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) January 2, 1997 FURON COMPANY (Exact name of Registrant as Specified in its Charter) California 0-8088 95-1947155 - --------------------------------------------------------------------------------------------------------------- (State or other (Commission (IRS Employer Jurisdiction of File Number) Identification Incorporation) Number) 29982 Ivy Glenn Drive, Laguna Niguel, California 92677 - --------------------------------------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (714) 831-5350 Not applicable (Former Name or Former Address, if Changed Since Last Report) 2 Item 7. Financial Statements and Exhibits A current report on Form 8-K was filed on January 17, 1997 by Furon Company ("Furon") describing the merger of Medex, Inc. ("Medex") as required under Item 2 of Form 8-K. Pursuant to Item 7(b)(2), the report omitted the unaudited pro forma financial information for Furon on a combined basis, reflecting the acquisition of Medex. This Form 8-K/A provides that information. Pro forma financial information: Page No. -------- Unaudited Pro Forma Condensed Consolidated Statement of Income for the Nine Months Ended November 2, 1996 4 Unaudited Pro Forma Condensed Consolidated Statement of Income for the Fiscal Year Ended February 3, 1996 5 Notes to Unaudited Pro Forma Condensed Consolidated Statements of Income 6 Unaudited Pro Forma Condensed Consolidated Balance Sheet as of November 2, 1996 8 Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet 9 3 UNAUDITED PRO FORMA FINANCIAL INFORMATION The following Pro Forma Condensed Consolidated Statements of Income for the nine months ended November 2, 1996 and for the fiscal year ended February 3, 1996 present unaudited pro forma operating results for Furon as if the Agreement and Plan of Merger ("Merger") between Furon and Medex had occurred as of the beginning of the periods presented. The following Pro Forma Condensed Consolidated Balance Sheet presents the unaudited pro forma financial condition of Furon as if the Merger occurred as of November 2, 1996. Of the total purchase price, $53.7 million represented the value of in-process research and development. The excess of the purchase price of Medex (exclusive of the amount allocated to in-process research and development) over the net identifiable assets and liabilities of Medex is reported as goodwill. The carrying values of Medex's net assets are assumed to equal their fair values for purposes of these unaudited pro forma financial statements, unless indicated otherwise in the Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet. These values are subject to revision. However, management believes that any resulting adjustments will not have a material effect on the financial position or results of operations. The Unaudited Pro Forma Condensed Consolidated Balance Sheet and Statements of Income were prepared assuming the consummation of: (i) the Merger, which is accounted for under the purchase method of accounting; and (ii) the New Credit Agreement, as defined in Note (a) of Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet. The unaudited pro forma adjustments are described in the accompanying notes. The unaudited pro forma adjustments represent Furon's preliminary determination of the necessary adjustments and are based upon certain assumptions Furon considers reasonable under the circumstances. Final amounts may differ from those set forth below. The unaudited pro forma financial information presented does not consider any future events which may occur after the Merger. The unaudited pro forma financial information presented does not attempt to quantify any operating expense synergies or cost reductions of the combined operations of Furon and Medex that may be realized after the Merger. Nor does the unaudited pro forma financial information consider the incremental expense, capital or conversion costs which may be incurred as a result of the Merger. THE UNAUDITED PRO FORMA FINANCIAL INFORMATION IS PRESENTED FOR INFORMATIONAL PURPOSES ONLY AND IS NOT NECESSARILY INDICATIVE OF THE OPERATING RESULTS OR FINANCIAL POSITION THAT WOULD HAVE OCCURRED HAD THE MERGER BEEN CONSUMMATED AT THE DATES INDICATED, NOR IS IT NECESSARILY INDICATIVE OF FUTURE OPERATING RESULTS OR FINANCIAL POSITION OF FURON FOLLOWING THE MERGER. The unaudited pro forma condensed financial information should be read in conjunction with the consolidated financial statements of each of Furon and Medex and the related notes thereto contained in (i) Furon's Annual Report on Form 10-K for the fiscal year ended February 3, 1996, (ii) Furon's Quarterly Report on Form 10-Q for the quarter ended November 2, 1996, (iii) Medex's Annual Report on Form 10-K for the fiscal years ended June 30, 1996 and 1995, respectively, and (iv) Medex's Quarterly Report on Form 10-Q for the quarters ended March 31, 1996 and September 30, 1996. 4 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME For the nine months ended November 2, 1996 (In Thousands, Except Per Share Amounts) PRO FORMA FURON MEDEX COMBINED ADJUSTMENTS PRO FORMA ----- ----- -------- ----------- --------- Net sales $ 287,206 $ 77,066 $ 364,272 $ - $364,272 Cost of sales 208,995 46,086 255,081 (979) (a) 254,102 --------- ---------- ---------- ---------- -------- Gross profit 78,211 30,980 109,191 979 110,170 Selling, general and administrative expenses 60,239 28,542 88,781 1,685 (b) 90,466 Medex restructuring costs - 1,658 1,658 - 1,658 Gain on sale of product line - (3,098) (3,098) - (3,098) Other (income) expense, net (2,918) 374 (2,544) - (2,544) Interest expense 1,939 332 2,271 8,018 (c) 10,289 --------- ---------- ---------- ---------- -------- Income (loss) before taxes 18,951 3,172 22,123 (8,724) 13,399 Provision (benefit) for income taxes 6,443 1,729 8,172 (2,738) (d) 5,434 --------- ---------- ---------- ---------- -------- Net income (loss) $ 12,508 $ 1,443 $ 13,951 $ (5,986) (e) $ 7,965 ========= ========== ========== ========== ======== Net income per share $ 1.37 $ 0.87 ========= ======== Weighted average common shares outstanding 9,125 9,125 ===== ===== See Accompanying Notes to Unaudited Pro Forma Condensed Consolidated Statements of Income. 5 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME For the fiscal year ended February 3, 1996 (In Thousands, Except Per Share Amounts) PRO FORMA FURON MEDEX COMBINED ADJUSTMENTS PRO FORMA ----- ----- -------- ----------- --------- Net sales $ 344,886 $ 97,750 $ 442,636 $ - $ 442,636 Cost of sales 249,102 51,923 301,025 (1,305) (a) 299,720 Discontinued items - 1,678 1,678 - 1,678 ---------- ---------- ---------- -------- ---------- Gross profit 95,784 44,149 139,933 1,305 141,238 Selling, general and administrative expenses 78,337 41,046 119,383 2,298 (b) 121,681 Medex restructuring costs - 2,699 2,699 - 2,699 Other (income), net (3,866) (224) (4,090) - (4,090) Interest expense 2,899 255 3,154 10,897 (c) 14,051 ---------- ---------- ---------- -------- ---------- Income (loss) before taxes 18,414 373 18,787 (11,890) 6,897 Provision (benefit) for income taxes 5,245 1,083 6,328 (3,733) (d) 2,595 ---------- ---------- ---------- -------- ---------- Net income (loss) $ 13,169 $ (710) $ 12,459 $ (8,157) (e) $ 4,302 ========== ========== ========== ======== ========== Net income per share $ 1.46 $ 0.48 ========== ========== Weighted average common shares outstanding 9,040 9,040 ===== ===== See Accompanying Notes to Unaudited Pro Forma Condensed Consolidated Statements of Income. 6 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME Basis of Consolidation Furon's fiscal year ends on the Saturday closest to January 31. The fiscal year refers to the year in which the period ends. Fiscal year 1996 ended February 3, 1996 and includes 53 weeks. Medex's fiscal year ends on June 30. For purposes of the Unaudited Pro Forma Condensed Consolidated Statement of Income for the nine months ended November 2, 1996, results of operations for Medex are for the three quarters ended December 31, 1996. For purposes of the Unaudited Pro Forma Condensed Consolidated Statement of Income for Furon's fiscal year ended February 3, 1996, results of operations for Medex are for the four quarters ended March 31, 1996. The results of operations for Medex included in the Unaudited Pro Forma Condensed Consolidated Statements of Income contain certain reclassification entries in order to present cost of sales and operating expense information on a basis consistent with the presentation used by Furon. Pro Forma Adjustments (a) Reflects the decrease in depreciation and amortization expense resulting from the write-down of tangible assets to fair market value. The estimated useful lives of these assets are 25 years for buildings and a range of 3 to 18 years for machinery and equipment. (b) Reflects the effect on depreciation and amortization expense resulting from the adjustments below (in thousands): Nine Months Fiscal Year Ended Ended November 2, 1996 February 3, 1996 ---------------- ---------------- Amortization of goodwill (utilizing a 25 year life) related to the Merger and purchase price accounting adjustments $ 900 $ 1,223 Net increase in amortization expense resulting from the step-up of intangible assets to fair market value (utilizing amortization periods ranging from 8 to 25 years) 1,094 1,487 Decrease in depreciation and amortization expenses resulting from the write-down of tangible assets to fair market value. Estimated useful lives are 25 years for buildings and a range of 3 to 5 years for research and develop- ment equipment, computer hardware/software, etc. (309) (412) ------------ ----------- $ 1,685 $ 2,298 ============ =========== 7 (c) Reflects the effect on interest expense resulting from the adjustments below (in thousands): Nine Months Fiscal Year Ended Ended November 2, 1996 February 3, 1996 ---------------- ---------------- Interest expense on an incremental debt level under the New Credit Agreement of $166.3 million as a result of the Merger with an assumed interest rate of 6.3% $7,858 $10,680 Elimination of the amortization of debt issuance costs related to Furon's existing bank credit facilities (39) (53) Amortization of debt issuance costs related to the New Credit Agreement (utilizing a 5 year term) 199 270 ------ ------- $8,018 $10,897 ====== ======= (d) Reflects the decrease in income tax expense resulting from the combined pro forma adjustments of Furon and Medex at Furon's statutory tax rate, but reflecting the non-deductibility of Medex's goodwill amortization for tax purposes. (e) The pro forma adjustments exclude the effect of $53.7 million of purchased in-process research and development which is expected to be expensed by Furon in the fourth quarter of fiscal year ended February 1, 1997. If the write-off had been reflected, net income (loss) per share would decrease from $0.87 to $(5.01) for the nine months ended November 2, 1996 and net income (loss) per share would decrease from $0.48 to $(5.46) for the fiscal year ended February 3, 1996. 8 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET As of November 2, 1996 (In Thousands) PRO FORMA FURON MEDEX COMBINED ADJUSTMENTS PRO FORMA ----- ----- -------- ----------- --------- ASSETS Current assets: Cash and cash equivalents $ 3,872 $ 10,832 $ 14,704 $ - $ 14,704 Accounts receivable, net 54,073 19,524 73,597 - 73,597 Inventories 41,437 23,325 64,762 - 64,762 Deferred income taxes 5,102 2,796 7,898 - 7,898 Prepaid expenses and other assets 3,593 1,498 5,091 - 5,091 --------- ------------ ----------- ---------- ---------- Total current assets 108,077 57,975 166,052 - 166,052 Property, plant and equipment, at cost: Land and land improvements 2,478 2,370 4,848 2,350 7,198 Buildings and leasehold improvements 20,031 19,631 39,662 (7,427) 32,235 Machinery and equipment 137,084 41,295 178,379 (24,475) 153,904 --------- ------------ ----------- ---------- ---------- 159,593 63,296 222,889 (29,552) 193,337 Less accumulated depreciation and amortization (76,633) (28,321) (104,954) 28,321 (76,633) --------- ------------ ----------- ---------- ---------- Net property, plant and equipment 82,960 34,975 117,935 (1,231) 116,704 Goodwill - 4,608 4,608 25,392 30,000 Intangible assets, net 24,769 - 24,769 20,260 45,029 Other assets 5,879 2,430 8,309 1,123 9,432 --------- ------------ ----------- ---------- ---------- $ 221,685 $ 99,988 $ 321,673 $ 45,544 $ 367,217 ========= ============ =========== ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 19,430 $ 4,953 $ 24,383 $ - $ 24,383 Salaries, wages and related benefits payable 10,823 3,438 14,261 - 14,261 Current portion of long-term debt 177 600 777 - 777 Facility rationalization and - 223 223 6,898 7,121 severance Other current liabilities 10,750 7,441 18,191 (4,187) 14,004 --------- ------------ ----------- ---------- ---------- Total current liabilities 41,180 16,655 57,835 2,711 60,546 Long-term debt 35,228 6,175 41,403 166,317 207,720 Other long-term liabilities 22,009 - 22,009 282 22,291 Deferred income taxes 7,603 491 8,094 6,804 14,898 Commitments and contingencies Stockholders' equity: Common stock 38,853 43,359 82,212 (43,359) 38,853 Foreign currency translation 883 830 1,713 (830) 883 adjustment Unearned ESOP shares (3,316) - (3,316) - (3,316) Unearned compensation (314) - (314) - (314) Additional pension liability (1,649) - (1,649) - (1,649) Retained earnings 81,208 32,478 113,686 (86,381) 27,305 --------- ------------ ----------- ---------- ---------- Total stockholders' equity 115,665 76,667 192,332 (130,570) 61,762 --------- ------------ ----------- ---------- ---------- $ 221,685 $ 99,988 $ 321,673 $ 45,544 $ 367,217 ========= ============ =========== ========== ========== See Accompanying Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet. 9 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET For purposes of the Unaudited Pro Forma Condensed Consolidated Balance Sheet, the financial position of Medex is as of December 31, 1996, the end of Medex's second quarter. The following table reflects a detailed breakdown of the pro forma adjustments in the Unaudited Pro Forma Condensed Consolidated Balance Sheet: Unaudited Pro Forma Adjustments (In Thousands) ADJUSTMENT TO MEDEX TRANSACTION CARRYING MERGER (A) COSTS (B) VALUES (C) TOTAL ---------- --------- ---------- ----- ASSETS Current assets: Cash and cash equivalents $ - $ - $ - $ - Accounts receivable, net - - - - Inventories - - - - Deferred income taxes - - - - Prepaid expenses and other assets - - - - ------------ ------------ ---------- --------- Total current assets - - - - Property, plant and equipment, at cost Land and land improvements - - 2,350 2,350 Buildings and leasehold improvements - - (7,427) (7,427) Machinery and equipment - - (24,475) (24,475) ------------ ------------ ---------- --------- - - (29,552) (29,552) Less accumulated depreciation and amortization - - 28,321 28,321 ------------ ------------ ---------- --------- Net property, plant and equipment - - (1,231) (1,231) Goodwill 79,841 5,639 (60,088) 25,392 Intangible assets, net - - 20,260 20,260 Other assets - 1,123 - 1,123 ------------ ------------ ---------- --------- $ 79,841 $ 6,762 $ (41,059) $ 45,544 ============ ============ ========== ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ - $ - $ - $ - Salaries, wages and related benefits payable - - - - Facility rationalization and severance - - 6,898 6,898 Other current liabilities (4,431) - 244 (4,187) ------------ ------------ ---------- --------- Total current liabilities (4,431) - 7,142 2,711 Long-term debt 159,352 6,965 - 166,317 Other long-term liabilities - - 282 282 Deferred income taxes 1,587 - 5,217 6,804 Commitments and contingencies Stockholders' equity: Common stock (43,359) - - (43,359) Foreign currency translation adjustment (830) - - (830) Retained earnings (32,478) (203) (53,700) (86,381) ------------ ------------ ---------- --------- Total stockholders' equity (76,667) (203) (53,700) (130,570) ------------ ------------ ---------- --------- $ 79,841 $ 6,762 $ (41,059) $ 45,544 ============ ============ ========== ========== 10 (a) Reflects the purchase of all outstanding Medex common stock and common stock options at a purchase price of $23.50 per share of common stock and the difference between the $23.50 and the exercise price for each share of common stock covered by each stock option, net of any applicable tax withholding, or a total of $159.4 million. The excess of the purchase price of Medex stock over the net book value of Medex as of the pro forma balance sheet date represents goodwill in the amount of $79.8 million. See note (c) below for further adjustments to goodwill. To finance the Merger, Furon entered into a Credit Agreement dated as of November 12, 1996 (the "New Credit Agreement"), by and among Furon, the lenders party thereto (the "Lenders") and the Bank of New York ("BNY"), as swing line lender and as administrative agent. The New Credit Agreement provides that Furon may borrow up to an aggregate principal amount not to exceed $200,000,000 (the "Facility") (such amount subject to increase to $250,000,000 in aggregate principal amount upon request of Furon and the agreement of lenders to provide such additional amounts). Amounts borrowed under the New Credit Agreement will mature November 12, 2001 and may be prepaid by Furon at any time in whole, or from time to time in part. Borrowings under the New Credit Agreement will bear interest, at Furon's option, at a rate per annum equal to either; (i) the greater of (a) BNY's prime commercial lending rate as publicly announced to be in effect from time to time and (b) 1/2% plus the federal funds rate (as published by the Federal Reserve Bank of New York); or (ii) LIBOR (adjusted for reserves) plus an applicable margin determined on the basis of Furon's leverage ratio for interest periods of one, two, three or six months; or (iii) with respect to swing line loans a rate negotiated between BNY and Furon. Any amounts not paid when due bear interest at the rate otherwise applicable plus two percent. The New Credit Agreement provides for the payment of a commitment fee of a certain rate per annum based on Furon's leverage ratio on the average daily unused amount of the Facility, payable to BNY as administrative agent, for the pro rata account of the Lenders, quarterly in arrears and on maturity or termination. The New Credit Agreement also contains representations and warranties, covenants, conditions to borrowing and events of default customary for a facility of its type. (b) Reflects Furon's estimate of costs associated with the Merger and related financing requirements as follows (in thousands): Debt issuance costs related to the New Credit Agreement $ 1,326 Legal and other professional fees (allocated to goodwill) 5,639 --------- 6,965 Debt issuance costs related to Furon's prior bank credit facilities (203) --------- $ 6,762 ========= 11 (c) Reflects adjustments to the carrying values of Medex's net assets to equal their estimated fair values. These values are subject to revision. However, management believes that any resulting adjustments will not have a material effect on the financial position or results of operations. Land reflects a write-up of $2.6 million and the net book value of buildings reflects a write-down of $2.9 million based on independent appraisals. The net book value of machinery and equipment reflects a write-down of $0.9 million based upon management's best estimate of the fair market value. Other intangible assets, including developed technology, were valued at fair market value based on independent appraisals. Furon estimates that expenses associated with closing certain Medex facilities and other severance costs will approximate $6.9 million. The deferred tax liability is associated with certain adjustments to Medex's carrying values which result in temporary differences under SFAS No. 109, "Accounting for Income Taxes". The fair market value of purchased in-process research and development of $53.7 million was determined by an independent appraisal. The entire amount is expected to be expensed by Furon in the fourth quarter of fiscal year ended February 1, 1997. 12 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 hereunto duly authorized. FURON COMPANY, a California corporation March 18, 1997 By: /S/ MONTY A. HOUDESHELL ---------------------------------------- Name: Monty A. Houdeshell Title: Vice President, Chief Financial Officer and Treasurer