 ------------------------------------------------ (Unaudited) (Unaudited) CASH FLOW FROM OPERATING ACTIVITIES: Net income (loss) 2 854 3 078 (3 318) 3 850 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES Add back/(subtract): Depreciation and amortization 3 244 5 052 18 463 37 445 Changes in: Inventories 505 (13 949) (2 893) (232) Receivable from Rank Xerox Ltd (103 534) (68 731) 14 183 (35 962) Prepaid expenses and other receivables 6 365 711 (2 903) 5 306 Other long term assets (5 022) 728 1 087 (16) Trade accounts payable 16 371 38 963 (15 275) 35 242 Accrued liabilities and other current liabilities 47 509 24 306 12 354 (11 102) Other - - 1 269 925 --------- -------- -------- ------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (31 708) (9 842) 22 967 35 456 --------- -------- -------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of plant and equipment (21 113) (1 064) (2 109) (18 724) Proceeds from sale of fixed assets 19 027 2 724 11 168 - --------- -------- -------- ------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (2 086) 1 660 9 059 (18 724) --------- -------- -------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Net (increase)/decrease in advances to Xerox companies 90 107 8 181 (28 693) (16 749) Repayments of capital lease obligation (928) - (3 359) - Share capital reduction (55 400) - - - --------- -------- -------- ------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 33 779 8 181 (32 052) (16 749) --------- -------- -------- ------- NET DECREASE IN CASH AND CASH EQUIVALENTS (15) (1) (26) (17) Cash and Cash Equivalents at Beginning of Period 17 43 43 60 --------- -------- -------- ------- Cash and Cash Equivalents at End of Period 2 42 17 43 ========= ======== ======== ======= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest 154 112 1 206 170 ========= ======== ======== =======
The accompanying notes are an integral part of these Financial Statements 10 RANK XEROX ET COMPAGNIE SNC NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1995 AND 1994 1. DESCRIPTION OF THE BUSINESS Rank Xerox et Compagnie SNC (the "Company") operates a repair facilities plant which provides value added services (labor) to its customers for the refurbishment, upgrading or repair of primarily large copier machines. The plant was built in Lille (France) in 1974. It is located on 38 acres of land, including an office building and production area of 37 000 m2. The Company employed 670 people as of December 31, 1995. The legal status of the Company is a "Societe en Nom Collectif" (SNC), similar to a partnership. The owners are Rank Xerox - The Document Company SA, a French "Societe Anonyme" (RXSA), a subsidiary of Rank Xerox Limited, an English company (RXL), and Servitique SA, a subsidiary of RXSA. The Company is part of the "Single Ownership Interest" (SOI) plan organized in Europe by RXL, the ultimate parent company of the Company in Europe. The Company operates the business on behalf of RXSA, through a business rental contract (contrat de location-gerance). Under the terms of this contract, the Company pays an annual fee to RXSA, in return for the use of the land and building (owned by RXSA) and the license rights to undertake all RXSA manufacturing operations. As a result of the SOI plan and of the business contract, the Company's operations are undertaken on the basis of two agreements dated November 1, 1993, the "Manufacturing Agreement" and the "Agreement for the Provision of Management Services". Under the terms of these two intercompany agreements: i) RXL has requested the Company and the Company has agreed to manufacture, assemble or otherwise process certain office equipment, parts and accessories and provide RXL with certain services in connection with such manufacturing, assembly or processing activities in accordance with the provisions contained in the "Manufacturing Agreement", ii) RXL and the Company mutually agree annually the products and the services to be provided by the Company, iii) RXL pays the Company the following for the provision of such products and services to RXL: (a) such direct labor and production costs as have been necessarily incurred by the Company; and (b) such additional sums of monies as the parties have mutually agreed annually, 11 Rank Xerox et Compagnie SNC Notes to Financial Statements Years ended December 31, 1995 and 1994 Page 6 iv) Title to all material, work in progress and products is vested in RXL, v) The Company shall not manufacture or provide any other services for any company which, in RXL's opinion, is a competitor of RXSA, vi) RXL has requested the Company and the Company has agreed to provide RXL with management services in connection with the distribution of certain RXL goods in accordance with the provisions contained in the "Agreement for the Provision of Management Services", vii) RXL reimburses the Company 105% of such costs necessarily incurred by or on behalf of the Company in the provision of the services (as defined in vi) above). 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of cash on hand and short term highly liquid investments with original maturities of three months or less. INVENTORIES Inventories consisting of materials and work-in-progress are stated at the lower of cost (purchase price plus related costs) or market value on a first-in-first-out (FIFO) cost basis. Inventory held by the Company on consignment from customers is excluded from the balance sheet. PLANT AND EQUIPMENT Plant and equipment are stated at cost. Depreciation is provided using the straight line method or the declining balance method, over the estimated useful lives, as follows:
Depreciation Useful life method Years ------------------ ----------- Tooling and equipment Declining balance 5 to 7 Fixtures and Fittings Straight-line 10 Information Technology systems and office equipment Declining balance 5 to 10
Assets under capital lease are amortised over their estimated useful lives or the term of the lease, whichever is shorter. 12 Rank Xerox et Compagnie SNC Notes to Financial Statements Years ended December 31, 1995 and 1994 Page 7 Assets under construction are shown as construction in progress until they are completed and enter into service. INCOME TAXES Taxable income or loss from operations is allocated among the stockholders pursuant to the legal status of the Company as an SNC (see Note 1) and is reported by the stockholders on their separate income tax returns. Accordingly, the Company has no liability for income taxes. REVENUE RECOGNITION Sales are recognized upon completion of the manufacturing process or of the distribution services rendered, according to the agreements described in Note 1 above. The manufacturing process is considered complete at the time products are transferred to the Company's storage area after packaging and quality control. The Company's functional currency is the French franc. FINANCIAL STATEMENT ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. LEGAL PROFIT SHARING PLAN Under French laws and regulations, employees are entitled to a profit sharing distribution, which is based on a standard legal formula. This legal formula is designed in such a way that the Company will not have to make any payments unless the Company's net taxable profits exceed five percent of Stockholders' Equity on a French GAAP basis. No profit sharing was paid for the years ended December 31, 1995 and 1994. 3. ADVANCES TO XEROX GROUP COMPANIES Intercompany advances are made under the provisions of a Rank Xerox Group (RXL and subsidiaries) cash pooling agreement and bear interest at "T4M" (monetary market monthly average interest rate) plus a premium of 0.25% if the pooling group is in a cash surplus position and 0.50% if a cash deficit position exists. 13 Rank Xerox et Compagnie SNC Notes to Financial Statements Years ended December 31, 1995 and 1994 Page 8 4. DUE FROM XEROX GROUP COMPANIES
(FF in thousands) December 31, ----------------------- 1995 1994 ----------------------- Rank Xerox Limited (RXL) 57 124 81 389 Other Xerox Group companies 12 490 2 408 ------ ------ 69 614 83 797 ====== ======
In accordance with the provisions of the agreements presented in Note 1 above, the RXL intercompany balance relates to added value services provided to RXL during the production process. 5. INVENTORIES
(FF in thousands) December 31, ----------------------- 1995 1994 ----------------------- Materials 1 641 - Work in progress (materials) 1 350 208 Work in progress (production cost) 2 434 2 324 ----- ----- 5 425 2 532 ===== =====
Materials reported in inventory by the Company relate entirely to third party customer operations (ie customers outside the Xerox Group). Materials used in repair and refurbishing operations performed for RXL, the Company's most significant customer, are not owned by the Company but are held on consignment for the benefit of RXL. Therefore, the Company's inventory balances related to RXL include only value added related to RXL materials which is accounted for in work in progress (value added). 14 Rank Xerox et Compagnie SNC Notes to Financial Statements Years ended December 31, 1995 and 1994 Page 9 6. PLANT AND EQUIPMENT, NET
(FF in thousands) December 31, ---------------------- 1995 1994 ---------------------- Tooling and equipment 70 202 65 575 Fixtures and fittings 28 973 26 045 Information technology systems and office equipment 15 350 12 681 ------- ------- 114 525 104 301 Less: Accumulated depreciation and amortization (62 503) (44 040) Plus : Construction in progress 2 422 10 537 ------- ------- PLANT AND EQUIPMENT, NET 54 444 70 798 ======= ======= Depreciation expense for the period 15 429 37 445
7. LEASES Included in plant and equipment in the accompanying balance sheets is the following equipment under capital lease:
(FF in thousands) December 31, -------------------- 1995 1994 -------------------- Information technology systems at cost 9 102 - Accumulated amortization (3 034) - ------ ------ Assets under capital lease, net 6 068 - ====== ======
During 1995, certain information technology system assets with a book value of FF 9 102 were sold to a third party as part of a sale-leaseback transaction. Under the agreement, the Company received FF 11 168 which resulted in a gain of FF 2 066 which has been deferred and will be amortized to income over the 3 year life of the lease. 15 Rank Xerox et Compagnie SNC Notes to Financial Statements Years ended December 31, 1995 and 1994 Page 10 Capital lease obligations are summarized below:
(FF in thousands) December 31, ----------------- 1995 ----------------- Total capital lease obligation 7 809 Less current installments (3 710) ------ Long-term obligations under capital leases 4 099 ======
The Company also leases premises from RX SA under an operating lease which was terminated in March 1996 as a result of the purchase of the land and buildings concerned by the Company (See Note 15) on March 22, 1996. Rental expense for operating leases amounted to FF 9 331 and FF 9 555 in 1995 and 1994, respectively. Minimum lease payments under leases expiring subsequent to December 31, 1995 follow:
(FF in thousands) December 31, ------------------------------------- Capital leases Operating leases ------------------------------------- 1996 4 324 2 481 1997 4 324 - ----- ----- Total 8 648 2 481 Less interest (839) - ----- ----- Minimum lease payments 7 809 2 481 ===== =====
16 Rank Xerox et Compagnie SNC Notes to Financial Statements Years ended December 31, 1995 and 1994 Page 11 8. OTHER ASSETS
(FF in thousands) December 31, ------------------- 1995 1994 ------------------- Value Added Tax receivable 1 784 2 121 Guarantee deposit - 750 ----- ----- 1 784 2 871 ===== =====
Value Added Tax (VAT) receivable relates to a change in the French VAT system which occurred in 1993 resulting in a tax credit corresponding to one month's recoverable VAT, reimbursable by the tax authorities over a period of up to twenty years and currently accruing interest at below market rates. As at December 31, 1994, the VAT credit amounted to FF 4 716 of which FF 422 was reimbursed by tax authorities during 1995. The receivable balance has been discounted to reflect a fair market rate of interest. As of December 31, 1995 and 1994 respectively, the unamortized discount amounted to FF 2 510 and FF 2 595. 17 Rank Xerox et Compagnie SNC Notes to Financial Statements Years ended December 31, 1995 and 1994 Page 12 9. ACCRUED LIABILITIES AND OTHER CURRENT LIABILITIES
(FF in thousands) December 31, --------------------- 1995 1994 --------------------- Payroll, bonuses and employee benefits (a) 38 819 30 228 Post employment benefit reserve (current portion) 1 050 982 Value added and other business taxes 10 077 6 452 Other accrued current liabilities 141 72 ------ ------ 50 087 37 734 ====== ======
(a) PAYROLL, BONUSES AND EMPLOYEE BENEFITS Includes primarily payroll, related taxes and compensated absences. In addition, as a result of the anticipated sale of the Company to The Cerplex Group, Inc, the Company's management decided to grant an exceptional bonus of FF 7 000 to employees which was accrued as of December 31, 1995. 10. OTHER LONG TERM LIABILITIES
(FF in thousands) December 31, --------------------- 1995 1994 --------------------- Retirement indemnity (a) 14 266 13 426 Postemployment benefit reserve (b) 6 834 6 405 ------ ------ 21 100 19 831 ====== ======
(a) RETIREMENT INDEMNITY RESERVE In accordance with the "Collective Bargaining Agreement for the Metallurgical Industry" or more favorable Company agreements, employees who retire are entitled to a lump-sum payment (retirement indemnity) based upon their length of service within the company. This benefit is not vested for employees who leave the Company before they retire. 18 Rank Xerox et Compagnie SNC Notes to Financial Statements Years ended December 31, 1995 and 1994 Page 13 Net retirement indemnity expense/(benefit) was comprised of the following:
(FF in thousands) Year ended December 31, ----------------------- 1995 1994 ----------------------- Service cost 782 778 Interest cost 710 679 Assumed return on assets - - ----- ----- NET RETIREMENT INDEMNITY EXPENSE/(BENEFIT) 1 492 1 457 ===== =====
The key actuarial assumptions used in determining retirement indemnity expense were as follows for the years ended December 31:
Year ended December 31, ----------------------- 1995 1994 ----------------------- Discount rate 5.0% 5.0% Weighted-average rate of compensation increase 2.5% 2.5% Long-term rate of return on plan assets N/A N/A
The funded status of the plan was as follows:
(FF in thousands) December 31, ---------------------- 1995 1994 ---------------------- Actuarial present value of benefit obligations: Vested - - Non-vested 10 295 9 653 Accumulated benefit obligation 10 295 9 653 Effect of projected future salary increases 3 971 3 773 Projected benefit obligation 14 266 13 426 Plan assets at market value - - Plan assets in excess of projected benefit N/A N/A obligation ------ ------ TOTAL RETIREMENT INDEMNITY LIABILITY 14 266 13 426 ====== ======
19 Rank Xerox et Compagnie SNC Notes to Financial Statements Years ended December 31, 1995 and 1994 Page 14 In the context of the acquisition of the Company by Cerplex Inc, the retirement indemnity liability and postemployment benefit liabilities were funded with a third party in April 1996 for a total amount of FF 23 777. (B) POSTEMPLOYMENT BENEFIT RESERVE In accordance with the "Collective Bargaining Agreement for the Metallurgical industry", employees who are terminated are entitled to receive a lump-sum severance benefit based on their length of service with the Company. The postemployment benefit reserve has been determined on the basis of the net present value of the estimated future costs of severance benefits relating to past service periods of the Company's employees. 11. PENSION OBLIGATIONS PENSION COSTS In accordance with French laws pension contributions are made to defined contribution pension schemes managed by the state or state related agencies. Pension costs are recorded each month and paid to these agencies, on the basis of gross salaries paid to employees. Accordingly, the Company is not subject to any additional liability related to pension obligations except for retirement indemnities described in Note 10. 12. COMMITMENTS AND CONTINGENCIES Fiscal years 1995, 1994 and 1993 are currently under inspection by tax and customs audits by the French Administration. Management is of the opinion that the outcome of these audits will not have a material adverse effect on the financial position, results of operations or cash flows of the Company. 13. RELATED PARTY TRANSACTIONS The activity of the Company results from the SOI plan described in Note 1 above and is therefore almost totally performed with Xerox Group companies. 20 Rank Xerox et Compagnie SNC Notes to Financial Statements Years ended December 31, 1995 and 1994 Page 15 Purchase of components, raw materials and supplies are made on behalf of RXL and are therefore not recorded in the financial statements of the Company. Sales of value added costs (salaries, royalties, lease terms, component supply costs) are made to RXL. Major intercompany transactions were as follows:
(FF in thousands) Year ended December 31, ------------------------ 1995 1994 ------------------------ Sales to RXL 271 161 267 578 Other sales 18 618 1 623 Interest income 5 612 4 120
Intercompany receivable balances are described in Notes 3 and 4 above. 14. NON RECURRING ITEMS For the year ending December 31, 1995 non-recurring items comprise an exceptional bonus granted to all employees as a result of the anticipated sale of the Company to the Cerplex Group, Inc. (See Note 9). For the year ended December 31, 1994, non-recurring items comprise restructuring costs, primarily termination costs, relating to the implementation of the SOI plan described in Note 1. 15. SUBSEQUENT EVENTS On May 24, 1996, the Company was sold to The Cerplex Group, Inc. ("Cerplex") a Delaware, USA incorporated Company. Cerplex is a leading independent provider of electronics parts repair and logistics services for a wide range of electronic equipment for the computer and peripheral, telecommunications and office automation markets. Immediately prior to the acquisition the legal form of the Company was changed from a "societe en nom collectif" (SNC) to a limited liability company "societe par actions simplifiee" (SAS) and its name was changed to Cerplex SAS. The common stock of the Company was reduced from FF 84 400 to FF 29 000 through compensation with the RXL account. 21 Rank Xerox et Compagnie SNC Notes to Financial Statements Years ended December 31, 1995 and 1994 Page 16 As detailed in Note 7, the Company purchased the Lille premises and Rank Xerox manufacturing rights from Rank Xerox SA on March 22, 1996. Rank Xerox specific tooling was sold by the Company to RXL with effect from January 1, 1996. Simultaneous to the acquisition, Cerplex SAS entered into a new four-year supply agreement with RXL ("Supply Agreement"). Under the terms of this agreement: (i) Cerplex SAS is now guaranteed a minimum revenue stream from RXL (based on the number of labor hours at standard production rates) which is estimated to be approximately FF 272 million for the first year (twelve month period beginning May 24, 1996). The second, third and fourth years guarantee levels each have declining volumes of approximately 90%, 60% and 30% respectively, of the first year revenue stream, which is based on a volume of 750 000 standard hours, (ii) The hourly rate during each of the four year periods of the agreement will be agreed in advance of such contract year; for the first contract year the hourly rate will be 362.65 French francs and for the second contract year, the hourly rate will be 2% below that of the first year. (iii) Cerplex SAS shall be entirely responsible for the manufacture of Products ordered by RXL and shall be entitled to all of the benefits, and, except for variances induced by quarterly volume variations above 5%, shall bear all of the costs, if actual hours are different from standard hours agreed to between the parties to manufacture the Products, (iv) All raw materials, parts and inventories (including work-in-process) used to manufacture Products, and all finished Products and RXL spares (collectively "Inventories") shall at all times be and remain the property of RXL, (v) All vendor tooling for the manufacture of Products shall be owned, maintained and insured by RXL, (vi) RXL agrees to advance to Cerplex SAS at all times during the term of the agreement an amount equal to one month's advance payment for guaranteed manufacturing services, (vii) RXL will contribute (through the hourly rate used) to the commercialization expenses incurred by Cerplex SAS related to introduction of new activities, during the first contract year, and, depending on the volume of new activity generated, in the second contract year. 22 Rank Xerox et Compagnie SNC Notes to Financial Statements Years ended December 31, 1995 and 1994 Page 17 As part of this contract, Cerplex SAS is committed to: (i) not reduce the aggregate number of permanent employees during 15 months after May 24, 1996, (ii) not distribute any dividend, except if certain conditions are met, during the four year period after May 24, 1996. 16. INTERIM FINANCIAL INFORMATION The unaudited interim financial statements include all adjustments, consisting only of normal recurring adjustments, which in the opinion of management are necessary for a fair presentation of results for the interim periods. 23 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of RANK XEROX ET COMPAGNIE SNC We have audited the accompanying balance sheets of Rank Xerox et Compagnie SNC as of December 31, 1995 and 1994, and the related statements of income, of cash flows and of changes in stockholders' equity for the years 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 audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements audited by us present fairly, in all material respects, the financial position of Rank Xerox et Compagnie SNC at December 31, 1995 and 1994, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. BEFEC - PRICE WATERHOUSE Brian Towhill Partner Paris, France July 31, 1996 24 UNAUDITED PRO FORMA COMBINED FINANCIAL DATA The following unaudited pro forma combined financial data presents the Pro Forma Combined Balance Sheet at March 31, 1996, giving affect to the acquisition of Cerplex S.A.S., a French company ("Cerplex SAS") and the remaining 51% interest in Modcomp/Cerplex L.P. ("Modcomp/Cerplex") as if the acquisitions were consummated on that date. Cerplex SAS is the legal successor to Rank Xerox et Compagnie ("Rank Xerox SNC"), which was transformed immediately prior to the acquisition from societe en nom collectif ( a type of partnership) into a societe par actions simplifee (a form of limited liability company), at which time its name was changed to Cerplex SAS. Also presented is the Pro Forma Combined Statement of Operations for the three months ended March 31, 1996, and the twelve months ended December 31, 1995, after giving affect to the acquisitions as if they were consummated on January 1, 1995. The pro forma data is based on the historical financial statements of Cerplex SAS and Modcomp/Cerplex giving affect to the transaction under the assumptions and adjustments outlined in the accompanying Notes to Unaudited Pro Forma Combined Financial Data. The unaudited pro forma data is provided for comparative purposes only. It does not purport to be indicative of the results that actually would have occurred if the acquisition had been consummated on the date indicated or which may be obtained in the future. The pro forma combined financial data should be read in connection with the notes thereto contained elsewhere herein, the audited financial statements of Rank Xerox SNC with the notes thereto contained elsewhere herein, the audited financial statements of Modcomp/Cerplex and notes thereto filed as part of the Form 8-K dated April 8, 1996 herein incorporated by reference, and the audited consolidated financial statements of the Company and the related notes thereto incorporated herein by reference. The historical financial statements of Rank Xerox SNC were prepared in local currency and converted into U.S. dollars at the exchange rate at the balance sheet date and average exchange rate for the reporting periods reflected in the pro forma Combined Statements of Operations. As reflected in the historical financial statements of Rank Xerox SNC, the first quarter reporting period ends March 22, 1996. The pro forma combined financial data set forth herein incorporates such reporting dates in the Company's reporting period ended March 31, 1996. 25 THE CERPLEX GROUP, INC. PRO FORMA COMBINED BALANCE SHEET (Unaudited) MARCH 31, 1996 (dollars in thousands)
Pro Forma Historical ----------------------------------------------------------- -------------------------------- Adjustments Adjustments Modcomp/ Rank Xerox Increase Adjustment Increase Adjustment Combined Cerplex Cerplex SNC (Decrease) Reference (Decrease) Reference Total -------- -------- ----------- ----------- ---------- ----------- ---------- --------- ---Modcomp/Cerplex--- ---Rank Xerox SNC--- Acquisition Acquisition ASSETS Current Assets: Cash and cash equivalents $ 5,422 $10,194 $ (6,209) a(i) $ (6,133) c(iii) $ 34,994 2,621 a(i) 31,473 c(ii) (2,374) a(ii) -- Due from Xerox Group of companies $34,389 (2,916) c(i) -- (31,473) c(ii) Accounts receivable, net 27,472 5,481 (600) a(iv) 32,353 Inventories 28,387 4,909 977 34,273 Net assets of discontinued operations 2,920 2,920 Prepaid expenses and other 2,623 1,400 516 (469) a(ii) 4,230 160 a(iv) -------- ------- ------- -------- -------- -------- Total current assets 66,824 21,984 35,882 (6,871) (9,049) 108,770 Property, plant and equipment, net 17,441 1,504 10,583 (1,438) a(iv) (10,583) c(i) 29,854 12,347 c(iii) Investment in joint venture 8,005 (2,621) a(i) -- (5,384) a(iii) Goodwill 6,361 993 (993) c(i) 6,361 Other long-term assets 2,793 359 3,152 -------- ------- ------- -------- -------- -------- Total assets $101,424 $23,488 $47,817 $(16,314) $ (8,278) $148,137 ======== ======= ======= ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 20,898 $ 2,048 $12,555 $ 35,501 Accrued liabilities 11,158 5,126 19,384 35,668 Short-term borrowings 47,700 47,700 Current portion of long-term debt 253 756 1,009 Income taxes payable 2,349 2,349 -------- ------- ------- -------- -------- -------- Total current liabilities 82,358 7,174 32,695 -- -- 122,227 Long-term debt, less current portion 20,567 20,567 Other long-term liabilities 4,801 $ (4,171) c(i) 6,844 6,214 c(iii) Stockholders' Equity: Common stock, par value $.001; 13 5,760 (5,760) c(i) 13 Partner Equity 16,314 $ (6,209) (a)(i) -- (2,843) a(ii) (5,384) a(iii) (1,878) a(iv) Additional paid-in capital 47,546 47,546 Notes receivable from stockholders (229) (229) Unearned compensation (125) (125) Retained earnings (accumulated deficit) (48,599) 4,561 (4,561) c(i) (48,599) Cumulative translation adjustments (107) (107) -------- ------- ------- -------- -------- -------- Total stockholders' equity (1,501) 16,314 10,321 (16,314) (10,321) (1,501) -------- ------- ------- -------- -------- -------- Total liabilities and stockholders' equity $101,424 $23,488 $47,817 $(16,314) $ (8,278) $148,137 ======== ======= ======= ======== ======== ========
See accompanying Notes to Unaudited Pro Forma Combined Financial Data 26 THE CERPLEX GROUP, INC. PRO FORMA COMBINED STATEMENT OF OPERATIONS (Unaudited) FOR THE THREE MONTHS ENDED MARCH 31, 1996 (dollars in thousands, except per share data)
Pro Forma Historical ----------------------------------------------------------- -------------------------------- Adjustments Adjustments Modcomp/ Rank Xerox Increase Adjustment Increase Adjustment Combined Cerplex Cerplex SNC (Decrease) Reference (Decrease) Reference Total -------- -------- ---------- ----------- ---------- ----------- ---------- -------- ---Modcomp/Cerplex--- ---Rank Xerox SNC--- Acquisition Acquisition Net Sales $40,846 $9,583 $15,273 $ (17) b(i) $ 1,853 d(i) $ 67,538 (495) d(ii) Cost of Sales 33,915 7,153 13,715 (17) b(i) 112 d(iv) 54,383 ------- ------ ------- ------- ------- -------- Gross Profit 6,931 2,430 1,558 -- 2,236 13,155 Selling, general and administrative expenses 7,057 1,816 1,169 10,042 ------- ------ ------- ------- ------- -------- Operating income (loss) (126) 614 389 -- 2,236 3,113 Equity in earnings from joint venture 357 (357) b(ii) -- Interest expense, net 1,511 (114) (181) -- 1,216 ------- ------ ------- ------- ------- -------- Income (loss) from continuing operations before taxes (1,280) 728 570 (357) 2,236 1,897 Income taxes 293 -- 1,027 d(vi) 1,320 ------- ------ ------- ------- ------- -------- Income (loss) from continuing operations (1,573) 728 570 (357) 1,209 577 -------- ------ ------- ------- ------- -------- Discontinued operations, net of income taxes: Loss from operations -- -- Estimated loss from liquidation of discontinued operations -- -- ------- ------ ------- ------- ------- -------- Loss from discontinued operations -- -- -- -- -- -- ------- ------ ------- ------- ------- -------- Net income (loss) $(1,573) $ 728 $ 570 $ (357) $ 1,209 $ 577 ======= ====== ======= ======= ======= ======== Income (loss) per share: Continuing operations $ (0.12) $ 0.04 Discontinued operations -- -- ------- -------- Net income (loss) per share $ (0.12) $ 0.04 ======= ======== Weighted average common and common equivalent shares 13,174 14,498 ======= ========
See accompanying Notes to Unaudited Pro Forma Combined Financial Data 27 THE CERPLEX GROUP, INC. PRO FORMA COMBINED STATEMENT OF OPERATIONS (Unaudited) FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995 (dollars in thousands, except per share data)
Pro Forma Historical ----------------------------------------------------------- -------------------------------- Adjustments Adjustments Modcomp/ Rank Xerox Increase Adjustment Increase Adjustment Combined Cerplex Cerplex SNC (Decrease) Reference (Decrease) Reference Total -------- -------- ---------- ----------- ---------- ----------- ---------- -------- ---Modcomp/Cerplex--- ---Rank Xerox SNC--- Acquisition Acquisition Net Sales $144,328 $38,223 $59,873 $ (216) b(i) $ 34 d(i) $242,242 (1,893) d(ii) Cost of Sales 127,817 23,407 55,442 (216) b(i) 455 d(iv) 202,720 (2,292) d(iii) -------- ------- ------- ------- ------- -------- Gross Profit 16,511 14,816 4,431 -- 3,764 39,522 Selling, general and administrative expenses 33,819 10,165 5,998 (1,420) d(v) 48,562 -------- ------- ------- ------- ------- -------- Operating income (loss) (17,308) 4,651 (1,567) -- 5,184 (9,040) Equity in earnings from joint venture 2,425 (2,426) b(ii) (1) Interest expense, net 5,075 (299) (894) -- 3,882 -------- ------- ------- ------- ------- -------- Income (loss) from continuing operations before taxes (19,958) 4,950 (673) (2,426) 5,184 (12,923) Income taxes 2,089 -- 1,651 d(vi) 3,740 -------- ------- ------- ------- ------- -------- Income (loss) from continuing operations (22,047) 4,950 (673) (2,426) 3,533 (16,663) -------- ------- ------- ------- ------- -------- Discontinued operations, net of income taxes: Loss from operations (1,966) (1,966) Estimated loss from liquidation of discontinued operations (15,381) (15,381) -------- ------- ------- ------- ------- -------- Loss from discontinued operations (17,347) -- -- -- -- (17,347) -------- ------- ------- ------- ------- -------- Net income (loss) $(39,394) $ 4,950 $ (673) $(2,426) $ 3,533 $(34,010) ======== ======= ======= ======= ======= ======== Net loss per share: Continuing operations $ (1.68) $ (1.27) Discontinued operations (1.33) (1.33) -------- -------- Net loss per share $ (3.01) $ (2.60) ======== ======== Weighted average common and common equivalent shares 13,091 13,091 ======== ========
See accompanying Notes to Unaudited Pro Forma Combined Financial Data 28 THE CERPLEX GROUP, INC. Notes to Unaudited Pro Forma Combined Financial Data (dollars in thousands) The pro forma combined balance sheet has been prepared to reflect the acquisition by the Company of the remaining 51% interest in Modcomp/Cerplex and the acquisition of Cerplex S.A.S., a French company ("Cerplex SAS"). The acquisitions are reflected under the purchase method of accounting. (a) The pro forma combined balance sheet has been adjusted to reflect the acquisition transaction of Modcomp/Cerplex as follows: (i) To record the cash distribution of 1994 and 1995 earnings to the Partners paid in April 1996 less certain partner liabilities. The Company's share of distributions was $2,621. (ii) The Company used its share of the cash distribution to acquire the stock of Modcomp Joint Venture, Inc. which subsequently acquired the remaining interest in Modcomp/Cerplex from Modular Computer Systems, Inc. pursuant to the Letter of Agreement dated April 5, 1996. The total purchase price was $2,843 of which $2,374 was paid in cash and $469 was offset against certain partner receivables. (iii) To eliminate the Company's investment in Modcomp/Cerplex against its underlying partner equity in order to reflect the consolidation of Modcomp/Cerplex previously accounted for under the equity method of accounting. (iv) To record a reduction in non-current assets related to the estimated fair market value of the assets and liabilities of 51% of Modcomp/Cerplex in excess of the purchase price as required by APB #16, "Business Combinations." (b) The pro forma combined statement of operations gives affect to following pro forma adjustments to reflect the acquisition of Modcomp/Cerplex: (i) To eliminate recognition of the management fee charged by Cerplex to Modcomp/Cerplex in accordance with the Partnership Agreement to reflect the consolidation of Modcomp/Cerplex assumed January 1, 1995. (ii) To eliminate the Company's equity in earnings of Modcomp/Cerplex to reflect the consolidation of Modcomp/Cerplex assumed January 1, 1995. 29 THE CERPLEX GROUP, INC. Notes to Unaudited Pro Forma Combined Financial Data (dollars in thousands) (c) The pro forma combined balance sheet has been adjusted to reflect the acquisition by the Company of Rank Xerox SNC. The acquisition is reflected under the purchase method of accounting for an aggregate estimated purchase price of $6,133, including estimated acquisition related taxes, registration fees, legal and accounting fees, and other out-of-pocket costs of $1,280. The pro forma combined balance sheet has been adjusted to reflect the above acquisition transaction as follows: (i) To adjust the pro forma combined balance sheet to eliminate the assets and liabilities of Rank Xerox SNC not acquired by the Company, historical cost property and equipment acquired, and to eliminate the equity of Rank Xerox SNC. (ii) To reflect the settlement of the Amounts due from the Xerox Group of companies assuming the acquisition was completed at March 22, 1996. Under the terms of the Stock Purchase Agreement dated May 24, 1996, Rank Xerox Limited was committed to provide cash and current accounts receivable sufficient in the aggregate to satisfy all current and long-term liabilities of Rank Xerox SNC. Such cash is restricted by contract to support the working capital and other requirements of Cerplex SAS, and may not be used by Cerplex for general corporate purposes. (iii) To allocate the purchase price to property and equipment acquired and liabilities assumed as part of the acquisition. (d) The pro forma combined statement of operations gives affect to the following pro forma adjustments to reflect the acquisition of Rank Xerox SNC: (i) To adjust the historical revenues of Cerplex SAS using the standard production hours during the pro forma periods at the units rates set forth in the Supply and Services Agreement, assuming such contract was entered into at January 1, 1995. (ii) To eliminate the rental charge from Rank Xerox-The Document Company SA for use of the land and building. 30 THE CERPLEX GROUP, INC. Notes to Unaudited Pro Forma Combined Financial Data (dollars in thousands) (iii) To eliminate depreciation charge for tooling acquired by Rank Xerox and provided to Rank Xerox SNC for use without charge under the Supply and Services Contract. (iv) To record depreciation expense related to the building, using a twenty (20) year estimated useful life on a straight-line basis. (v) To eliminate a non-recurring compensation charge by Cerplex SAS related to an exceptional bonus paid prior to the acquisition. (vi) To record a foreign tax provision based on the local statutory rate of 36.6%. (e) The pro forma combined financial data may not include all potential fair value adjustments and opening balance sheet accruals which will be identified within the twelve months succeeding the acquisition. -----END PRIVACY-ENHANCED MESSAGE-----