================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JUNE 3, 1996 COMMISSION FILE NUMBER: 0-10095 UNIT INSTRUMENTS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) CALIFORNIA 33-0077406 (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER OF INCORPORATION) IDENTIFICATION NUMBER) 22600 SAVI RANCH PARKWAY, YORBA LINDA, CALIFORNIA 92887 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 921-2640 ================================================================================ ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS ------------------------------------ This filing is an amendment to the prior 8-K filing of June 3, 1996 regarding the Control Systems, Inc. ("CSI") acquisition in order to present the required financial statements. On June 3, 1996, Unit Instruments, Inc. ("Unit") completed its previously announced acquisition of CSI through a wholly-owned subsidiary, CSI Acquisition Corporation. CSI was a privately held company based in Rio Rancho, New Mexico. Total consideration was $1.2 million in cash and 289,308 shares of Unit Common Stock valued at approximately $4 million. Funds for this acquisition were obtained from the Registrant's cash balances. The acquisition will be accounted for as a purchase. CSI was founded in 1991 and manufacturers gas isolation boxes, gas panels and other ultra high purity gas delivery systems for the semiconductor industry. CSI will operate as a wholly-owned subsidiary under its current name. To the best knowledge of the Registrant, there is no material relationship between the sellers and the Registrant or any of its affiliates, any director or officer of the Registrant, or any associate of any such director or officer. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS --------------------------------- (a) Financial statements of business acquired. (1) Financial statements of business acquired for year ended December 31, 1995 Report of independent accountants for year ended December 31, 1995 Balance sheet Statement of earnings Statement of stockholder equity Statement of Cash Flow Notes to Financial Statements (2) Unaudited interim statements Balance sheets for the years ended May 31, 1996 and December 31, 1995 Statement of earnings for the five month periods ended May 31, 1996 and May 31, 1995 Statement of cash flows for the five month periods ended May 31, 1996 and May 31, 1995 Notes to unaudited interim financial statements (b) Unaudited pro forma financial information Pro forma balance sheet as of May 31, 1996 Pro forma statement of earnings for the year ended May 31, 1996 FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS CONTROL SYSTEMS, INC. DECEMBER 31, 1995 C O N T E N T S Page REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS......................... 1 FINANCIAL STATEMENTS BALANCE SHEET............................................................ 2 STATEMENT OF EARNINGS.................................................... 3 STATEMENT OF STOCKHOLDERS' EQUITY........................................ 4 STATEMENT OF CASH FLOWS.................................................. 5-6 NOTES TO FINANCIAL STATEMENTS............................................7-13 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors Control Systems, Inc. We have audited the balance sheet of Control Systems, Inc. as of December 31, 1995 and the related statements of earnings, stockholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Control Systems, Inc. as of December 31, 1995 and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. ATKINSON & CO., LTD. Albuquerque, New Mexico June 17, 1996 -1- Control Systems, Inc. BALANCE SHEET December 31, 1995 ASSETS CURRENT ASSETS Cash (note B1) $ 13,412 Accounts receivable Trade (notes B2 and H) $ 855,335 Due from employees 7,030 862,365 Note receivable from stockholder (note D) 143,347 Costs and estimated earnings in excess of billings on uncompleted contracts (notes B4 and E) 214,424 Inventory (notes B3 and H) 1,782,541 ---------- Total current assets 3,016,089 PROPERTY AND EQUIPMENT (notes B5 and H) Leasehold improvements 477,442 Machinery and equipment 468,457 Office equipment 175,112 Vehicle 13,000 ---------- 1,134,011 Less accumulated depreciation and amortization 198,493 935,518 ---------- OTHER ASSETS Deposits 10,700 ---------- Total assets $3,962,307 ========== -2- Control Systems, Inc. LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of long-term debt (notes B5 and H) $ 23,637 Accounts payable 2,862,112 Payroll taxes withheld and accrued 14,996 Other accrued expenses 11,129 Note payable (note G) 50,000 Deferred income taxes (notes B6 and F) 319,329 Deferred revenue (note B4) 129,538 ---------- Total current liabilities 3,410,741 LONG-TERM DEBT, less current maturities (notes B5 and H) 77,673 DEFERRED INCOME TAXES (notes B6 and F) 25,026 ---------- Total liabilities 3,513,440 COMMITMENTS (note I) STOCKHOLDERS' EQUITY Common stock; $1 par value; 500,000 shares authorized, 20,000 shares issued and outstanding 20,000 Retained earnings 428,867 ---------- Total stockholders' equity 448,867 ---------- Total liabilities and stockholders' equity $3,962,307 ========== The accompanying notes are an integral part of this statement. -3- Control Systems, Inc. STATEMENT OF EARNINGS For the year ended December 31, 1995 Sales (notes B4 and B7) $10,388,435 Cost of goods sold (note B4) 8,366,917 ----------- Gross profit on sales 2,021,518 Estimated earnings on contracts (notes B4 and E) 457,270 General and administrative expenses 1,334,537 ----------- Earnings from operations 1,144,251 Other income (expense) Interest expense (94,981) Miscellaneous income 3,562 ----------- Earnings before income taxes 1,052,832 Provision for income tax (notes B6 and F) 463,355 ----------- NET EARNINGS $ 589,477 =========== The accompanying notes are an integral part of this statement. -4- Control Systems, Inc. STATEMENT OF STOCKHOLDERS' EQUITY For the year ended December 31, 1995 Additional Retained Shares Common Paid-In Earnings Treasury Issued Stock Capital (Deficit) Stock Total -------- -------- ---------- ---------- --------- ----------- Balances - December 31, 1994, as previously reported 25,000 $25,000 $ 26,000 $(130,960) $ - $ (79,960) Prior period adjustment - - - 39,350 - 39,350 ------ ------- -------- --------- --------- --------- Balances - December 31, 1994, as restated 25,000 25,000 26,000 (91,610) - (40,610) Purchase of 5,000 shares of treasury stock at $20 per share - - - - (100,000) (100,000) Retirement of treasury stock (5,000) (5,000) (26,000) (69,000) 100,000 - Net earnings for the year - - - 589,477 - 589,477 ------ ------- -------- --------- --------- --------- Balances - December 31, 1995 20,000 $20,000 $ - $ 428,867 $ - $ 448,867 ====== ======= ======== ========= ========= ========= The accompanying notes are an integral part of this statement. -5- Control Systems, Inc. STATEMENT OF CASH FLOWS For the year ended December 31, 1995 Increase (decrease) in cash Cash flows from operating activities Collections from customers and others $11,456,080 Payments to suppliers, employees, and others (9,346,129) Cash paid for interest (94,981) ----------- Net cash (used) provided by operating activities 2,014,970 ----------- Cash flows from investing activities Purchases of property and equipment (698,659) Loans to stockholders (138,331) ----------- Net cash used in investing activities (836,990) ----------- Cash flows from financing activities Repayment of notes payable (1,050,000) Payments on long-term debt (24,015) Purchase of treasury stock (50,000) ----------- Net cash used in financing activities (1,124,015) ----------- Net increase in cash 53,965 Net cash overdraft, December 31, 1994 (40,553) ----------- Cash, December 31, 1995 $ 13,412 =========== The accompanying notes are an integral part of this statement. -6- Control Systems, Inc. STATEMENTS OF CASH FLOWS - CONTINUED For the year ended December 31, 1995 Increase (decrease) in cash Reconciliation of net earnings to net cash provided by operating activities Net earnings $ 589,477 Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 109,639 Provision for deferred income taxes 463,355 Changes in operating assets and liabilities Decrease in trade accounts receivable 453,663 Decrease in other accounts receivable 24,091 Net increase in costs and estimated earnings in excess of billings on uncompleted contracts (297,575) Increase in inventory (514,855) Increase in deposits (4,690) Increase in accounts payable 1,075,979 Decrease in payroll taxes withheld and accrued (23,793) Increase in other accrued expenses 10,141 Increase in deferred revenue 129,538 ---------- Net cash (used) provided by operating activities $2,014,970 ========== SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES Purchase of treasury stock $ 100,000 Cash paid 50,000 ---------- Note payable $ 50,000 ========== The accompanying notes are an integral part of this statement. -7- Control Systems, Inc. NOTES TO FINANCIAL STATEMENTS December 31, 1995 NOTE A - ORGANIZATION Control Systems, Inc. (CSI and the Company) was incorporated on July 15, 1991 in the State of New Mexico for the purpose of designing, manufacturing, and certifying Ultra High Purity gas distribution systems used primarily by manufacturers of microelectronic devices. The work is performed under sales agreements and a short-term fixed-price contract. NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. Cash ---- For purposes of the statement of cash flows, the Company includes in cash all balances on hand and in demand deposit accounts. 2. Accounts Receivable ------------------- Management considers all accounts receivable to be collectible; therefore, no allowance for doubtful accounts is necessary to present accounts receivable at net realizable value. Trade accounts receivable are due primarily from one international semi- conductor manufacturing company. Collateral has not been required on such receivables. 3. Inventories ----------- Inventories, consisting primarily of raw materials and subassemblies, are stated at the lower of (average) cost or market. 4. Revenue and Cost Recognition ---------------------------- The Company manufactures gas distribution systems according to customer specification under sales agreements, primarily with one customer. Revenues are earned and billed as systems are shipped to the customer. Deferred revenue, representing advances on sales contracts, is earned as systems are shipped. -8- Control Systems, Inc. NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 1995 NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED 4. Revenue and Cost Recognition - Continued ---------------------------------------- The Company also provides installation services under a construction-type contract that is accounted for on the percentage-of-completion method. Under this method, the amount of revenues recognized is that portion of the total contract amount that the actual cost expended bears to the anticipated final total cost based on current estimates of cost to complete the project (cost- to-cost method). It is not related to the progress billings to customers. However, when it becomes known that the anticipated final total cost will exceed the contract amount, the excess of cost over contract amount is immediately recognized as a loss on the contract. Recognition of profit commences on an individual project only when cost to complete the project can reasonably be estimated and after there has been some meaningful performance achieved on the project (greater than 10 percent complete). Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions (when applicable), and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined. Costs of goods sold and contract costs include direct costs consisting of labor and related taxes and benefits, materials, and subcontracts, plus an allocation of indirect costs related to manufacturing and contract performance, consisting of personnel, facilities, depreciation, and other manufacturing support costs. Indirect costs are allocated to manufacturing projects and the contract based on a percentage of actual direct costs expended. Operating expenses, consisting of selling, general and administration expenses are charged to operations as incurred. 5. Property, Equipment and Depreciation ------------------------------------ Property and equipment are carried at cost. Major additions and improvements to property and equipment are capitalized and maintenance and repairs, including the replacement of minor items, are expensed as incurred. Depreciation and amortization are provided by the Company using straight-line and accelerated methods over the estimated useful lives of 3 to 31.5 years. -9- Control Systems, Inc. NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 1995 NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED 6. Income Taxes ------------ As discussed in note E, CSI accounts for income taxes under the provisions of Statement of Financial Accounting Standards (SFAS) No. 109 Accounting for Income Taxes. Under the liability method specified by SFAS 109, deferred tax assets and liabilities are determined based on the differences between the financial statement and income tax bases of assets and liabilities as measured by the enacted tax rates that are expected to be in effect when these differences reverse. Deferred income tax expense is based on the changes in the deferred assets and liabilities from period to period. 7. Major Customer -------------- During 1995, approximately ninety-eight percent of the Company's revenues were earned from the delivery of products and services to one customer or its sub- contractors. 8. 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 at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. Significant estimates by management include the collectibility of receivables and the utility and ultimate recoverability of inventory and property and equipment. 9. Fair Value of Financial Instruments ----------------------------------- The carrying values of short-term financial instruments approximate fair value because of their short maturities. -10- Control Systems, Inc. NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 1995 NOTE C - PRIOR PERIOD ADJUSTMENT Retained earnings as of December 31, 1994 has been restated from the balance originally reported to reflect the correction of errors in the measurements of inventories, accounts payable, and accrued and deferred revenues. Inventories and accounts payable were understated by $192,478 and $179,896, respectively. Net revenues in the amount of $26,768 were deferred under the percentage-of- completion method of accounting for certain sales agreements for which generally accepted accounting principles requires the accrual basis of accounting with a provision for sales returns, as necessary. The effect of these corrections was to decrease net income in 1995 by $22,036. NOTE D - NOTES RECEIVABLE The Company has a promissory note receivable due from its major stockholder in the amount of $143,347. The note bears interest at 6.0% per annum, and is due in full on December 31, 1996. -11- Control Systems, Inc. NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 1995 NOTE E - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACT Costs, estimated earnings, and billings on the uncompleted contract are as follows: Costs incurred on uncompleted contract $116,432 Estimated earnings 97,992 -------- 214,424 Less billing to date - -------- Cost and estimated earnings in excess of billings $214,424 ======== NOTE F - INCOME TAXES The components of the provision for income tax expense are as follows: Currently payable $ - Deferred 463,355 -------- $463,355 ======== Significant components of the Company's deferred tax asset and liabilities include: net operating losses available to offset future taxable income, differences in revenue recognition on sales agreements and contracts for financial and income tax reporting purposes, and property and equipment basis differences resulting from differences between financial statement and income tax depreciation methods and lives. The Company's effective tax rate differs from the federal statutory rate due to expenses which have been recorded for financial reporting purposes but are not deductible for income tax purposes, and the effects of state income tax expense, net of the federal benefit. For income tax reporting purposes, the Company has a net operating loss carry forward of approximately $206,000 which, if not applied to offset taxable income, will expire in 2009. -12- Control Systems, Inc. NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 1995 NOTE G - NOTE PAYABLE As of December 31, 1995, the Company was obligated in the amount of $50,000 to a former stockholder under a promissory note agreement, bearing interest at 10%. The entire balance plus accrued interest was paid on February 15, 1996. Subsequent to December 31, 1995, the Company entered into borrowing arrangements with a local commercial bank as follows: Short-term note payable to bank, due on demand after March 31, 1996; interest at Norwest Bank Base Lending Rate plus 3.0% (11.5% as of January 3, 1996); secured by substantially all Company assets; personally guaranteed by the Company's stockholders. $500,000 Long-term note payable to bank, due in monthly payments of $9,907, including interest through December 31, 1998; interest at Norwest Bank Base Lending Rate plus 3.0% (11.5% as of January 3, 1996); secured by substantially all Company assets; personally guaranteed by the Company's stockholders. 300,000 -------- $800,000 ======== Future principal reduction requirement by year on subsequent bank borrowings: 1996 $581,164 1997 98,815 1998 120,021 -------- $800,000 ======== -13- Control Systems, Inc. NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 1995 NOTE H - LONG-TERM DEBT Note payable to bank; due in monthly payments of $2,820, including interest at 2.75% above the Chase Manhattan prime rate (11.25% as of December 31, 1995), through April 30, 1999; secured by furniture, equipment, accounts receivable, inventories, contract rights, and general intangibles. $101,310 Less current maturities 23,637 -------- Total long-term debt, less current maturities $ 77,673 ======== Future maturities of long-term debt are as follows: 1996 $ 23,637 1997 26,437 1998 29,570 1999 21,666 -------- Total $101,310 ======== NOTE I - COMMITMENTS CSI leases office and manufacturing space in Albuquerque, New Mexico and Chandler, Arizona under noncancellable operating leases which expire through November 1999. Minimum lease payments are subject to scheduled increases over the lives of the leases. The Company also leases vehicles and office equipment under various long-term operating leases expiring through December 1996. Lease expense in 1995 totaled $132,945. Future minimum lease payments required by long-term operating leases in the years subsequent to 1995 are as follows: 1996 $121,938 1997 88,310 1998 45,369 1999 49,824 -14- Control Systems, Inc. NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 1995 The Company also leases a residence in Chandler from its principle stockholder. Monthly rentals are $2,000, and rent expense in 1995 totaled $12,000. NOTE J - RELATED PARTY TRANSACTIONS The Company's principle stockholder owns a controlling interest in BCR Commissioning, Inc., which he purchased in order to utilize its construction license. CSI has used this construction license to perform services under the construction type contract (see notes B4 and D). From time to time the Company purchases training services from an entity owned by a stockholder. NOTE K - SUBSEQUENT EVENT Subsequent to December 31, 1995, Unit Instruments, Inc., acquired all of CSI's outstanding common stock in exchange for cash and shares of Unit's common stock. -15- Interim Period Financial Statements - ----------------------------------- Item 7(a)(2) UNAUDITED INTERIM STATEMENTS CONTROL SYSTEMS, INC. STATEMENT OF EARNINGS FOR THE 5 MONTH PERIOD ENDING MAY 31, 1996 AND 1995 (Amounts in thousands) 1996 1995 ------ ------ Net sales $5,132 $4,603 Operating costs and expenses: Cost of goods sold 3,257 3,622 Selling, general and administrative 1,889 388 ------ ------ Operating income (14) 594 Interest income - 3 Interest expense (49) (47) ------ ------ Income before income taxes (63) 550 Provision for income taxes - 247 ------ ------ Net income (loss) $ (63) $ 303 ====== ====== -16- Item 7 (a) (2) UNAUDITED INTERIM STATEMENTS CONTROL SYSTEMS, INC. BALANCE SHEETS (Amounts in thousands) May 31 December 31 1996 1995 -------- ----------- ASSETS Current Assets: Cash and equivalents $ 71 $ 13 Accounts receivable 1,359 1,005 Inventories 1,875 1,783 Prepaid expenses and other 1 214 ------ ------ Total current assets 3,306 3,022 Property, plant and equipment 1,375 1,134 Accumulated depreciation 281 198 ------ ------ Net property, plant and equipment 1,094 578 Other assets 11 11 ------ ------ Total $4,411 $3,962 ====== ====== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $1,503 $2,912 Accrued compensation and benefits 71 15 Current installments of long-term debt 611 23 Deferred income taxes 319 319 Other current liabilities 155 141 ------ ------ Total current liabilities 2,659 3,303 Long-term debt 1,279 78 Other 86 25 ------ ------ Total liabilities 4,024 3,386 Shareholders' equity: Common stock, $1 par value; 500,000 shares authorized, 20,000 shares issued and outstanding 20 20 Additional paid-in capital -- -- Retained earnings 367 429 ------ ------ Total shareholders' equity 387 449 ------ ------ Total $4,411 $3,962 ====== ====== -17- Item 7 (a) (2) UNAUDITED INTERIM STATEMENTS CONTROL SYSTEMS, INC. STATEMENT OF CASH FLOWS FOR THE 5 MONTH PERIOD ENDING MAY 31, 1996 AND 1995 (amounts in thousands) 1996 1995 ------ ------ CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income $ (63) $ 303 Adjustments to reconcile net income to net cash provided from operating activities: Depreciation and amortization 83 19 Deferred income taxes (25) 310 Changes in assets and liabilities: Accounts receivable (354) (124) Inventories (92) (78) Prepaids and other assets 213 (100) Accounts payable (1,359) 566 Accrued expenses 71 (253) Other liabilities 86 -- ------- ----- Net cash flow (used in) provided from operating activities (1,440) 643 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (241) (251) Other -- (3) ------- ----- Net cash provided from (used in) investing activities (241) (254) CASH FLOWS FROM FINANCING ACTIVITIES: Increase (decrease) on long-term debt 1,202 (13) Change in short-term borrowings, net 537 (214) ------- ----- Net cash provided from (used in) financing activities 1,739 (227) Net increase (decrease) in cash and cash equivalents 58 162 Cash and cash equivalents at beginning of year 13 3 ------- ----- Cash and cash equivalents at end of year $ 71 $ 165 -18- CONTROL SYSTEMS, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (amounts in thousands) 1. SIGNIFICANT ACCOUNTING POLICIES The financial statements included herein are based in part on estimates and include such adjustments (consisting solely of normal, recurring adjustments) which management believes are necessary for fair presentation of the Company's financial position at May 31, 1996 and the results of its operations for the two five-month periods ended May 31, 1996 and May 31, 1995. The financial statements and related notes are condensed and have been prepared in accordance with generally accepted accounting principles applicable to interim periods. Consequently, they do not include all generally accepted accounting disclosures required for complete annual financial statements. These condensed financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 1995 contained in this report on form 8-K/A. The results of operations for the periods presented are not necessarily indicative of results to be expected for any subsequent fiscal year or interim period thereof. Certain prior year items have been reclassified to conform to current year presentation. 2. On June 3, 1996, Unit Instruments, Inc. ("Unit") acquired all outstanding capital stock of Control Systems, Inc. ("CSI") for $1.2 million cash and 289,308 shares of Unit Common Stock valued at approximately $4 million. In May of 1996, Unit advanced CSI loans in the amount of $1,025,000, which became intercompany advances as a result of the acquisition. -19- (b) Proforma Financial Information The unaudited proforma condensed combined statement of income of Unit Instruments, Inc. (Unit) and Control Systems, Inc. (CSI) for the year ended May 31,1996 reflects adjustments as if the transaction had occurred on June 1, 1995. The unaudited proforma condensed combined balance sheet is presented as if the transaction had been consummated May 31, 1996. The acquisition of CSI was completed on June 3, 1996 and is being accounted for using the purchase method. The effect of discontinued operations related to the sale of Autoclave Engineers Inc. on Unit's statements has been excluded from the proforma statement of earnings because of the non-recurring nature of that transaction. The unaudited proforma condensed combined financial statements reflect Unit's allocation of the purchase price of approximately $5.18 million, consisting of $1.2 million in cash and 289,308 shares of Unit's Common Stock, to the assets and liabilities of CSI based on estimates of the relative values of assets acquired and liabilities assumed. Transaction costs are minimal as the acquisition of CSI was a stock purchase with one seller owning the majority of shares jointly. The final allocation of the purchase price may vary as additional information is obtained and, accordingly, the ultimate allocations may differ from those used in the unaudited proforma condensed combined financial statements. The unaudited proforma condensed combined financial statements should be read in conjunction with the separate historical financial statements and related notes of CSI appearing in answer to Item 7 (a) of this Current Report on Form 8K/A and historical financial statements, related notes and Management's discussion and Analysis of Consolidated Financial Condition and Results of Operations of Unit for the year ended May 31, 1996. The proforma information is not necessarily indicative of the results that would have been reported had the acquisition actually occurred on the dates specified, nor is it necessarily indicative of the future results of the combined companies. -20- UNIT INSTRUMENTS, INC. UNAUDITED PROFORMA CONDENSED COMBINED STATEMENT OF EARNINGS YEAR ENDED MAY 31, 1996 (amounts in thousands, except per share data) Unit Control Consolidated Systems Proforma Combined Historical Inc. (CSI) Adjustments Proforma ------------ ---------- ----------- -------- Net sales $65,568 $10,802 $76,370 Operating costs and expenses: -- Cost of goods sold 39,501 8,426 47,927 Selling, general and administrative 14,587 1,786 399 (a) 16,772 Restructuring costs 373 373 Research, development and engineering 3,757 3,757 ------- ------- ----- ------- Operating income 7,350 590 (399) 7,541 Interest income 690 (60)(b) 630 Interest expense (112) (97) (209) Other income (expense) (132) 3 (129) ------- ------- ----- ------- Income before income taxes 7,796 496 (459) 7,833 Provision for income taxes 3,018 198 (24)(c) 3,192 ------- ------- ----- ------- Net income (loss) from continuing operations $ 4,778 $ 298 $(435) $ 4,641 ======= ======= ===== ======= Earnings per share from continuing operations $ 1.09 $ 0.99 ------- ------- ----- ------- Average shares used in computing earnings per share 4,393 N/A 289 4,682 ======= ======= ===== ======= Proforma adjustment reference: (a) To reflect amortization of one year's worth of goodwill of $4,479,000 over a 12-year period. (b) To reflect interest income foregone due to $1.2 million cash paid for CSI. (c) To reflect the income tax effect of pro forma adjustments calculated at applicable federal and state statutory rates. -21- UNIT INSTRUMENTS, INC. UNAUDITED PROFORMA CONDENSED COMBINED BALANCE SHEET AS OF MAY 31, 1996 (amounts in thousands) Unit Control Consolidated Systems Proforma Combined Historical Inc. (CSI) Adjustments Proforma ------------ ---------- ----------- -------- ASSETS Current Assets: Cash and equivalents $14,572 $ 71 $(1,200)(a) $13,443 Accounts receivable 10,179 1,359 11,538 Inventories 9,709 1,875 11,584 Deferred taxes and other 1,233 1 1,234 ------- ------ ------- ------- Total current assets 35,693 3,306 (1,200) 37,799 Property, plant and equipment 17,490 1,375 18,865 Accumulated depreciation 7,267 281 7,548 ------- ------ ------- ------- Net property, plant and equipment 10,223 1,094 -- 11,317 Goodwill 4,338 4,790 (b) 9,128 Other assets 2,526 11 (1,025)(c) 1,512 ------- ------ ------- ------- Total $52,780 $4,411 $ 2,565 $59,756 ======= ====== ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,969 $1,503 $ 3,472 Accrued compensation and benefits 1,786 71 1,857 Income taxes payable 1,141 -- 1,141 Current installments on term debt 1,845 611 2,456 Other current liabilities 2,228 474 2,702 ------- ------ ------- ------- Total current liabilities 8,969 2,659 -- 11,628 Long-term debt -- 1,279 (1,025)(d) 254 Other 587 86 673 ------- ------ ------- ------- Total liabilities 9,556 4,024 (1,025) 12,555 Shareholders' equity: Common stock 613 20 23 (e) 656 Additional paid-in capital 19,247 3,934 (f) 23,181 Retained earnings 23,673 367 (367)(g) 23,673 Foreign currency translation (309) (309) ------- ------ ------- ------- Total shareholders' equity 43,224 387 3,590 47,201 ------- ------ ------- ------- Total $52,780 $4,411 $ 2,565 $59,756 ======= ====== ======= ======= -22- Balance sheet proforma adjustment (a) Cash purchase price $(1,200) (b) Purchase price allocated to goodwill 4,790 (c) Intercompany loans to CSI (1,025) (d) Loans to CSI by Unit (1,025) (e) Capital stock used for purchase of CSI - 289,308 shares at $.15 par 43 Elimination of CSI capital stock for consolidation purposes (20) ------- 23 (f) Additional paid-in capital of 289,308 shares paid for CSI valued at $13.75 per share on June 3, 1996 of which $13.60 per share is applied to additional paid-in capital 3,934 (g) Removal of CSI's prior retained earnings (367) -23- SIGNATURES Pursuant to 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. UNIT INSTRUMENTS, INC. Date: August 13, 1996 By /s/ GARY N. PATTEN ----------------------------- Gary N. Patten Chief Financial Officer -24-