UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________TO _________
COMMISSION FILE NUMBER: 000-23231
------------------------
INNOVATIVE VALVE TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0530346
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2 NORTHPOINT DRIVE, SUITE 300 77060
HOUSTON, TEXAS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (281) 925-0300
------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares of Common Stock of the Registrant, par value $.001 per
share, outstanding at August 14, 1998 was 9,664,562.
INNOVATIVE VALVE TECHNOLOGIES, INC.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998
INDEX
PAGE
----
Part I -- Financial Information ........................................... 2
Item 1 -- Financial Statements ........................................... 2
General Information ..................................................... 2
Unaudited Pro Forma Combined Statements of Operations
for the ................................................................... 3
Three Months and Six Months Ended June 30, 1997 and 1998
Note to Unaudited Pro Forma Combined Statements of ...................... 4
Operations
Consolidated Balance Sheets as of December 31, 1997 and
June 30, 1998 (Unaudited) ............................................. 6
Consolidated Statements of Operations for the Three Months
and Six Months ended June 30, 1997 and 1998 (Unaudited) ............... 7
Consolidated Statements of Cash Flows for the Six Months
ended June 30, 1997 and 1998 (Unaudited) .............................. 8
Notes to Consolidated Financial Statements (Unaudited) .................. 9
Item 2 -- Management's Discussion and Analysis of
Financial ................................................................. 13
Condition and Results of Operations
Part II -- Other Information ............................................. 17
Item 4 -- Submission of Matters to a Vote of Security Holders ............ 17
Item 6 -- Exhibits and Reports on Form 8-K ............................... 19
1
INNOVATIVE VALVE TECHNOLOGIES, INC.
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
GENERAL INFORMATION
Introduction to Pro Forma Combined Statements of Operations.
Innovative Valve Technologies, Inc. ("Invatec" or the "Company") was
incorporated in Delaware in March 1997 to create the leading single-source
provider of comprehensive maintenance, repair, replacement and value-added
distribution services for industrial valves and related process-system
components throughout North America. Except for its purchase of an established
business in July 1997, Invatec conducted no operations of its own prior to the
closing on October 28, 1997 of (i) its initial public offering (the "IPO") of
its common stock ("Common Stock"), (ii) its purchase of two established
businesses and (iii) a merger (the "SSI Merger") in which The Safe Seal Company,
Inc. ("SSI") became its subsidiary (Invatec, SSI and all businesses acquired
through the closing of the IPO are collectively referred to herein as the
"Founding Companies"). Earlier in 1997, SSI had purchased three established
businesses. SSI and its subsidiaries were affiliates of Invatec prior to the SSI
Merger.
Following the IPO, the Company acquired additional businesses in 1997 and
the first half of 1998 (these businesses, together with the businesses acquired
through the closing of the IPO, are referred to herein as the "Acquired
Businesses"). The Company accounted for the acquisitions of the Acquired
Businesses in accordance with the purchase method of accounting.
The accompanying unaudited pro forma combined statements of operations of
the Company for the three and six months ended June 30, 1997 and 1998,
respectively, include the combined operations of the Founding Companies from
January 1, 1997 and the other Acquired Businesses from their respective dates of
acquisition.
2
INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
These unaudited pro forma combined financial statements should be read in
conjunction with the unaudited interim historical consolidated financial
statements of the Company elsewhere in this report.
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
--------------------- ---------------------
1997 1998 1997 1998
Pro forma Pro forma
-------- -------- -------- --------
REVENUES ....................... $ 24,394 $ 40,367 $ 46,701 $ 73,871
COST OF OPERATIONS ............. 16,210 27,308 32,191 49,856
-------- -------- -------- --------
Gross profit .............. 8,184 13,059 14,510 24,015
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES ........ 6,229 11,423 11,707 19,482
-------- -------- -------- --------
Income from operations .... 1,955 1,636 2,803 4,533
OTHER INCOME (EXPENSE):
Interest, net ............. (83) (1,423) (166) (2,132)
Other ..................... (4) 87 4 99
-------- -------- -------- --------
Total other ............... (87) (1,336) (162) (2,033)
INCOME BEFORE INCOME TAXES ..... 1,868 300 2,641 2,500
PROVISION FOR INCOME TAXES ..... 883 129 1,215 1,075
-------- -------- -------- --------
NET INCOME ..................... $ 985 $ 171 $ 1,426 $ 1,425
======== ======== ======== ========
EARNINGS PER SHARE - BASIC ..... $ 0.13 $ 0.02 $ 0.18 $ 0.17
======== ======== ======== ========
EARNINGS PER SHARE - DILUTED ... $ 0.12 $ 0.02 $ 0.18 $ 0.17
======== ======== ======== ========
WEIGHTED AVERAGE SHARES
OUTSTANDING - BASIC .......... 7,822 8,716 7,822 8,375
======== ======== ======== ========
WEIGHTED AVERAGE SHARES
OUTSTANDING - DILUTED ........ 8,093 8,845 7,898 8,586
======== ======== ======== ========
The accompanying note is an integral part of these unaudited pro forma combined
financial statements.
3
NOTE TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS:
The unaudited pro forma combined statements of operations include the
Company's historical consolidated information for the three months and six
months ended June 30, 1998 and present the historical consolidated information
for the corresponding periods in 1997 (with SSI as the "accounting acquirer"),
as adjusted to give effect to the following 1997 events and transactions as if
they had occurred on January 1, 1997: (i) the SSI Merger; (ii) the acquisitions
of the Founding Companies and the financings thereof; (iii) certain reverse
stock splits of outstanding stock; (iv) the IPO and the Company's application of
the net proceeds therefrom; and (v) the issuance of shares of Common Stock to
repay certain of the Company's indebtedness. The unaudited pro forma combined
statements convert the results of operations of the Acquired Businesses whose
historical fiscal periods were not on a calendar-year basis to a calendar-year
basis and include pro forma adjustments consisting principally of the following:
(i) the adjustments to selling, general and administrative expenses described
below; (ii) adjustments for the effects of recording inventories on a first-in,
first-out rather than on a last-in, first-out basis;(iii) adjustments for pro
forma goodwill amortization using a 40-year estimated life; (iv) eliminations of
historical interest expense resulting from the application of proceeds from the
IPO and the use of Common Stock to retire outstanding indebtedness; and (v)
adjustments to federal and state income tax provisions.
The unaudited pro forma combined statements of operations include pro forma
adjustments to selling, general and administrative expenses to reflect: (i)the
decrease in salaries and benefits associated with certain owners and managers of
the Acquired Businesses who (a) were not employed by the Company after the
acquisition of their Acquired Business and will not be replaced, or (b) agreed
prospectively to the decrease prior to the acquisition of their Acquired
Business; (ii) the elimination of certain excess administrative support service
fees charged by the former parent company of one of the Acquired Businesses; and
(iii) the reversal of the special non-cash, non-recurring compensation expense
attributable to stock awards made by SSI and Common Stock sales and option
awards made by Invatec.
The integration of the Acquired Businesses may present opportunities to
reduce other costs through the elimination of duplicative functions and
operating locations and the development of economies of scale. The Company
cannot currently quantify these anticipated savings and expects these savings
will be partially offset by incremental costs that the Company expects to incur,
but also cannot currently quantify accurately. The unaudited pro forma combined
financial information herein reflects neither unquantifiable expected savings
nor unquantifiable expected incremental costs. The pro forma adjustments are
based on preliminary estimates, available information and certain assumptions
that management deems appropriate.
The provision for income taxes included in the unaudited pro forma combined
statement of operations for the three and six months ended June 30, 1997 is an
estimate of the federal and state income taxes that would have been applicable
to the Company had it acquired all the Founding Companies on January 1, 1997.
The tax rates indicated by this provision differ from statutory federal and
state rates primarily because a portion of the goodwill amortization arising
from the acquisitions is not deductible for tax purposes.
The computation of pro forma earnings per share for the three and six
months ended June 30, 1997 is based on 8,092,849 and 7,897,871 weighted average
shares outstanding common and common equivalent shares, respectively, which
include (i) 7,821,732 shares issued and outstanding for the entire three-month
and six-month periods, (ii) 76,139 shares representing the dilution
4
attributable to outstanding options to purchase the Company's Common Stock,
using the treasury stock method, and (iii) 194,978 shares representing the
dilution attributable to convertible subordinated notes using the if-converted
method for the three months ended June 30, 1997.
The unaudited pro forma combined financial information may not be
comparable to and may not be indicative of the Company's future results of
operations because SSI and the Acquired Businesses were not under common control
or management throughout the periods presented.
5
INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, JUNE 30,
1997 1998
------------- -------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash ....................................... $ 2,544,450 $ 116,457
Accounts receivable, net of
allowance of $1,079,857 and $1,570,586... 17,680,697 31,372,129
Inventories, net ......................... 15,987,765 22,181,213
Prepaid expenses and other
current assets........................... 1,171,090 2,082,677
Deferred tax asset ....................... 3,723,448 3,808,947
------------- -------------
Total current assets ................ 41,107,450 59,561,423
PROPERTY AND EQUIPMENT, net ................ 11,474,701 17,883,492
GOODWILL, net .............................. 48,387,981 88,575,446
OTHER NONCURRENT ASSETS, net ............... 4,462,551 4,819,976
------------- -------------
TOTAL ASSETS ........................ $ 105,432,683 $ 170,840,337
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt .......................... $ 4,660,924 $ --
Current maturities of long-term debt...... 304,310 128,191
Credit Facility .......................... -- 56,077,800
Accounts payable and accrued expenses..... 14,910,638 21,582,883
------------- -------------
Total current liabilities ........... 19,875,872 77,788,874
LONG-TERM DEBT, net ........................ 318,911 1,070,873
CREDIT FACILITY ............................ 11,750,000 --
CONVERTIBLE SUBORDINATED DEBT .............. 12,493,178 12,916,927
OTHER LONG-TERM OBLIGATIONS ................ 1,125,417 1,500,764
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value,
30,000,000 shares authorized,
7,890,198 and 9,223,542 shares
issued and outstanding............... 7,890 9,223
Additional paid-in capital ............ 70,212,035 86,479,043
Retained deficit ...................... (10,350,620) (8,925,367)
------------- -------------
Total stockholders' equity ......... 59,869,305 77,562,899
------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY............... $ 105,432,683 $ 170,840,337
============= =============
The accompanying notes are an integral part of these consolidated financial
statements.
6
INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
---------------------------- ----------------------------
1997 1998 1997 1998
------------ ------------ ------------ ------------
REVENUES .................................... $ 12,814,638 $ 40,367,440 $ 19,759,635 $ 73,871,478
COST OF OPERATIONS .......................... 8,743,747 27,307,900 13,494,613 49,856,116
------------ ------------ ------------ ------------
Gross profit .............................. 4,070,891 13,059,540 6,265,022 24,015,362
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES ................... 2,965,967 11,423,158 4,917,324 19,481,930
SPECIAL COMPENSATION EXPENSE ................ -- -- 2,605,005 --
------------ ------------ ------------ ------------
Income (loss) from operations ............. 1,104,924 1,636,382 (1,257,307) 4,533,432
OTHER INCOME (EXPENSE):
Interest expense, net ..................... (655,412) (1,423,652) (998,111) (2,132,454)
Other ..................................... 2,281 87,172 2,243 99,468
------------ ------------ ------------ ------------
Total Other ............................... (653,131) (1,336,480) (995,868) (2,032,986)
INCOME (LOSS) BEFORE INCOME TAXES ........... 451,793 299,902 (2,253,175) 2,500,446
PROVISION (BENEFIT) FOR INCOME TAXES ........ 274,321 128,958 (275,095) 1,075,191
------------ ------------ ------------ ------------
NET INCOME (LOSS) ........................... $ 177,472 $ 170,944 $ (1,978,080) $ 1,425,255
============ ============ ============ ============
NET INCOME (LOSS) BEFORE
DIVIDENDS APPLICABLE TO PREFERRED STOCK ..... $ 177,472 $ 170,944 $ (1,978,080) $ 1,425,255
PREFERRED STOCK DIVIDENDS ................... -- -- (47,500) --
------------ ------------ ------------ ------------
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES $ 177,472 $ 170,944 $ (2,025,580) $ 1,425,255
============ ============ ============ ============
EARNINGS (LOSS) PER SHARE - BASIC ........... $ 0.07 $ 0.02 $ (0.90) $ 0.17
============ ============ ============ ============
EARNINGS (LOSS)PER SHARE - DILUTED .......... $ 0.07 $ 0.02 $ (0.90) $ 0.17
============ ============ ============ ============
WEIGHTED AVERAGE SHARES
OUTSTANDING - BASIC ....................... 2,419,338 8,716,415 2,241,564 8,374,666
============ ============ ============ ============
WEIGHTED AVERAGE SHARES
OUTSTANDING - DILUTED ..................... 2,419,338 8,845,210 2,241,564 8,586,051
============ ============ ============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
7
INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30
----------------------------
1997 1998
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ............................... $ (1,978,080) $ 1,425,255
Adjustments to reconcile net income
(loss) to net cash used in
operating activities -
Depreciation and amortization ................... 469,200 1,889,479
Special compensation expense .................... 2,605,005 --
Gain on sale of property and equipment .......... -- (3,195)
Deferred taxes .................................. -- (30,955)
(Increase) decrease in -
Accounts receivable ........................... (1,741,839) (7,164,853)
Inventories ................................... (761,987) (2,008,946)
Prepaid expenses and other
current assets ............................. 1,186,376 (1,357,280)
Other noncurrent assets ....................... (2,667,005) (221,964)
Increase (decrease) in -
Accounts payable and accrued
expenses ................................ 3,458,788 (738,928)
Payable to Innovative Valve
Technologies, Inc. ......................... (1,453,897) --
------------ ------------
Net cash used in operating
Activities .............................. (883,439) (8,211,387)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment ................. -- 100,515
Additions to property and
equipment .................................... (275,161) (2,124,341)
Business acquisitions, net of cash
acquired of $135,109 and $335,519............. (19,109,479) (32,122,864)
------------ ------------
Net cash used in investing activities ...... (19,384,640) (34,146,690)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt .................... 19,598,566 350,182
Repayments of long-term debt .................... (505,187) (199,157)
Repayments of short-term debt ................... -- (4,660,924)
Net borrowings under Credit Facility ............ -- 44,327,800
Payments on noncompete obligations .............. -- (96,318)
Proceeds from exercise of stock
options ...................................... -- 208,501
Proceeds from exercise of common
stock warrant ................................ 1,216,855 --
Preferred stock dividends ....................... (47,500) --
------------ ------------
Net cash provided by
financing activities .................... 20,262,734 39,930,084
NET DECREASE IN CASH ................................. (5,345) (2,427,993)
CASH, beginning of period ............................ 396,637 2,544,450
------------ ------------
CASH, end of period .................................. $ 391,292 $ 116,457
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest .......................... $ 415,975 $ 1,874,374
Cash paid for income taxes ...................... $ -- $ 1,679,152
The accompanying notes are an integral part of these consolidated financial
statements.
8
INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION:
Innovative Valve Technologies, Inc. ("Invatec") was incorporated in
Delaware in March 1997 to create the leading single-source provider of
comprehensive maintenance, repair, replacement and value-added distribution
services for industrial valves and related process-system components throughout
North America. Except for its purchase of an established business in July 1997,
Invatec conducted no operations of its own prior to the closing on October 28,
1997 of (i) its initial public offering (the "IPO") of its common stock ("Common
Stock"), (ii) its purchase of two established businesses and (iii) a merger (the
"SSI Merger") in which The Safe Seal Company, Inc. ("SSI") became its
subsidiary. Earlier in 1997, SSI had purchased three established businesses. SSI
and its subsidiaries were affiliates of Invatec prior to the SSI Merger.
For financial reporting purposes, SSI is presented as the "accounting
acquirer" of the seven businesses it and Invatec purchased through the IPO
closing date(collectively, the "Initial Acquired Businesses"), and, as used
herein, the term "Company" means (i) SSI and its consolidated subsidiaries prior
to October 31, 1997 and (ii)Invatec and its consolidated subsidiaries (including
SSI) on that date and thereafter.
Following the IPO, the Company purchased four businesses in the fourth
quarter of 1997, three businesses in the first quarter of 1998 and two in the
second quarter of 1998 (these businesses, together with the Initial Acquired
Businesses, are referred to herein as the "Acquired Businesses"). The Company is
accounting for the acquisitions of the Acquired Businesses in accordance with
the purchase method of accounting. The allocation of the purchase prices paid to
the assets acquired and the liabilities assumed in the acquisitions of the
Acquired Businesses has been recorded initially on the basis of preliminary
estimates of fair value and may be revised as additional information concerning
the valuation of those assets and liabilities becomes available. The
accompanying historical consolidated financial statements of operations present
historical information of the Company which gives effect to the acquisitions as
of their respective acquisition dates.
The consolidated financial statements herein have been prepared by the
Company without audit, pursuant to rules and regulations of the Securities and
Exchange Commission which permit certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles to be condensed or omitted. The Company believes
the presentation and disclosures herein are adequate to make the information not
materially misleading, and the financial statements reflect all elimination
entries and normal adjustments that are necessary for a fair presentation of the
results for the interim periods ended June 30, 1997 and 1998.
Operating results for interim periods are not necessarily indicative of the
results for full years. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Fluctuations in Operating Results" in
Item 2 of this Part I. Invatec's Annual Report on Form 10-K for the year ended
December 31, 1997, as amended (the "1997 10-K Report"), includes the Company's
consolidated financial statements and related notes for 1997.
9
INNOVATIVE VALVE TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
2. NEW ACCOUNTING PRONOUNCEMENT:
Statement of Financial Accounting Standards ("SFAS") No. 130,
"Reporting
Comprehensive Income" requires the presentation of comprehensive income in an
entity's financial statements. Comprehensive income represents all changes in
equity of an entity during the reporting period, including net income and
charges directly to equity which are excluded from net income (such as
additional minimum pension liability changes, currency translation adjustments
and unrealized gains and losses on available for sale securities). The Company
adopted this standard effective January 1, 1998. The adoption of SFAS No. 130
did not have a material impact on the Company's consolidated financial
statements. For the three- and six-month periods ended June 30, 1998, there were
no material items of comprehensive income other than net income.
3. CREDIT FACILITY:
The Company has a revolving credit facility (the "Credit Facility") of up to
$90 million (as amended). Currently, the Company may use borrowings under the
Credit Facility only for working capital purposes. Invatec's present and future
subsidiaries will guarantee the repayment of all amounts due under the facility,
and the facility is secured by the capital stock of those subsidiaries and the
Company's accounts receivable and inventories. The Credit Facility prohibits the
payment of cash dividends by Invatec, restricts the ability of the Company to
incur other indebtedness and requires the Company to comply with certain
financial covenants. It is scheduled to mature in June 2001.
As of August 14, 1998, the Company was not in compliance with certain of its
loan covenants under the Credit Facility. The Company has therefore classified
amounts due under the Credit Facility as of June 30, 1998, as a current
liability. The Company has obtained a waiver of the covenant violations for 30
days (terminating August 21, 1998) and is in the process of negotiating an
amendment to the Credit Facility to address future compliance with these
covenants. At August 14, 1998, approximately $65.9 million of borrowings were
outstanding under the Credit Facility.
Management believes that the Credit Facility will be amended within the
next 60 days to bring the Company in compliance with the amended covenants.
Management further believes that in the event that an amendment is not in place
at the time the current waiver expires, additional waivers or extensions will be
granted. However, there can be no assurance that such waivers or extensions will
be obtained. In the event that the terms of the Credit Facility are not amended
so that the Company is in compliance with that agreement, the Company would need
to seek additional debt or equity financings to repay the amounts due under the
Credit Facility.
4. INCOME TAXES:
Certain of the Acquired Businesses were subject to the provisions of
subchapter S of the Internal Revenue Code prior to their acquisition by the
Company. Under these provisions, their former stockholders paid income taxes on
their proportionate share of the earnings of these businesses. Because the
stockholders were taxed directly, their businesses paid no federal income tax
and only certain state income taxes.
The Company files a consolidated federal income tax return that includes the
operations of the Acquired Businesses for periods subsequent to their respective
acquisition dates.
The provision for income taxes included in the unaudited consolidated
statement of operations for the three and six months ended June 30, 1997 differs
from statutory federal and state rates primarily because of the partial
recognition of certain net operating loss benefits carried forward by SSI.
10
INNOVATIVE VALVE TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
5. EARNINGS (LOSS) PER SHARE:
The computation of earnings (loss) per share of common stock for the
interim periods is presented in accordance with SFAS No. 128, "Earnings Per
Share," based on the following shares of Common Stock outstanding:
Three Months Ended Six Months Ended
June 30 June 30
--------------------- ---------------------
1997 1998 1997 1998
--------- --------- --------- ---------
Issued and outstanding at January 1 . 1,481,919 7,890,198 1,481,919 7,890,198
Issued to acquire a business in the
first quarter of 1998 (weighted) . -- 807,828 -- 473,093
Issued for stock options exercised
and warrants exercised ........... 937,419 18,389 759,645 11,375
--------- --------- --------- ---------
Weighted average shares
outstanding - Basic ............... 2,419,338 8,716,415 2,241,564 8,374,666
Dilutive effect of shares issuable
on exercise of stock options .... -- 128,795 -- 211,385
--------- --------- --------- ---------
Weighted average shares
outstanding - Diluted ............. 2,419,338 8,845,210 2,241,564 8,586,051
========= ========= ========= =========
6. ACQUISITIONS:
During the quarter ended June 30, 1998, the Company acquired two businesses
for $2.4 million in cash and assumed debt and 500,024 shares of Common Stock. Of
the total purchase price paid for these acquisitions, $1.1 million has been
allocated to the net assets acquired and the remaining $5.7 million has been
recorded as goodwill. These acquisitions were accounted for as purchases and the
accompanying balance sheet as of June 30, 1998 includes preliminary allocations
of the respective purchase prices which are subject to final adjustment.
For one business acquired during the quarter ended June 30, 1998, the
Company guaranteed a Common Stock price target to the sellers at specified
future dates. If the guaranteed price target is not met or exceeded, the Company
is required, at the option of the Company, to either issue additional shares of
Common Stock or pay additional funds to the sellers for the difference between
the price at the acquisition date and the guaranteed price target. Using the
Common Stock price at August 13, 1998 ($3.625), the total additional
consideration would be $1,000,048. The net present value of the price guarantee
is reflected in the accompanying balance sheet at June 30, 1998. This guarantee
is subject to adjustment within the next twelve months.
The following table reflects, on an unaudited pro forma basis, certain
results of the combined operations of the Company as if the IPO, the SSI Merger,
the Company's acquisitions of Acquired Businesses in 1997 and the
11
INNOVATIVE VALVE TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
first and second quarters of 1998 and certain other events and transactions
discussed in Note 1 had taken place on January 1, 1997. These pro forma results
have been prepared for comparative purposes only and do not purport to be
indicative of the results of operations the Company would have obtained had the
acquisitions taken effect on January 1, 1997, has obtained since the dates of
acquisition or may obtain in the future.
June 30
-----------------------
1997 1998
------- ------
(Unaudited and in thousands,
except per share data)
Revenues ...................................... $74,592 $82,321
Income before income taxes .................... 3,531 2,694
Net income .................................... 2,013 1,536
Earnings per share - basic .................... $ 0.22 $ 0.17
Earnings per share - diluted .................. $ 0.22 $ 0.16
7. SUBSEQUENT EVENTS:
In July 1998, the Company acquired four additional businesses providing
services in the industrial valve services industry for total consideration
(subject to certain adjustments) consisting of approximately $5.9 million in
cash and assumed debt and 441,020 shares of Common Stock. The Company used
borrowings under the Credit Facility to fund the cash portions of the purchase
prices.
For one of the businesses acquired in July 1998, the Company guaranteed to the
sellers a Common Stock price target at a specified future date. If the
guaranteed price target is not met or exceeded, the Company is required to issue
additional shares of Common Stock and pay additional funds to the sellers for
the difference between the price at the acquisition date and the guaranteed
price target. Using the Common Stock price at August 13, 1998 ($3.625), the
total additional consideration to the sellers on the specified future date would
be $483,660 and 168,230 additional shares of Common Stock. This guarantee is
subject to adjustment within the next twelve months.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion should be read in conjunction with the historical
consolidated and unaudited pro forma combined financial statements and the notes
thereto which are included in Item 1 of this Part I. This report contains
"forward-looking" statements that involve a number of risks, uncertainties and
assumptions. No assurance can be given that actual results will not differ
materially from these statements as a result of various factors. See "Factors
That May Affect Future Results" in Item 1 of the Company's Annual Report on Form
10-K/A for the year ended December 31, 1997.
OVERVIEW
The Company derives its revenues principally from (i) sales of industrial
valves and related process-system components to its process-industry customers
and commissions paid by the manufacturers of these products in connection with
the Company's direct sales of these products and (ii) performance of
comprehensive, maintenance, repair, services of industrial valves and related
process-system components for its customers. Cost of operations consists
principally of direct costs of valves and components sold, coupled with labor
and overhead costs connected with the performance of repair services. Selling,
general and administrative expenses consist principally of compensation and
benefits payable to owners and to sales, management and administrative
personnel, insurance, depreciation and amortization and other related expenses.
RESULTS OF OPERATIONS -- PRO FORMA COMBINED (Unaudited)
The unaudited pro forma combined results of operations for the interim
periods presented below do not purport to be comparable to and may not be
indicative of the Company's post-combination results of operations because (i)
SSI and the Acquired Businesses were not under common control or management
throughout the periods presented and (ii) the Company established a new basis of
accounting to record the purchase of the Acquired Businesses under the purchase
method of accounting. See Note 1 in Item 1 of this Part I.
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------------------------ -----------------------------------
1997 1998 1997 1998
----------------------------------- -----------------------------------
(IN THOUSANDS) (IN THOUSANDS)
Revenues ................ $ 24,394 100% $ 40,367 100% $ 46,701 100% $ 73,871 100%
Cost of operations ...... 16,210 66 27,308 68 32,191 69 49,856 68
-------- --- -------- ---- -------- --- -------- ----
Gross profit ............ 8,184 34 13,059 32 14,510 31 24,015 32
Selling, general and
administrative expenses 6,229 26 11,423 28 11,707 25 19,482 26
-------- --- -------- ---- -------- --- -------- ----
Income from operations .. 1,955 8 1,636 4 2,803 6 4,533 6
Interest expense, net ... (83) -- (1,423) (3) (166) -- (2,132) (3)
Other income (expense) .. (4) -- 87 -- 4 -- 99 --
-------- --- -------- ---- -------- --- -------- ----
Income from operations
before Income taxes .... $ 1,868 8% $ 300 1% $ 2,641 6% $ 2,500 3%
======== === ======== ==== ======== === ======== ====
13
THREE MONTHS ENDED JUNE 30
REVENUES -- Revenues increased $16.0 million, or 66%, from $24.4 million in
the three months ended June 30, 1997 to $40.4 million in the corresponding
period in 1998. Approximately $16.4 million of this increase primarily resulted
from the inclusion in the 1998 period of the results of the businesses acquired
during the fourth quarter of 1997 and the first quarter of 1998 ("the
Acquisitions") offset slightly by a decrease in revenues at three of the
Founding Companies. This decrease is primarily the result of cost deferral
programs implemented by the companies' customers in response to a downturn in
the industries they serve.
GROSS PROFIT -- Gross profit increased $4.9 million, or 60%, from $8.2
million in the three months ended June 30, 1997 to $13.1 million in the
corresponding period in 1998, primarily as a result of the incremental gross
margins generated in the 1998 period by the Acquisitions. As a percentage of
revenues, gross profit decreased to 32% in the three months ended June 30, 1998
from 34% in the same period in 1997. The decrease in gross profit percentage
primarily resulted from certain relatively larger service jobs at two Acquired
Businesses being competitively bid, resulting in lower than normal gross
margins.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES -- Selling, general and
administrative expenses increased $ 5.2 million, or 83%, from $6.2 million in
the three months ended June 30, 1997 to $11.4 million in the corresponding
period in 1998, primarily as a result of the incremental selling, general and
administrative expenses in the 1998 period of the Acquisitions. As a percentage
of revenues, selling, general and administrative expenses increased from 26% in
the second quarter of 1997 to 28% in the second quarter of 1998. For the
Founding Companies, as a percentage of revenues, these expenses were 24% in the
second quarter of 1998, down from 26% in the same period in 1997. These expenses
for the Acquisitions were approximately 33% of revenues. This spending level, in
actual dollars, for the acquisition is in line with historical spending levels.
However, these expenses for the Acquisitions as a percentage of revenues are
higher in the quarter ended June 30, 1998, as compared with the same period in
1997 as a result of lower revenue volumes in the 1998 period.
INTEREST EXPENSE, NET -- Interest expense increased $1.3 million, or
1,614%, from $0.1 million in the second quarter of 1997 to $1.4 million in the
second quarter of 1998. This increase is primarily the result of borrowings
under the Company's Credit Facility to fund the cash portion of the purchase
prices paid for the Acquisitions.
SIX MONTHS ENDED JUNE 30
REVENUES -- Revenues increased $27.2 million, or 58%, from $46.7 million in
the six months ended June 30, 1997, to $73.9 million in the corresponding period
in 1998. Approximately $25.7 million of this increase resulted from the
inclusion in the 1998 period of the results of the Acquisitions. The remaining
increase of approximately $1.5 million was attributable to internal growth
primarily in the first quarter of 1998.
GROSS PROFIT -- Gross profit increased $9.5 million, or 66%, from $14.5
million in the six months ended June 30, 1997 to $24.0 million in the
corresponding period in 1998, primarily as a result of the incremental gross
margins generated in the 1998 period by the Acquisitions. As a percentage of
revenues, gross profit increased to 33% in the six months ended June 30, 1998
from 31% in the same period in 1997. This overall 2% increase in gross margin as
a percentage of revenues was the result of an increase of 4% due to the
inclusion of the incremental gross profit of the Acquisitions offset by a 2%
reduction in the gross profit percentage of the Founding Companies. The decrease
in the gross profit percentage of the Founding Companies was primarily due to
the relatively fixed nature of the cost of sales structure combined with a drop
in revenues during the second quarter of 1998.
14
SELLING, GENERAL, AND ADMINISTRATIVE -- Selling, general and administrative
expenses increased $7.8 million, or 66%, from $11.7 million in the six months
ended June 30, 1997 to $19.5 million in the corresponding period in 1998,
primarily as a result of the incremental selling, general and administrative
expenses of the Acquisitions. For the Founding Companies, selling, general and
administrative expenses in the six months ended June 30, 1998 decreased
approximately 11% as compared to the same period in 1997. As a percentage of
revenues, selling, general and administrative expenses increased from 25% in the
six months ended June 30, 1997 to 26% in the corresponding period in 1998. This
overall 1% increase in these expenses as a percentage of revenues in 1998
resulted from the combination of an increase of 3% due to the incremental effect
of including the selling, general and administrative expenses of the
Acquisitions offset by a 2% decrease in these expenses as a percentage of
revenues for the Founding Companies.
INTEREST EXPENSE, NET -- Interest expense, net increased $2.0 million, or
1,184%, from $0.1 million in the six months ended June 30, 1997, to $2.1 million
in the corresponding period in 1998. This increase is primarily the result of
borrowings under the Company's Credit Facility to fund the cash portion of the
purchase prices for the Acquisitions.
RESULTS OF OPERATIONS -- HISTORICAL (Unaudited)
The following table sets forth for the Company certain selected
consolidated financial data and that data as a percentage of consolidated
revenues for the periods indicated:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------------------ ----------------------------------
1997 1998 1997 1998
------------------------------ ----------------------------------
(IN THOUSANDS) (IN THOUSANDS)
Revenues ........... $12,815 100% $40,367 100% $ 19,760 100% $73,871 100%
Cost of operations . 8,744 68 27,308 68 13,495 68 49,856 68
------- --- ------- --- -------- ---- ------- ---
Gross profit ....... 4,071 32 13,059 32 6,265 32 24,015 32
Selling, general and
administrative
expenses ........ 2,966 23 11,423 28 4,917 25 19,482 26
Special compensation
expense ......... -- -- -- -- 2,605 13 -- --
------- --- ------- --- -------- ---- ------- ---
Income (loss) from
Operations ...... $ 1,105 9% $ 1,636 4% $ (1,257) (6)% $ 4,533 6%
======= === ======= === ======== ==== ======= ===
THREE MONTHS ENDED JUNE 30
REVENUES -- Revenues increased $27.6 million, or 215%, from $ 12.8 million
in the three months ended June 30, 1997 to $40.4 million in the corresponding
period in 1998. This increase primarily resulted from the inclusion in the 1998
period of the results of the Acquired Businesses.
GROSS PROFIT -- Gross profit increased $9.0 million, or 221%, from $ 4.1
million in the three months ended June 30, 1997 to $13.1 million in the
corresponding period in 1998. This increase occurred principally as a result of
the inclusion in the 1998 period of the incremental gross profit of the Acquired
Businesses. As a percentage of revenues, gross profit remained essentially flat
at 32%.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES -- Selling, general and
administrative expenses increased $8.4 million, or 285%, from $ 3.0 million in
the three months ended June 30, 1997 to $11.4 million in the corresponding
period in 1998. This increase primarily reflected the incremental selling,
general and administrative expenses in the 1998 period of the Acquired
Businesses. As a percentage of revenues, these expenses increased from 23% in
the three months ended June 30, 1997 to 28% in the same period in 1998,
primarily as a result of the inclusion of the results of the Acquisitions
coupled with a decrease in the revenue base in the second quarter of 1998
compared with the same period in 1997.
15
SIX MONTHS ENDED JUNE 30
REVENUES -- Revenues increased $54.1 million, or 274%, from $19.8 million
in the six months ended June 30, 1997, to $73.9 million in the corresponding
period in 1998. This increase primarily resulted from the inclusion in the 1998
period of the results of the Acquired Businesses.
GROSS PROFIT -- Gross profit increased $17.7 million, or 283%, from $6.3
million in the six months ended June 30, 1997 to $24.0 million in the
corresponding period in 1998, primarily as a result of the inclusion in the 1998
period of the incremental gross profit of the Acquired Businesses. As a
percentage of revenues, gross profit remained relatively flat in 1998 as
compared with 1997.
SELLING, GENERAL AND ADMINISTRATIVE -- Selling, general and administrative
expenses increased $14.6 million, or 296%, from $4.9 million in the six months
ended June 30, 1997 to $19.5 million in the corresponding period in 1998,
primarily as a result of the incremental selling, general, and administrative
expenses in the 1998 period of the Acquired Businesses. As a percentage of
revenues, selling, general and administrative expenses increased from 25% in the
six months ended June 30, 1997, to 26% in the corresponding period in 1998. This
increase primarily resulted from the inclusion of the results of the Acquired
Businesses.
SPECIAL COMPENSATION EXPENSE
In connection with the issuance of common stock to certain members of
management and a management services provider, SSI recorded a $2.6 million
non-cash, non-recurring charge in the six months ended June 30, 1997.
YEAR 2000 ISSUE
The Company is reviewing its computer programs and systems to ensure that
the programs and systems will function properly in the Year 2000 and beyond. In
this process, the Company expects to replace some existing systems and upgrade
others. The Company presently believes that, with modifications to existing
software and conversions to new software, the Year 2000 problem will not pose
significant operational problems for the Company's computer systems. The
estimated costs of these efforts are not expected to be material to the
Company's financial position or results of operations in any year.
FLUCTUATIONS IN OPERATING RESULTS
The Company's results of operations may fluctuate significantly from
quarter-to-quarter or year-to-year because of a number of factors, including the
timing of future acquisitions, seasonal fluctuations in the demand for the
Company's services and competitive factors. Accordingly, quarterly comparisons
of the Company's revenues and operating results should not be relied on as an
indication of future performance, and the results of any quarterly period may
not be indicative of results to be expected for a full year.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 1998, the Company's operations used $8.2
million in cash primarily as a result of increased accounts receivable and
inventory levels attributable to the expected seasonal increase in the Company's
sales. Capital expenditures during the period totaled $2.1 million. The majority
of the capital expenditures were for the purchase of operating equipment for
certain locations. Also, during the six months ended June 30, 1998, the Company
had net borrowings of $44.3 million under its
16
Credit Facility. These borrowings were primarily used to fund the cash portion
of the purchase prices paid for the businesses acquired during the period.
The Company's Credit Facility is a revolving credit facility of up to
$90 million. Currently, the Company may use borrowings under the Credit Facility
only for working capital purposes. Invatec's subsidiaries have guaranteed the
repayment of all amounts due under the facility, and the facility is secured by
the capital stock of those subsidiaries and the Company's accounts receivable
and inventories. The Credit Facility prohibits the payment of cash dividends by
Invatec, restricts the ability of the Company to incur other indebtedness and
requires the Company to comply with certain financial covenants.
As of August 14, 1998, the Company was not in compliance with certain of its
loan covenants under the Credit Facility. The Company has therefore classified
amounts due under the Credit Facility as of June 30, 1998 as a current
liability. The Company has obtained a waiver of the covenant violations for 30
days (terminating August 21, 1998) and is in the process of negotiating an
amendment to the Credit Facility to address future compliance with these
covenants. At August 14, 1998, approximately $65.9 million of borrowings were
outstanding under the Credit Facility.
Management believes that the Credit Facility will be amended within the
next 60 days to bring the Company in compliance with the amended covenants.
Management further believes that in the event that an amendment is not in place
at the time the current waiver expires, additional waivers or extensions will be
granted. However, there can be no assurances that such waivers or extensions
will be obtained. In the event that the terms of the Credit Facility are not
amended so that the Company is in compliance with that agreement, the Company
would need to seek additional debt or equity financing to repay the amounts due
under the Credit Facility.
At June 30, 1998, the Company's capitalization included approximately $12.9
million aggregrate principal amount of convertible subordinated notes due
2002-04 that bore a weighted average interest rate of 5.3%. The Company issued
these notes as partial consideration in acquisitions of Acquired Businesses.
These notes are convertible into Common Stock at initial conversion prices
ranging from $16.90 to $22.52 per share.
Management believes that in the event of additional cash needs required to
support the Company's working capital requirements, the Company may need to seek
additional financing through amendments to increase the borrowing capacity under
the existing Credit Facility or the public or private sale of equity or debt
securities. There can be no assurance that the Company could secure such
financing if and when it is needed or on terms the Company deems acceptable.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 22, 1998, the Company held its 1998 Annual Meeting of Stockholders.
The matters voted on at the meeting and the results thereof are as follows:
A. Election of Class I Directors.
Stockholders elected the persons listed below as Class I directors whose
terms expire at the 2001 annual meeting of stockholders. Results by
nominee were:
VOTED VOTED
FOR AGAINST ABSTENTIONS
--------- ------- -----------
William E. Haynes 5,154,232 52,686 --
--------- ------- -----------
Arthur L. French 5,154,032 52,886 --
There were no broker non-votes in connection with the election of Class
I Directors.
17
The Class II directors, whose terms expire at the 1999 annual meeting of
stockholders, are Tommy E. Knight and Pierre R. Latour. The Class III
directors, whose terms expire at the 2000 annual meeting of
stockholders, are Michael A. Baker, Robert M. Chiste and T. Wayne Wren,
Jr.
B. Ratification of Appointment of Independent Public Accountants.
Stockholders ratified the appointment of Arthur Andersen LLP as the
Company's independent public accountants for the fiscal year ending
December 31, 1998, with 5,183,693 shares voted for, 22,200 shares voted
against, and 1,025 abstentions and [no] broker non-votes.
ITEM 5. OTHER INFORMATION.
NOTICE OF SHAREHOLDER PROPOSAL DEADLINE DATE
Rule 14a-8 under the Securities and Exchange Act of 1934, as amended,
specifies the requirements for timely submission of a stockholder proposal to be
included in the Company's proxy statement for an annual or special meeting of
stockholders. As set forth in the Company's proxy statement relating to its 1998
Annual Meeting of Stockholders, proposals stockholders intend to have included
in the Company's proxy statement for the 1999 Annual Meeting of Stockholders
should be received by the Company's Corporate Secretary by December 31, 1998.
If a stockholder desires to bring a matter before an annual or special meeting
which is not the subject of a proposal timely submitted for inclusion in the
Company's proxy statement, the stockholder must follow the procedures set forth
in the Company's Bylaws.
The Company's Bylaws provide generally that stockholder proposals for an
annual meeting may be made by a stockholder only if (i) the stockholder is a
stockholder of record and is entitled to vote at the meeting and (ii) the
stockholder gives timely written notice of the proposal to the Corporate
Secretary of the Company. In the case of the Company's 1999 Annual Meeting, to
be timely, a stockholder's notice must be delivered to, or mailed and received
at, the principal executive offices of the Company no later than February 21,
1999; provided, however, that, in the event the date of the annual meeting is
not within 30 days before or 60 days after May 22, 1999, notice by the
stockholder to be timely must be so delivered not later than the close of the
business on the later of the 90th day prior to such annual meeting or the tenth
day following the day on which public announcement of the date of such meeting
is first made by the Company.
18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
2.1* -- Stock Purchase Agreement dated as of December 28, 1996 by and
Among The Safe Seal Company, Inc. ("SSI"), certain stockholders
of Harley Industries, Inc. ("Harley") and Harley (Form S-1 (Reg.
No. 333-31617), Ex. 2.1).
2.2* -- Stock Transfer Agreement dated as of January 24, 1997 by and
among SSI, a stockholder of Harley, Harley and Harley Equipment
Corporation (Form S-1 (Reg. No. 333- 31617), Ex. 2.2).
2.3* -- Stock Purchase Agreement entered into on June 23, 1997 by and
among the Company, Puget Investments, Inc., Flickinger- Benicia
Inc. and the stockholders named therein (Form S-1 (Reg. No.
333-31617), Ex. 2.3).
2.4* -- Stock Purchase Agreement dated as of July 15, 1997 by and
among the Company, Industrial Controls & Equipment, Inc., Valve
Actuation & Repair Co. and the other parties thereto (Form S-1
(Reg. No. 333-31617), Ex. 2.4).
2.5* -- Stock Purchase Agreement dated as of February 26, 1997 by and
among SSI and the stockholders of GSV, Inc. (Form S-1 (Reg. No.
333-31617), Ex. 2.5).
2.6* -- Stock and Real Estate Purchase Agreement dated as of May 22,
1997 by and among SSI, Plant Specialties, Inc., and the
stockholders named therein (Form S-1 (Reg. No. 333-31617), Ex.
2.6).
2.7* -- Agreement and Plan of Reorganization dated as of June 27,
1997 by and among the Company, Southern Valve Service, Inc. and
the other parties thereto (Form S-1 (Reg. No. 333-31617), Ex.
2.7).
2.8* -- Stock Redemption and Purchase Agreement dated as of June 27,
1997 by and among the Company, Lee Roy Jordan, Ralph Buffkin and
55 Leasing and Sales, Inc. (Form S- 1 (Reg. No. 333-31617), Ex.
2.8).
2.9* -- Agreement and Plan of Merger dated as of June 27, 1997 by and
among the Company, IVT Acquisition, Inc. and SSI, as amended as
of August 15, 1997 (Form S-1 (Reg. No. 333-31617), Ex. 2.9).
2.10* -- Uniform Provisions for Acquisitions (incorporated into the
agreements incorporated herein as Exhibits 2.3, 2.4 and 2.7)
(Form S-1 (Reg. No. 333-31617), Ex. 2.10).
2.11* -- Merger Agreement dated as of December 17, 1997 by and among
the Company, DIVT Acquisition, LLC, Dalco, Inc. and the
stockholders named therein (Form 8-K dated December 17, 1997
(file No. 000-23231), Ex. 2).
2.12* -- Stock Purchase Agreement dated as of February 27, 1998 by and
among the Company, Cypress Industries, Inc. and the Stockholders
named therein (Form 8-K dated February 27, 1998 (File No.
000-23231), Ex. 2).
19
2.13* -- Merger Agreement, dated as of March 16, 1998, by and among
the Company, IPSCO Acquisition, Inc., IPS Holding, Ltd. ("IPS")
and the subsidiaries and stockholders of IPS named therein (Form
8-K dated March 16, 1998 (File No. 000-23231), Ex. 2).
-- Pursuant to Item 601(b)(2) of Regulation S-K, certain
schedules and exhibits to the agreements filed or incorporated
by reference as Exhibits 2.1 through 2.13 (all of which are
listed therein) have been omitted. Invatec hereby agrees to
furnish supplementally a copy of any such omitted item to the
SEC on request.
3.1* -- Certificate of Incorporation of the Company (Form S-1 (Reg.
No. 333-31617), Ex. 3.1).
3.2* -- Bylaws of the Company (Form S-1 (Reg. No. 333-31617), Ex.
3.2).
4.1 -- Loan Agreement, dated as of July 7, 1998, by and among the
Company and Chase Bank of Texas, National Association, and
the other lenders referred to therein.
27.1 -- Financial Data Schedule.
- ---------------
* Incorporated by reference to the filing indicated.
(b) Reports on Form 8-K.
None.
20
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant, Innovative Valve Technologies, Inc., has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.
INNOVATIVE VALVE TECHNOLOGIES, INC.
/s/ Charles F. Schugart
CHARLES F. SCHUGART
CHIEF FINANCIAL OFFICER, SENIOR VICE
PRESIDENT - CORPORATE DEVELOPMENT
Dated: August 14, 1998
21
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
2.1* -- Stock Purchase Agreement dated as of December 28, 1996 by and
Among The Safe Seal Company, Inc. ("SSI"), certain stockholders
of Harley Industries, Inc. ("Harley") and Harley (Form S-1 (Reg.
No. 333-31617), Ex. 2.1).
2.2* -- Stock Transfer Agreement dated as of January 24, 1997 by and
among SSI, a stockholder of Harley, Harley and Harley Equipment
Corporation (Form S-1 (Reg. No. 333- 31617), Ex. 2.2).
2.3* -- Stock Purchase Agreement entered into on June 23, 1997 by and
among the Company, Puget Investments, Inc., Flickinger- Benicia
Inc. and the stockholders named therein (Form S-1 (Reg. No.
333-31617), Ex. 2.3).
2.4* -- Stock Purchase Agreement dated as of July 15, 1997 by and
among the Company, Industrial Controls & Equipment, Inc., Valve
Actuation & Repair Co. and the other parties thereto (Form S-1
(Reg. No. 333-31617), Ex. 2.4).
2.5* -- Stock Purchase Agreement dated as of February 26, 1997 by and
among SSI and the stockholders of GSV, Inc. (Form S-1 (Reg. No.
333-31617), Ex. 2.5).
2.6* -- Stock and Real Estate Purchase Agreement dated as of May 22,
1997 by and among SSI, Plant Specialties, Inc., and the
stockholders named therein (Form S-1 (Reg. No. 333-31617), Ex.
2.6).
2.7* -- Agreement and Plan of Reorganization dated as of June 27,
1997 by and among the Company, Southern Valve Service, Inc. and
the other parties thereto (Form S-1 (Reg. No. 333-31617), Ex.
2.7).
2.8* -- Stock Redemption and Purchase Agreement dated as of June 27,
1997 by and among the Company, Lee Roy Jordan, Ralph Buffkin and
55 Leasing and Sales, Inc. (Form S- 1 (Reg. No. 333-31617), Ex.
2.8).
2.9* -- Agreement and Plan of Merger dated as of June 27, 1997 by and
among the Company, IVT Acquisition, Inc. and SSI, as amended as
of August 15, 1997 (Form S-1 (Reg. No. 333-31617), Ex. 2.9).
2.10* -- Uniform Provisions for Acquisitions (incorporated into the
agreements incorporated herein as Exhibits 2.3, 2.4 and 2.7)
(Form S-1 (Reg. No. 333-31617), Ex. 2.10).
2.11* -- Merger Agreement dated as of December 17, 1997 by and among
the Company, DIVT Acquisition, LLC, Dalco, Inc. and the
stockholders named therein (Form 8-K dated December 17, 1997
(file No. 000-23231), Ex. 2).
2.12* -- Stock Purchase Agreement dated as of February 27, 1998 by and
among the Company, Cypress Industries, Inc. and the Stockholders
named therein (Form 8-K dated February 27, 1998 (File No.
000-23231), Ex. 2).
2.13* -- Merger Agreement, dated as of March 16, 1998, by and among
the Company, IPSCO Acquisition, Inc., IPS Holding, Ltd. ("IPS")
and the subsidiaries and stockholders of IPS named therein (Form
8-K dated March 16, 1998 (File No. 000-23231), Ex. 2).
-- Pursuant to Item 601(b)(2) of Regulation S-K, certain
schedules and exhibits to the agreements filed or incorporated
by reference as Exhibits 2.1 through 2.13 (all of which are
listed therein) have been omitted. Invatec hereby agrees to
furnish supplementally a copy of any such omitted item to the
SEC on request.
3.1* -- Certificate of Incorporation of the Company (Form S-1 (Reg.
No. 333-31617), Ex. 3.1).
3.2* -- Bylaws of the Company (Form S-1 (Reg. No. 333-31617), Ex.
3.2).
4.1 -- Loan Agreement, dated as of July 7, 1998, by and among the
Company and Chase Bank of Texas, National Association, and
the other lenders referred to therein
27.1 -- Financial Data Schedule.
- ---------------
* Incorporated by reference to the filing indicated.