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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) SEPTEMBER 14, 1995
KULICKE AND SOFFA INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PENNSYLVANIA 0-121 23-1498399
(STATE OR OTHER (COMMISSION FILE NUMBER) (IRS EMPLOYER
JURISDICTION OF IDENTIFICATION NO.)
INCORPORATION)
2101 BLAIR MILL ROAD, WILLOW GROVE, PA 19090
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
(215) 784-6000
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This amendment to Form 8-K is being filed solely for the purpose of revising
certain financial statements filed with the original Form 8-K pursuant to Item
7(a) and (b) and adding Exhibit 10.2.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
PAGE
----
(a) Historical financial statements of Circle "S" Industries, Inc. are
attached hereto:
(i) Independent Auditors' Report................................... F-1
(ii) Consolidated Balance Sheets at December 31, 1993 and 1994...... F-2
(iii) Consolidated Statements of Income for the Years Ended December
31, 1992, 1993 and 1994........................................ F-3
(iv) Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1992, 1993 and 1994......................... F-4
(v) Consolidated Statements of Cash Flows for the Years Ended
December 31, 1992, 1993 and 1994............................... F-5
(vi) Notes to Consolidated Financial Statements..................... F-6
(vii) Unaudited Consolidated Balance Sheets at December 31, 1994 and
June 30, 1995.................................................. F-14
(viii) Unaudited Consolidated Statements of Income for the Six Months
Ended June 30, 1994 and 1995................................... F-15
(ix) Unaudited Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1994 and 1995............................ F-16
(x) Notes to Unaudited Consolidated Financial Statements........... F-17
PAGE
----
(b) Unaudited Pro Forma Financial Information
(i) Basis of Presentation.......................................... F-18
(ii) Unaudited Pro Forma Balance Sheet at June 30, 1995............. F-19
(iii) Unaudited Pro Forma Statements of Operations for the Year Ended
September 30, 1994 and the Nine Months Ended June 30, 1995..... F-20
(c)Exhibits
10.1 Restated Loan Agreement between Registrant and Midlantic Bank,
N.A. dated September 14, 1995
10.2 Gold Supply Agreement, as amended October 2, 1995 between American
Fine Wire Corporation, et al, and Rothschild Australia Limited
(the Company has applied for confidential treatment with
respect to portions of this Agreement)
99.1 Report of Independent Accountants, dated September 14, 1995
SIGNATURE
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.
KULICKE AND SOFFA INDUSTRIES, INC.
By: /s/ Clifford G. Sprague
---------------------------------
CLIFFORD G. SPRAGUE,
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
Date: October 26, 1995
2
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
of Circle "S" Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Circle "S"
Industries, Inc. and subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statements presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Circle "S" Industries, Inc. and
subsidiaries at December 31, 1994 and 1993, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1994 in conformity with generally accepted accounting principles.
We have not audited any financial statements of the Company for any periods
subsequent to December 31, 1994, nor have we performed a review of interim
financial statements in conformity with the standards set forth by the American
Institute of Certified Public Accountants. However, as discussed in Note 12 to
the consolidated financial statements, on July 20, 1995 the Company signed a
letter of intent to sell its bonding wire manufacturing operations. Pursuant to
signing the letter of intent, the Company adopted a formal plan to discontinue
its contracting and real estate operations on July 24, 1995.
/s/ Deloitte & Touche LLP
Birmingham, Alabama
March 29, 1995, except for Note 11, as to
which the date is April 10, 1995 and Note 12,
as to which the date is July 24, 1995
F-1
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
DECEMBER 31,
----------------
1993 1994
------- -------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 1)........................... $ 8,241 $11,267
Accounts receivable, net of allowance for doubtful accounts
of $115 (1993) and $173 (1994).............................. 6,577 8,049
Inventories (Note 3)......................................... 1,387 1,625
Prepaid expenses and other................................... 262 331
Deferred income tax benefit (Note 7)......................... 135 108
Net assets of discontinued operations (Note 12).............. 2,262 2,726
------- -------
Total.................................................... 18,864 24,106
------- -------
PROPERTY, PLANT AND EQUIPMENT, Net (Note 4).................. 3,835 3,528
------- -------
INTANGIBLE AND OTHER ASSETS:
Goodwill, net of accumulated amortization of $458 (1993)
and $531 (1994)........................................... 1,585 1,212
Other...................................................... 192 94
------- -------
Total.................................................... 1,777 1,306
------- -------
TOTAL (Note 5)........................................... $24,476 $28,940
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of capital lease obligations and notes pay-
able (Note 5)............................................... $ 7,536 $11,932
Accounts payable............................................. 674 798
Accrued liabilities.......................................... 908 1,313
Income taxes payable......................................... 849 905
------- -------
Total.................................................... 9,967 14,948
------- -------
LONG-TERM LIABILITIES:
Long-term portion of capital lease obligations and notes
payable (Note 5).......................................... 2,711 --
Deferred income taxes (Note 7)............................... 595 1,331
------- -------
Total.................................................... 3,306 1,331
------- -------
Total Liabilities........................................ 13,273 16,279
------- -------
STOCKHOLDERS' EQUITY (Notes 3, 5 and 8):
Common stock, par value $.10 per share, authorized 1,100,000
shares, issued 570,804 shares............................... 57 57
Additional paid-in capital................................... 1,140 1,258
Retained earnings............................................ 15,362 17,929
Treasury stock, at cost...................................... (5,376) (6,701)
Accumulated translation adjustment........................... 20 118
------- -------
Total stockholders' equity............................... 11,203 12,661
------- -------
TOTAL.................................................... $24,476 $28,940
======= =======
See notes to consolidated financial statements.
F-2
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
-------------------------
1992 1993 1994
------- ------- -------
REVENUES (Note 2)................................... $50,824 $55,609 $68,764
COST OF SALES....................................... 46,532 48,256 58,898
------- ------- -------
GROSS PROFIT........................................ 4,292 7,353 9,866
SELLING, GENERAL AND ADMINISTRATIVE................. 4,223 3,627 5,004
------- ------- -------
OPERATING INCOME.................................... 69 3,726 4,862
------- ------- -------
OTHER INCOME (EXPENSE):
Interest income................................... 81 13 28
Interest expense (Note 5)......................... (722) (522) (457)
Other, net........................................ (62) (316) (191)
------- ------- -------
Total other expense, net........................ (703) (825) (620)
------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES................... (634) 2,901 4,242
INCOME TAX PROVISION (BENEFIT) (Note 7)............. (671) 1,064 1,629
------- ------- -------
INCOME FROM CONTINUING OPERATIONS................... 37 1,837 2,613
DISCONTINUED OPERATIONS (Note 12)--income (loss)
from operations of contracting and real estate
operations to be disposed of [net of income tax
(benefit) of $(45) (1992), $165 (1993) and $(13)
(1994)]............................................ (81) 298 (46)
------- ------- -------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES........................ (44) 2,135 2,567
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME
TAXES (Note 1)..................................... 103 -- --
------- ------- -------
NET INCOME.......................................... $ 59 $ 2,135 $ 2,567
======= ======= =======
See notes to consolidated financial statements.
F-3
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1992, 1993, AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
COMMON STOCK TREASURY STOCK
---------------- ADDITIONAL ------------------ ACCUMULATED TOTAL
NUMBER PAID-IN RETAINED NUMBER TRANSLATION STOCKHOLDERS'
OF SHARES AMOUNT CAPITAL EARNINGS OF SHARES AMOUNT ADJUSTMENT EQUITY
--------- ------ ---------- -------- --------- ------- ----------- -------------
BALANCE AT
JANUARY 1, 1992........ 570,804 $57 $1,140 $13,168 (259,165) $(5,376) $ 53 $ 9,042
Net Income.............. 59 59
Foreign currency
translation
adjustment............. (22) (22)
------- --- ------ ------- -------- ------- ---- -------
BALANCE AT
DECEMBER 31, 1992...... 570,804 57 1,140 13,227 (259,165) (5,376) 31 9,079
Net Income.............. 2,135 2,135
Foreign currency
translation
adjustment............. (11) (11)
------- --- ------ ------- -------- ------- ---- -------
BALANCE AT
DECEMBER 31, 1993...... 570,804 57 1,140 15,362 (259,165) (5,376) 20 11,203
Net Income.............. 2,567 2,567
Purchases of treasury
stock.................. (56,256) (1,547) (1,547)
Exercise of stock op-
tions.................. 118 10,000 222 340
Foreign currency
translation
adjustment............. 98 98
------- --- ------ ------- -------- ------- ---- -------
BALANCE AT
DECEMBER 31, 1994...... 570,804 $57 $1,258 $17,929 (305,421) $(6,701) $118 $12,661
======= === ====== ======= ======== ======= ==== =======
See notes to consolidated financial statements.
F-4
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
----------------------------
1992 1993 1994
-------- -------- --------
OPERATING ACTIVITIES:
Net income...................................... $ 59 $ 2,135 $ 2,567
Adjustments to reconcile net income to net cash
provided by continuing operations:
Discontinued operations........................ 81 (298) 46
Cumulative effect of change in accounting meth-
od............................................ (103) -- --
Depreciation and amortization................. 822 779 850
Provision for doubtful accounts............... 15 84 48
(Gain) loss on sale of property, plant and
equipment.................................... 8 (666) 2
Deferred income tax provision (benefit)....... (795) 347 699
Changes in assets and liabilities provided
(used) cash:
Accounts receivable.......................... (1,027) 172 (1,667)
Inventories and prepaid expenses............. 384 (511) (565)
Accounts payable and accrued liabilities..... 434 (993) 621
Income taxes payable......................... 411 813 58
Other, net................................... (39) 73 133
-------- -------- --------
Net cash provided by continuing operations.. 250 1,935 2,792
Net cash provided by discontinued opera-
tions...................................... 50 541 570
-------- -------- --------
Net cash provided by operating activities... 300 2,476 3,362
-------- -------- --------
INVESTING ACTIVITIES:
Capital expenditures............................ (369) (289) (412)
Proceeds from retirement of assets.............. -- 1,514 300
Net cash provided by (used in) investing activ-
ities......................................... (369) 1,225 (112)
-------- -------- --------
FINANCING ACTIVITIES:
New borrowings.................................. 10,993 13,770 15,402
Principal payments on debt and capital lease ob-
ligations...................................... (14,103) (12,467) (14,464)
Purchases of treasury stock..................... -- -- (1,547)
Proceeds from exercise of stock options......... -- -- 340
-------- -------- --------
Net cash provided by (used in) financing activ-
ities......................................... (3,110) 1,303 (269)
-------- -------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH.......... (22) (11) 45
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS..................................... (3,201) 4,993 3,026
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR... 6,449 3,248 8,241
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR......... $ 3,248 $ 8,241 $ 11,267
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMA-
TION:
Cash paid during the year for:
Interest....................................... $ 772 $ 792 $ 468
======== ======== ========
Income taxes................................... $ 331 $ 169 $ 849
======== ======== ========
See notes to consolidated financial statements.
F-5
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include the
accounts of Circle "S" Industries, Inc. and its wholly-owned subsidiaries
(collectively, the "Company"). All significant intercompany transactions and
account balances are eliminated in consolidation.
Operating Subsidiary--
American Fine Wire Corporation ("AFW"), including its wholly-owned
subsidiaries, American Fine Wire, Ltd. ("AFW, Ltd.") and Muller Feindraht
AG ("MFD")
Discontinued Operations:
Nelson-Brantley Glass Contractors, Inc.
Clearview Properties, Inc.
Luminar Corporation ("Luminar") (formerly DISCO Aluminum Products Company,
Inc.)
NATURE OF BUSINESS--The Company, through American Fine Wire Corporation and
its subsidiaries, manufactures gold and aluminum bonding wire for the
electronics industry; Nelson-Brantley Glass Contractors, Inc. contracts for
the installation of glass doors, windows and panels in commercial buildings;
and Clearview Properties, Inc. owns commercial buildings which are leased to
others under long-term leases. On July 24, 1995 the Company adopted a formal
plan to sell its contracting and real estate operations (see Note 12).
Luminar has been a non-operating subsidiary of the Company since November
1985. In December 1993 the Company sold the former manufacturing facility of
Luminar for $1,408 in cash. The sale resulted in a pretax gain of $562. The
remaining assets and liabilities of Luminar were reclassified into real estate
operations.
CASH EQUIVALENTS--For the purposes of the consolidated statements of cash
flows, the Company considers all highly liquid debt instruments purchased with
an original maturity of three months or less to be cash equivalents.
As of December 31, 1993 and 1994, the Company had obtained short-term bank
loans totaling $13,020 and $15,402, respectively, (including $7,655 and
$6,931, respectively, related to discontinued operations) the proceeds of
which were used to purchase approximately the same amount of U.S. Treasury
Bills which were pledged as collateral for the short-term bank loans. The
Bills were sold and the bank loans paid off in early January of the year
following their purchase.
INVENTORIES--Manufacturing and certain contracting inventories are stated at
the lower of cost or market on the first-in, first-out (FIFO) method. The
majority of contracting inventories are stated at the lower of cost or market
on the last-in, first-out (LIFO) method.
REVENUE RECOGNITION--Revenue from manufactured products is recognized in
accordance with terms of the contract at the time the product is shipped.
Revenue from long-term, fixed price contracts of the discontinued contracting
operations is recognized on the percentage-of-completion method, measured by
the percentage of cost incurred to date to the projected total cost for each
contract. The effect on revenue of revisions in the total projected cost is
recorded in the period in which the revised projection is determined.
Projected losses are provided for when determined.
F-6
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment is carried at
cost, reduced by permanent impairments in value. Major additions and
improvements which extend the capabilities or the life of an asset are
capitalized and depreciated. Maintenance and repair expenditures are expensed
as incurred. Upon sale, retirement or other disposal of these assets, the cost
and the related accumulated depreciation or amortization are removed from the
accounts and any gain or loss is included in income.
For financial reporting purposes, the Company provides for depreciation using
the straight-line method over the following lives:
Building and leasehold improvements............................ 8-15 years
Buildings...................................................... 15-40 years
Machinery and equipment........................................ 5-12 years
Automotive vehicles............................................ 3 years
Property, plant and equipment acquired under capital lease agreements is
valued at inception at the lower of the present value of minimum lease
payments or the fair value of the leased asset. These assets are amortized on
a straight-line basis in a manner consistent with the Company's depreciation
policy for similar purchased assets. Leasehold improvements are amortized on a
straight-line basis over the shorter of the asset's economic life or the term
of the lease.
INCOME TAXES--During 1992, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109 ("SFAS No. 109") which requires
deferred income taxes be recorded for differences in book and tax bases of
assets and liabilities based on the tax rates and laws enacted as of the
balance sheet date. The effects of future changes in tax laws or rates are not
anticipated. Such deferred income taxes are classified according to the
classification of the related asset or liability for financial reporting. The
Company elected to present the adoption of SFAS No. 109 through a cumulative
effect of change in accounting for income taxes in the consolidated statement
of income for the year ended December 31, 1992 (see Note 7).
FOREIGN CURRENCY TRANSLATION--The functional currency of AFW, Ltd. (located in
Singapore) is the U.S. dollar since substantially all sales, purchasing and
financing transactions are denominated as such. Gains and losses resulting
from foreign currency transactions are therefore included in the consolidated
statements of income and such amounts are insignificant.
Gains and losses resulting from translation of the accounts of MFD (located in
Switzerland) into U.S. dollars at current exchange rates for assets and
liabilities and at average rates of exchange for the year for revenues and
expenses are accumulated in a separate account, "Accumulated Translation
Adjustment," included in stockholders' equity.
GOODWILL--Cost in excess of net assets acquired (goodwill) is being amortized
on a straight-line basis generally over a period of forty years. The Company
periodically reviews goodwill to assess recoverability, and impairments would
be recognized in operating results if permanent diminution in value were to
occur.
ACCOUNTING STANDARDS YET TO BE ADOPTED--The Company has not yet adopted the
provisions of SFAS No. 107 regarding disclosure of the fair value of financial
instruments. Adoption of the Statement is expected in 1995 and will result in
only increased disclosure regarding the affected instruments.
RECLASSIFICATION--Certain reclassifications have been made to prior years
balances to conform to current year presentation.
F-7
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. MAJOR CUSTOMERS
A significant portion of the Company's revenue is derived from sales to a
limited number of customers in the semiconductor industry.
During 1992, 1993 and 1994 the Company's four largest customers each
represented over 10% of the Company's total revenues. These customers and their
percentages of total revenues are:
1992 1993 1994
---- ---- ----
Customer 1.................................................. 20% 18% 15%
Customer 2.................................................. 15% 17% 16%
Customer 3.................................................. 13% 15% 13%
Customer 4.................................................. 12% 15% 13%
At December 31, 1993 and 1994, approximately $4,254 and $4,748, respectively,
of the Company's trade receivables were due from its five major customers.
These receivables represent normal trade receivables which arose from the sale
of bonding wire. Generally, these accounts receivable are unsecured. Management
believes these accounts receivable are collectible and that each of these
customers are credit worthy.
3. INVENTORIES
Inventories at December 31, 1993 and 1994 consisted of the following:
1993 1994
------ ------
Finished goods............................................... $ 323 $ 379
Work in process.............................................. 39 90
Raw materials................................................ 1,025 1,156
------ ------
Total inventories.......................................... $1,387 $1,625
====== ======
The Company uses a significant amount of gold in its manufacturing process.
Most of this gold is held on consignment from the supplier under the terms of a
gold supply agreement. The agreement requires payment for the gold used in the
manufacturing process two days after the finished product is shipped to the
customer. The agreement also (a) requires stockholders' equity to be maintained
at certain levels, (b) requires that certain financial ratios be maintained and
(c) grants a security interest in related accounts receivable. In addition, the
Company's majority stockholder has guaranteed the value of gold on consignment
and is paid a monthly guarantee fee of 1/2% per annum of the consignment
balance. Such fee was $43 and $57 for the years ended December 31, 1993 and
1994, respectively. No fee was paid in 1992 as the agreement was not yet in
place.
4. PROPERTY, PLANT AND EQUIPMENT
Components of property, plant and equipment and accumulated depreciation and
amortization at December 31, 1993 and 1994 were as follows:
1993 1994
------- -------
Land..................................................... $ 56 $ 56
Building and improvements................................ 1,556 1,577
Manufacturing equipment.................................. 5,553 5,824
Furniture and equipment.................................. 781 853
------- -------
7,946 8,310
Accumulated depreciation and amortization................ (4,111) (4,782)
------- -------
Total.................................................. $ 3,835 $ 3,528
======= =======
F-8
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following is a summary of the property, plant and equipment under capital
leases which is included in the previous summary:
1993 1994
----- -----
Land......................................................... $ 15 $ 15
Building and improvements.................................... 392 392
Manufacturing equipment...................................... 370 370
----- -----
Total...................................................... 777 777
Accumulated amortization..................................... (530) (551)
----- -----
Net property under capital leases.......................... $ 247 $ 226
===== =====
5. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS
Notes payable and capital lease obligations at December 31, 1993 and 1994
consisted of:
1993 1994
------- --------
Notes payable:
U.S. Treasury Bill purchases (Note 1)................. $ 5,365 $ 8,471
Note payable to a bank, due on December 31, 1995, with
interest at 6.13%.................................... 2,500 2,500
Credit facility payable to a bank is as follows:
Working capital portion, paid in full during 1994..... 1,000 --
Working capital portion, with interest at the Singa-
pore Interbank Offered Rate plus 2.0% (7.5% at Decem-
ber 1, 1994)......................................... 750 750
Term portion, with quarterly principal installments of
$105 plus interest at prime plus 1%.................. 632 211
------- --------
Total................................................... 10,247 11,932
Current maturities:
Callable.............................................. (1,000) --
Scheduled............................................. (6,536) (11,932)
------- --------
Total noncurrent portion of notes payable and capital
lease obligations...................................... $ 2,711 $ --
======= ========
The Company's note payable to a bank is with the same bank which serves as the
primary supplier of gold used in the manufacturing process. Prior to March 21,
1995, the note payable contained convertible features whereby the lender could
convert up to $1,875 of the principal amount into an amount not greater than
20% of the common stock of AFW which is outstanding on the date of conversion,
on a fully-diluted basis.
On March 21, 1995, the Company negotiated amendments to the note payable which,
(i) eliminated the convertible feature of the note in exchange for payment of
$1,000 to the bank and (ii) granted the bank an option to purchase 12,350
shares of the Company's common stock for $1 prior to January 1, 1996. Payment
of the $1,000 was arranged through an increase of $1,000 in the note payable.
In the event that prior to January 1, 1996 the Company consummates the sale
discussed in Note 12, at a price in excess of $37,000, the Company is obligated
to repurchase, at the bank's election, any shares held by the bank which were
obtained through the option for $1,606.
Substantially all property, plant and equipment is pledged as collateral to the
Company's debt. In addition, a security interest in substantially all other
assets has been granted as collateral to secure the
F-9
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Company's debt and contractual obligations. The Company's working capital loan
and notes payable contain restrictions on dividends, capital expenditures, new
debt and purchases of treasury stock as well as covenants to maintain certain
financial ratios. At December 31, 1992, 1993 and 1994, the Company was in
violation of the covenant which requires maintenance of a current ratio of at
least 1.5 to 1.0 (see Note 11).
Included above is debt totaling $3,460 at December 31, 1994, which is
guaranteed by the Company's majority shareholder. A guarantee fee of 1 1/2%
per annum of the outstanding principal balance is paid monthly to such
shareholder. Such fee was $91, $87 and $67 for the years ended December 31,
1992, 1993 and 1994, respectively.
6. OPERATING LEASES AND OTHER
Total rental expense for all operating leases approximated $386, $342 and $401
for the years ended December 31, 1992, 1993, and 1994, respectively. Most of
these operating leases are short-term, expiring in 1995, with renewal options.
In 1993 the Company paid a commission of $75 to its majority shareholder as
compensation for serving as the agent relating to the sale of a former
manufacturing facility.
7. INCOME TAXES
The components of income (loss) before income taxes are as follows:
1992 1993 1994
------- ------ ------
Foreign............................................ $ 775 $3,451 $4,079
Domestic........................................... (1,409) (550) 163
------- ------ ------
Total.............................................. $ (634) $2,901 $4,242
======= ====== ======
The components of the income tax provision (benefit) from continuing
operations are as follows:
1992 1993 1994
----- ------ ------
Current provision..................................... $ 60 $ 878 $ 905
Deferred provision.................................... (731) 186 724
----- ------ ------
Total................................................. $(671) $1,064 $1,629
===== ====== ======
The income tax provision (benefit) differs from amounts computed by applying
the U.S. Federal statutory rate to income before provision for income taxes
due to the following reasons:
1992 1993 1994
----- ------ ------
Tax at statutory rate of 35% (34% for 1992).......... $(216) $1,015 $1,485
Tax effect of permanent differences.................. 38 52 51
Reversal of prior year overaccruals.................. (481) -- --
Other, net........................................... (12) (3) 93
----- ------ ------
Total................................................ $(671) $1,064 $1,629
===== ====== ======
F-10
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The components of the deferred tax provision (benefit) are as follows:
1992 1993 1994
----- ----- ----
Taxable loss.......................................... $(500) $(204)
Tax over (under) book depreciation.................... 38 21 $ (2)
Book/tax gain on sale of assets....................... -- 6 --
Income from foreign subsidiaries...................... 274 349 571
Changes in expense reserves not deducted for tax
purposes, net........................................ (4) 26 (11)
Net operating loss carryforward....................... -- -- 71
Reversal of prior year overaccruals................... (481) -- --
Other, net............................................ (58) (12) 95
----- ----- ----
Total................................................. $(731) $ 186 $724
===== ===== ====
The approximate tax effects of temporary differences are as follows:
ASSETS (LIABILITIES)
----------------------
1993 1994
---------- ----------
Current differences:
Bad debt reserve................................ $ 8 $ 12
Accrued expenses................................ 127 96
---------- ----------
Total............................................. $ 135 $ 108
========== ==========
Long-term differences:
Net operating loss carryforward................. $ 704 $ 585
Foreign subsidiaries............................ (1,121) (1,743)
Tax over book depreciation...................... (188) (183)
Other........................................... 10 10
---------- ----------
Total............................................. $ (595) $ (1,331)
========== ==========
F-11
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. STOCK REPURCHASE PROVISIONS AND INCENTIVE COMPENSATION PLANS
The Company's stockholders have entered into various agreements whereby the
stock owned by each stockholder will, under certain circumstances, first be
offered to the Company for purchase by the Company prior to disposition by the
stockholder.
The Company has outstanding stock options issued to key employees and certain
directors. The plan under which these options were issued expired on March 29,
1995; therefore, no additional options are available to be granted.
Transactions involving stock options for 1993 and 1994 were as follows:
NUMBER OF SHARES AT
---------------------------------------------------------
TOTAL $23.50 $29.13 $30.63 $33.63 $33.79 $ 47.71
------- ------- ------ ------- ------ ------- -------
Balance, December 31,
1992................... 80,000 10,000 20,000 20,000 30,000
Expired............... (30,000) (10,000) (20,000)
Granted............... 10,000 10,000
------- ------- ------ ------- ------ ------- ------
Balance, December 31,
1993................... 60,000 -- 10,000 -- 20,000 30,000 --
Expired............... (20,000) (20,000)
Granted............... 30,000 30,000
Exercised............. (10,000) (10,000)
------- ------- ------ ------- ------ ------- ------
Balance, December 31,
1994................... 60,000 -- 10,000 -- 20,000 -- 30,000
======= ======= ====== ======= ====== ======= ======
Exercisable at December
31, 1994............... 35,999
=======
Included in the 35,999 options exercisable at December 31, 1994 are 26,000
options repurchased by the Company on January 12, 1995 for $260.
In addition, at December 31, 1994 the Company had an Equity Appreciation
Rights Incentive Compensation Plan (the "EARs Plan") for key employees. During
1993, 5,000 of these rights were canceled through their exchange for $63. At
December 31, 1994, 51,000 rights were available for future grants; however, on
March 29, 1995, the EARs Plan expired with no rights having been issued.
9. OPERATIONS BY GEOGRAPHIC AREA
The Company operates primarily in one industry segment, the manufacture and
sale of bonding wire to the semiconductor industry. The Company's market is
worldwide. As indicated below, sales to foreign customers of bonding wire are
substantial:
YEAR ENDED DECEMBER 31,
-------------------------
1992 1993 1994
------- ------- -------
Sales to unaffiliated customers:
Domestic with foreign destination(1)........... $14,259 $ 7,756 $ 5,603
Foreign subsidiaries........................... 31,342 44,051 57,937
------- ------- -------
Total foreign destination...................... 45,601 51,807 63,540
Domestic destination........................... 5,223 3,802 5,224
------- ------- -------
Total sales to unaffiliated customers.......... $50,824 $55,609 $68,764
======= ======= =======
Sales to foreign customers as a percentage of
total sales................................... 90% 93% 92%
- --------
(1) Represents United States sales to unaffiliated customers that were either
sales to customers in foreign countries or shipments to the freight forwarding
agents of domestic companies for shipments to their foreign operating
facilities.
F-12
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Additional information by geographic area for years ended December 31 is as
follows:
YEAR ENDED DECEMBER 31,
-------------------------
1992 1993 1994
------- ------- -------
Sales to unaffiliated customers:
Europe.......................................... $ 2,991 $ 2,991 $ 3,967
Asia/Pacific.................................... 42,610 48,817 59,572
------- ------- -------
Total foreign................................... 45,601 51,808 63,539
United States................................... 5,223 3,801 5,225
Eliminations.................................... 0 0 0
------- ------- -------
Total............................................. $50,824 $55,609 $68,764
======= ======= =======
Intercompany sales:
Europe.......................................... $ 31 $ 33 $ 67
Asia/Pacific.................................... 356 917 1,719
------- ------- -------
Total foreign................................... 387 950 1,786
United States................................... 0 0 0
Eliminations.................................... (387) (950) (1,786)
------- ------- -------
Total............................................. $ 0 $ 0 $ 0
======= ======= =======
Total sales:
Europe.......................................... $ 3,022 $ 3,024 $ 4,034
Asia/Pacific.................................... 42,966 49,734 61,291
------- ------- -------
Total foreign................................... 45,988 52,758 65,325
United States................................... 5,223 3,801 5,225
Eliminations.................................... (387) (950) (1,786)
------- ------- -------
Total............................................. $50,824 $55,609 $68,764
======= ======= =======
Operating income:
Europe.......................................... $ 74 $ 67 $ 167
Asia/Pacific.................................... 1,046 3,662 4,026
------- ------- -------
Total foreign................................... 1,120 3,729 4,193
United States................................... (1,039) (3) 669
Eliminations.................................... (12) 0 0
------- ------- -------
Total............................................. $ 69 $ 3,726 $ 4,862
======= ======= =======
Income before income taxes:
Europe.......................................... $53 $60 $189
Asia/Pacific.................................... 722 3,391 3,890
------- ------- -------
Total foreign................................... 775 3,451 4,079
United States................................... (1,409) (550) 163
Eliminations.................................... 0 0 0
------- ------- -------
Total............................................. $ (634) $ 2,901 $ 4,242
======= ======= =======
F-13
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEAR ENDED DECEMBER 31,
----------------------------
1992 1993 1994
-------- -------- --------
Total Assets:
Europe.......................................... $ 591 $ 723 $ 1,017
Asia/Pacific.................................... 8,148 10,662 11,425
-------- -------- --------
Total foreign................................... 8,739 11,385 12,442
United States................................... 26,223 33,487 42,092
Eliminations.................................... (14,682) (20,396) (25,594)
-------- -------- --------
Total............................................. $ 20,280 $ 24,476 $ 28,940
======== ======== ========
Financial information pertaining to the consolidated foreign operations
follows:
YEAR ENDED DECEMBER
31,
--------------------
1992 1993 1994
------ ------ ------
Working Capital........................................... $2,780 $4,308 $7,719
Property, plant and equipment, less accumulated deprecia-
tion..................................................... 2,551 2,263 2,084
Total liabilities......................................... 5,977 6,089 4,446
Shareholders' equity including retained earnings of
$1,480, $4,003 and $6,606 for the fiscal years ended
1992, 1993 and 1994, respectively........................ 2,783 5,296 7,996
Net income for the year................................... $501 $2,524 $2,671
10. RETIREMENT SAVINGS PLAN
The Company maintains a retirement savings incentive plan established under
Internal Revenue Code Section 401(k). Substantially all domestic employees are
eligible to participate in the Plan. Under the 401(k) Plan, the Company is
required to match 50% of amounts contributed by each participant up to a
maximum of 6% of each participant's eligible compensation. Contributions by the
Company to the 401(k) Plan approximated $33, $34 and $37 for the years ended
December 31, 1992, 1993 and 1994, respectively.
11. WAIVER OF DEBT COVENANT VIOLATION
On April 29, 1993, May 9, 1994 and April 10, 1995, the Company's bank waived
the covenant violation discussed in Note 5.
12. SALE OF BUSINESS AND DISCONTINUED OPERATIONS
On July 20, 1995, the Company signed a letter of intent to sell its bonding
wire manufacturing operations to Kulicke and Soffa Industries, Inc. The sale is
anticipated to close by September 30, 1995.
Pursuant to the above, on July 24, 1995 the Company adopted a formal plan to
sell its contracting and real estate operations. The sale is expected to be
completed by September 30, 1995. The assets of the contracting operation
consist primarily of accounts receivable, inventories, prepaid expenses and
equipment used in the contracting business. Assets of the real estate operation
consist primarily of rental property.
The consolidated balance sheets at December 31, 1993 and 1994 and the
consolidated statements of income and cash flows for each of the three years in
the period ended December 31, 1994 have been restated to present the net
assets, operating results and cash flows of the contracting and real estate
operations separately.
F-14
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Net revenues of the contracting operation for the years ended December 31,
1992, 1993 and 1994 were $3,387, $2,659 and $3,299, respectively, while net
revenues of the real estate operation were $444, $446 and $444 for the same
periods, respectively. These amounts are not included in revenues in the
accompanying consolidated income statements.
Assets and liabilities of the contracting and real estate operations to be
disposed of consisted of the following at December 31:
1993 1994
-------------------------- --------------------------
REAL REAL
CONTRACTING ESTATE TOTAL CONTRACTING ESTATE TOTAL
----------- ------ ------ ----------- ------ ------
Accounts receivable,
net.................... $ 456 $ 23 $ 479 $ 610 $ 18 $ 628
Inventories............. 62 -- 62 141 -- 141
Prepaid and other, net.. 342 149 491 561 131 692
Property and equipment.. 183 1,518 1,701 223 1,471 1,694
------ ------ ------ ------ ------ ------
Total Assets............ 1,043 1,690 2,733 1,535 1,620 3,155
Accounts payable and
accrued liabilities.... (229) (81) (310) (246) (26) (272)
Deferred income taxes... -- (161) (161) -- (157) (157)
------ ------ ------ ------ ------ ------
$ 814 $1,448 $2,262 $1,289 $1,437 $2,726
====== ====== ====== ====== ====== ======
Estimated results of discontinued operations from July 24, 1995 to the disposal
date are not expected to be significant. The net proceeds from disposition are
expected to exceed the current carrying value.
* * * * *
F-15
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
DECEMBER 31, JUNE 30,
1994 1995
------------ --------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................ $11,267 $ 2,427
Accounts receivable, net of allowance for doubtful ac-
counts of $173 (1994) and $196 (1995)................... 8,049 8,902
Inventories (Note 2)..................................... 1,625 2,134
Prepaid expenses and other............................... 331 346
Deferred income tax benefit.............................. 108 109
Net assets of discontinued operations.................... 2,726 2,618
------- -------
Total................................................ 24,106 16,536
PROPERTY, PLANT AND EQUIPMENT, Net....................... 3,528 3,633
INTANGIBLE AND OTHER ASSETS:
Goodwill, net of accumulated amortization of $531 (1994)
and $568 (1995)......................................... 1,212 1,175
Other.................................................... 94 45
------- -------
TOTAL................................................ $28,940 $21,389
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of capital lease obligations and notes
payable (Note 3)........................................ $11,932 $ 3,750
Accounts payable......................................... 798 1,517
Accrued liabilities...................................... 1,313 1,473
Income taxes payable..................................... 905 593
------- -------
Total................................................ 14,948 7,333
Deferred income taxes.................................... 1,331 1,558
------- -------
Total liabilities.................................... 16,279 8,891
------- -------
STOCKHOLDERS' EQUITY:
Common stock, par value $.10 per share, authorized
1,100,000 shares issued 570,804 shares.................. 57 57
Additional paid-in capital............................... 1,258 2,863
Retained earnings........................................ 17,929 16,211
Treasury stock, at cost.................................. (6,701) (6,787)
Accumulated translation adjustment....................... 118 154
------- -------
Total stockholders' equity........................... 12,661 12,498
------- -------
TOTAL ............................................... $28,940 $21,389
======= =======
See notes to consolidated financial statements.
F-16
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
------------------
1994 1995
-------- --------
REVENUES................................................... $ 34,564 $ 35,639
COST OF SALES.............................................. 29,600 30,542
-------- --------
GROSS PROFIT............................................... 4,964 5,097
SELLING, GENERAL AND ADMINISTRATIVE........................ 2,398 2,982
-------- --------
OPERATING INCOME........................................... 2,566 2,115
OTHER INCOME (EXPENSE):
Interest income.......................................... 10 29
Interest expense......................................... (233) (182)
Other expense, net....................................... (128) (423)
-------- --------
Total other expense, net............................... (351) (576)
-------- --------
INCOME BEFORE INCOME TAXES................................. 2,215 1,539
INCOME TAX PROVISION....................................... 850 580
-------- --------
INCOME FROM CONTINUING OPERATIONS.......................... 1,365 959
DISCONTINUED OPERATIONS
Income (loss) from operations of contracting and real
estate operations to be disposed of [net of income tax of
$18 (1994) and $(40) (1995)].............................. 8 (72)
-------- --------
INCOME BEFORE EXTRAORDINARY LOSS........................... 1,373 887
EXTRAORDINARY LOSS FROM EARLY EXTINGUISHMENT OF DEBT (Note
3)........................................................ -- (2,605)
-------- --------
NET INCOME (LOSS).......................................... $ 1,373 $ (1,718)
======== ========
See notes to consolidated financial statements.
F-17
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
------------------
1994 1995
-------- --------
OPERATING ACTIVITIES:
Net income (loss)......................................... $ 1,373 $ (1,718)
Adjustments to reconcile net income to net cash provided
by continuing operations:
Discontinued operations.................................. (8) 72
Depreciation and amortization............................ 466 518
Provision for doubtful accounts.......................... 17 23
Deferred income tax provision ........................... 81 186
Loss on early extinguishment of debt..................... -- 1,605
Changes in assets and liabilities provided (used) cash:
Accounts receivable..................................... (1,950) (709)
Inventories and prepaid expenses........................ (369) (586)
Accounts payable and accrued liabilities................ 886 836
Income taxes payable.................................... (86) (317)
Other, net.............................................. (1) 6
-------- --------
Net cash provided by (used in) continuing operations... 409 (84)
Net cash provided by discontinued operations........... 7,549 7,026
-------- --------
Net cash provided by operating activities.............. 7,958 6,942
-------- --------
INVESTING ACTIVITIES
Capital expenditures...................................... (257) (617)
Proceeds from retirement of assets........................ 300 --
-------- --------
Net cash provided by (used in) investing activities.... 43 (617)
-------- --------
FINANCING ACTIVITIES
New borrowings............................................ 750 3,750
Principal payments on debt and capital lease obligations:
Continuing operation..................................... (13,984) (11,932)
Discontinued operations.................................. -- (6,933)
Purchases of treasury stock............................... (1,545) (86)
-------- --------
Net cash used in financing activities.................. (14,779) (15,201)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH.................... 33 36
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS.................. (6,745) (8,840)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD........... 8,241 11,267
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................. $ 1,496 $ 2,427
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the six month period for:
Interest................................................. $ 219 $ 156
======== ========
Income taxes............................................. $ 780 $ 753
======== ========
See accompanying notes to consolidated financial statements.
F-18
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements reflect, in the opinion of
management, all adjustments necessary for a fair statement of the results for
the interim periods presented. Such adjustments are of a normal, recurring
nature.
2. INVENTORIES
DECEMBER 31, JUNE 30,
1994 1995
------------ --------
Finished goods......................................... $ 379 $ 638
Work in process........................................ 90 23
Raw materials and supplies............................. 1,156 1,473
------ ------
$1,625 $2,134
====== ======
3. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS
On March 21, 1995, the company negotiated amendments to the note payable
which, (i) eliminated the convertible feature of the note in exchange for
payment of $1,000 to the bank and (ii) granted the bank an option to purchase
12,350 shares of the company's common stock for $1 prior to January 1, 1996.
These amendments are reflected in the accompanying financial statements (i) as
though the original $2,500 convertible note was refinanced by issuing a new
$3,500 note for the same interest rate and maturity, (ii) by recording an
extraordinary loss on early extinguishment of debt for $2,605, representing
the $1,000 payment to the bank and the $1,605 excess of the fair value of the
common stock issuable under the options over the option price, and (iii) by
increasing additional paid in capital by $1,605. This loss is not deductible
for tax purposes.
On August 10, 1995 the bank exercised its option to purchase the 12,350
shares. Such shares were sold in connection with the sale of the Company to
Kulicke and Soffa Industries, Inc. on October 2, 1995.
F-19
UNAUDITED PRO FORMA FINANCIAL INFORMATION
BASIS OF PRESENTATION
The accompanying Unaudited Pro Forma Balance Sheet as of June 30, 1995 and
the Unaudited Pro Forma Statements of Operations for the year ended September
30, 1994 and for the nine months ended June 30, 1995 have been prepared to
give effect to the AFW Acquisition as if it had occurred on June 30, 1995, in
the case of the Unaudited Pro Forma Balance Sheet, and on October 1, 1993, in
the case of the Unaudited Pro Forma Statements of Operations.
The following Unaudited Pro Forma Balance Sheet is based on the unaudited
historical balance sheets of the Company and Circle "S" as of June 30, 1995,
adjusted as if the following transactions occurred on June 30, 1995: (i) the
borrowing of $15.0 million under the Bank Credit Facility and $34.4 million
under the AFW Notes, (ii) payment of $53.6 million in cash and principal
amount of AFW Notes as acquisition consideration, (iii) the repayment of
Circle "S" short-term borrowings totaling $3.8 million prior to closing, and
(iv) the accrual of approximately $1.0 million in costs incurred in connection
with the AFW Acquisition. Prior to the closing of the AFW Acquisition, Circle
"S" sold certain unrelated operations of Circle "S," which are reflected as
discontinued operations in the historical financial statements of Circle "S."
The preliminary purchase price for the AFW Acquisition totaled approximately
$53.6 million, subject to possible upward or downward adjustment based upon
completion and audit of the closing balance sheet. The Company does not
anticipate that any such adjustment to the purchase price will be material.
The Unaudited Pro Forma Statement of Operations for the 12-month period
ended September 30, 1994 is based on the historical audited statements of
operations of the Company for the year ended September 30, 1994 and of Circle
"S" for the year ended December 31, 1994, which audited financial statements
are presented or incorporated by reference herein. The Unaudited Pro Forma
Statement of Operations for the nine-month period ended June 30, 1995 is based
on the historical unaudited interim statements of operations of the Company
and on the unaudited interim statement of operations of Circle "S" for the six
months ended June 30, 1995, both of which are presented or incorporated by
reference herein, and on the Circle "S" unaudited statement of operations data
for the three months ended December 31, 1994. Circle "S" interim financial
data for such three month period reflect sales of $17.2 million and net income
of $622,000, and are not separately presented or incorporated by reference
herein.
Such unaudited pro forma financial data have been presented for
informational purposes only and do not purport to indicate what the Company's
results of operations or financial position would have been if the AFW
Acquisition actually had occurred at the beginning of such period or to
project the Company's results of operations for any future period or future
date.
The unaudited pro forma adjustments are based upon available information and
upon certain assumptions stated in the notes thereto that the Company believes
are reasonable. However, there can be no assurance that such assumptions will
be realized. The pro forma financial data should be read in conjunction with
the Consolidated Financial Statements and notes thereto of the Company for the
fiscal year ended September 30, 1994 and the nine months ended June 30, 1995
which are incorporated by reference herein from the Company's fiscal 1994
Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1995, and with the Consolidated Financial Statements and
notes thereto of Circle "S" for the year ended December 31, 1994 and the six
months ended June 30, 1995 included under Item 7(a) of this Form 8-K/A.
F-20
UNAUDITED PRO FORMA BALANCE SHEET
(IN THOUSANDS)
HISTORICAL HISTORICAL
COMPANY CIRCLE "S"
JUNE 30, JUNE 30, PRO FORMA PRO FORMA
1995 1995 ADJUSTMENTS FOR ACQUISITION
---------------------------- ----------- ---------------
ASSETS
CURRENT ASSETS:
Cash and cash
equivalents.............. $ 22,234 $ 2,427 $(5,276)(a) $ 19,385
Short-term investments.... 9,808 9,808
Accounts and notes
receivable, net.......... 58,480 8,902 67,382
Inventories, net.......... 40,054 2,134 42,188
Prepaid expenses and other
current assets........... 3,395 346 3,741
Deferred income tax
benefit.................. 109 109
Net assets of discontinued
operations............... 2,618 (2,618)(b)
---------- ------- ------- --------
TOTAL CURRENT ASSETS.... 133,971 16,536 (7,894) 142,613
Long-term investments..... 4,301 4,301
Property, plant and
equipment, net........... 22,331 3,633 25,964
Intangible assets,
including goodwill....... 1,175 40,842 (c) 42,017
Other assets.............. 3,065 45 3,110
---------- ------- ------- --------
TOTAL ASSETS............ $ 163,668 $21,389 $32,948 $218,005
========== ======= ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Debt due within one year.. $ 60 $ 3,750 $45,679 (d) $ 49,489
Accounts payable to
suppliers and others..... 27,771 1,517 29,288
Accrued expenses.......... 10,674 1,473 1,000 (e) 13,147
Estimated income taxes
payable.................. 5,628 593 6,221
---------- ------- ------- --------
TOTAL CURRENT
LIABILITIES............ 44,133 7,333 46,679 98,145
Long-term debt, less
current portion.......... 1,519 1,519
Deferred income taxes..... 692 1,558 (1,233)(f) 1,017
Other liabilities......... 943 943
---------- ------- ------- --------
TOTAL LIABILITIES....... 47,287 8,891 45,446 101,624
---------- ------- ------- --------
SHAREHOLDERS' EQUITY:
Common stock.............. 44,219 2,920 (2,920)(g) 44,219
Retained earnings......... 72,427 16,211 (16,211)(g) 72,427
Treasury stock............ (6,787) 6,787 (g)
Cumulative translation
adjustment............... (223) 154 (154)(g) (223)
Unrealized loss on
investments, net of tax.. (42) (42)
---------- ------- ------- --------
TOTAL SHAREHOLDERS'
EQUITY................. 116,381 12,498 (12,498) 116,381
---------- ------- ------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY... $ 163,668 $21,389 $32,948 $218,005
========== ======= ======= ========
- --------
(a) The estimated excess of the $53.6 million purchase price to be paid for
Circle "S" over the amount borrowed under the Bank Credit Facility ($15.0
million) and the AFW Notes ($34.4 million), and repayment of Circle "S"
short-term borrowings ($3.8 million), offset by assumed cash proceeds from
the sale of the discontinued operations ($2.6 million) which occurred
prior to closing.
(b) Sale of the net assets associated with Circle "S" discontinued operations
not acquired by the Company.
(c) The purchase price and estimated costs for the AFW Acquisition are
expected to exceed the estimated fair value of net tangible assets
acquired by approximately $40.8 million.
(d) Borrowings under the Bank Credit Facility and principal amount of AFW
Notes, offset by the Circle "S" short-term borrowings ($3.8 million)
repaid prior to closing.
(e) Accrual of transaction related costs associated with the AFW Acquisition.
(f) Adjustment to eliminate deferred tax liabilities related to undistributed
earnings of foreign subsidiaries which are intended to be indefinitely
reinvested in foreign operations, net of the amount of deferred tax assets
associated with Circle "S" net operating loss carryforwards not expected
to be realized.
(g) Elimination of Circle "S" equity account balances in connection with the
AFW Acquisition.
F-21
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL HISTORICAL
COMPANY FISCAL CIRCLE "S"
YEAR ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, PRO FORMA PRO FORMA
1994 1994 ADJUSTMENTS FOR ACQUISITION
-------------- -------------- ----------- ---------------
Net sales............... $173,302 $68,764 $ -- $242,066
Cost of goods sold...... 101,334 58,898 -- 160,232
-------- ------- ------- --------
Gross profit............ 71,968 9,866 -- 81,834
-------- ------- ------- --------
Selling, general and
administrative......... 36,752 5,004 (505)(a) 41,251
Research and
development, net....... 21,286 -- 21,286
Amortization of
intangibles, including
goodwill............... -- -- 2,042 (b) 2,042
-------- ------- ------- --------
Total costs and
expenses............... 58,038 5,004 1,537 64,579
-------- ------- ------- --------
Operating income........ 13,930 4,862 (1,537) 17,255
Net interest and other
expense................ (907) (620) (3,228)(c) (4,755)
-------- ------- ------- --------
Income before income
taxes.................. 13,023 4,242 (4,765) 12,500
Income tax expense
(benefit).............. 2,605 1,629 (1,455)(d) 2,779
-------- ------- ------- --------
Net income from
continuing operations.. $ 10,418 $ 2,613 $(3,310) $ 9,721
======== ======= ======= ========
Net income per share:
Primary................ $ 0.63 $ 0.58
======== ========
Fully diluted.......... $ 0.63 $ 0.58
======== ========
Shares outstanding:
Primary................ 16,665 16,665
Fully diluted.......... 16,665 16,665
HISTORICAL
COMPANY CIRCLE "S"
NINE MONTHS NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30, PRO FORMA PRO FORMA
1995 1995 ADJUSTMENTS FOR ACQUISITION
-------------- -------------- ----------- ---------------
Net sales............... $203,540 $52,875 $ -- $256,415
Cost of goods sold...... 112,498 45,390 -- 157,888
-------- ------- ------- --------
Gross profit............ 91,042 7,485 -- 98,527
-------- ------- ------- --------
Selling, general and
administrative......... 35,476 4,336 (231)(a) 39,581
Research and
development, net....... 21,022 -- -- 21,022
Amortization of
intangibles, including
goodwill............... -- -- 1,532 (b) 1,532
-------- ------- ------- --------
Total costs and
expenses............... 56,498 4,336 1,301 62,135
-------- ------- ------- --------
Operating income........ 34,544 3,149 (1,301) 36,392
Net interest and other
expense................ (327) (600) (2,496)(c) (3,423)
-------- ------- ------- --------
Income before income
taxes.................. 34,217 2,549 (3,797) 32,969
Income tax expense
(benefit).............. 8,206 968 (996)(d) 8,178
-------- ------- ------- --------
Net income from
continuing operations.. $ 26,011 $ 1,581 $(2,801) $ 24,791
======== ======= ======= ========
Net income per share:
Primary................ $ 1.50 $ 1.43
======== ========
Fully diluted.......... $ 1.37 $ 1.31
======== ========
Shares outstanding:
Primary................ 17,381 17,381
Fully diluted.......... 19,668 19,668
- --------
(a) Elimination of non-recurring costs associated with the management of
Circle "S" and the discontinued operations, totaling $705 for the annual
period ($381 for the nine-month period), net of the $200 annual payment
($150 for the nine-month period) to be incurred pursuant to a 1990
employment and non-competition agreement between Circle "S" and Larry D.
Striplin, Jr. which provides for post-employment payments for five years
following closing of the AFW Acquisition.
(b) Amortization of intangible assets, including goodwill, arising from the
AFW Acquisition over an estimated 20-year life.
(c) Assumed interest expense on the Bank Credit Facility used to finance the
AFW Acquisition and the AFW Promissory Notes, with interest at LIBOR plus
50 basis points for the initial 90 days (which is assumed to be 6.4375%
per annum) and LIBOR plus 100 basis points upon conversion to the term
loan (assumed to be 6.9375% per annum), reduction of investment income on
$4.1 million of cash used for the AFW Acquisition and elimination of
interest expense incurred by Circle "S" in connection with the short-term
indebtedness assumed to be repaid at the beginning of the periods
presented. An increase of 1/8 of 1% in the interest rate applicable to the
Bank Credit Facility would result in increased interest expense of $51 and
$36 for the annual and nine month periods, respectively.
(d) Adjustment to provide income taxes (benefit) on the pro forma adjustments
and pro forma combined taxable income at the estimated combined effective
income tax rate giving effect to pro forma goodwill amortization which is
not tax deductible, and to Circle "S" historical income tax expense
provided on undistributed earnings of foreign subsidiaries which the
Company intends to indefinitely reinvest in foreign operations.
F-22
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT
------- ------- ---
10.2 Gold Supply Agreement, as amended October 2, 1995 between
American Fine Wire Corporation et al, and Rothschild Australia
Limited (the Company has applied for confidential treatment
with respect to portions of this Agreement)