SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM 8-K
-------------------------
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 19, 1996
------------------------
ZYGO CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-12944 06-0864500
- ---------------------------- ----------- ------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
Laurel Brook Road, Middlefield, Conn. 06455
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (860) 347-8506
----------------
Not Applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On August 19, 1996, Zygo Corporation (the "Company") completed the
acquisition of the proprietary products division of Technical Instrument
Company, a California corporation ("TIC"), through a merger between Zygo
Acquisition Corporation, a newly formed California subsidiary of the Company
("ZAC"), and TIC, with TIC, the surviving entity, becoming a wholly-owned
subsidiary of the Company. The acquisition was consummated pursuant to the terms
of the Agreement and Plan of Merger dated as of August 7, 1996 by and among the
Company, TIC, ZAC, and certain then shareholders of TIC. In the transaction, the
Company paid approximately $11.7 million in cash and issued unregistered shares
of its common stock, $.10 par value, valued at $3 million in exchange for all
the outstanding capital stock of TIC.
TIC, located in Sunnyvale, California, is engaged in the business of
designing, developing, assembling, and marketing precision microscope products
and systems used to improve the production efficiency and manufacturing yields
within the semiconductor, data storage, and other high technology industries.
The press release of the Company dated August 20, 1996, is attached hereto as
Exhibit 99.1 and incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
A. FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
1. Financial Statements as of December 31, 1995 and 1994 and for the
three years ended December 31, 1995, 1994 and 1993.
Report of Independent Auditors.
Balance Sheets as of December 31, 1995 and 1994.
Statements of Operations and Retained Earnings for the years
ended December 31, 1995, 1994 and 1993.
Notes to Financial Statements.
-2-
2. Interim Financial Statements as of March 31, 1996 and for the three-
month periods ended March 31, 1996 and 1995.
Balance Sheet as of March 31, 1996.
Statements of Operations and Retained Earnings for the
three-months ended March 31, 1996 and 1995.
Statement of Cash Flow for the three-months ended March 31, 1996.
Notes to Interim Financial Statements.
It is impracticable for the Company to provide the required Interim
Financial Statements as of June 30, 1996 and for the three-month periods ended
June 30, 1996 and 1995 of the Business Acquired on the date this report is being
filed. The Company intends to file the required Interim Financial Statements
under cover of Form 8-K/A as soon as practicable; but not later than 60 days
after the date this report must have been filed.
B. PRO FORMA FINANCIAL INFORMATION.
It is impracticable for the Company to provide the required pro forma
financial information on the date this report is being filed. The Company
intends to file the required financial statements under cover of Form 8-K/A as
soon as practicable; but not later than 60 days after the date this report must
have been filed.
C. EXHIBITS.
2. The Agreement and Plan of Merger, dated as of August 7, 1996, by and
among Technical Instrument Company, Zygo Corporation, Zygo Acquisition
Corporation, Francis E. Lundy, The Lundy 1996 Charitable Trust, The Sherman
Family Living Trust, Frank J. Scheufele Trust, David Lytle, and Inspectron
Development Partners L.P., a California Limited Partnership.
99.1 Press Release dated August 20, 1996.
-3-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ZYGO CORPORATION
Date: August 30, 1996 By /s/ GARY K. WILLIS
------------------------------
Gary K. Willis
President and Chief Executive Officer
-4-
TECHNICAL INSTRUMENT COMPANY
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Auditors........................................ 6
Financial Statements:
Balance Sheets............................................... 7
Statements of Earnings....................................... 8
Statements of Cash Flow..................................... 9
Notes to Financial Statements............................... 10
5
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Technical Instrument Company
We have audited the accompanying balance sheets of Technical Instrument
Company as of December 31, 1994 and 1995, and the related statements of
operations and retained earnings, and cash flows for each of the three years in
the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Technical Instrument Company
as of December 31, 1994 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
GRANT THORNTON LLP
SAN FRANCISCO, CALIFORNIA
JUNE 12, 1996
6
TECHNICAL INSTRUMENT COMPANY
BALANCE SHEETS
(000 Omitted)
December 31,
1994 1995 March 31, 1996
----- ----- --------------
(unaudited)
ASSETS
Current assets
Accounts receivable, less allowance for
doubtful accounts of $51, $103,
and $103 ........................................ $1,558 $1,740 $2,209
Inventories ....................................... 2,124 3,582 4,128
Deferred income taxes ............................. 94 278 278
Other current assets .............................. 30 47 15
Net assets of discontinued operations (note B) .... 3,178 1,648 1,689
------ ------ ------
Total current assets ........................... 6,984 7,295 8,319
Property and equipment, less accumulated depreciation
and amortization .................................. 6 54 120
Investments (note F) ................................ -- -- 60
Goodwill ............................................ 122 108 108
------ ------ ------
$7,112 $7,457 $8,607
====== ====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Note payable to bank .............................. $1,664 $2,000 $2,250
Current portion of long-term debt ................. 304 306 310
Accounts payable .................................. 2,329 1,895 2,429
Accrued liabilities ............................... 196 383 635
------ ------ ------
Total current liabilities ...................... 4,493 4,584 5,624
Long-term debt, less current portion ................ 800 494 417
Shareholders' equity
Common stock, no par value; authorized 10,000
shares; issued and outstanding 2,988 shares ..... 464 464 464
Retained earnings ................................. 1,355 1,915 2,102
------ ------ ------
1,819 2,379 2,566
------ ----- -----
$7,112 $7,457 $8,607
====== ====== ======
The accompanying notes are an integral part of these statements.
7
TECHNICAL INSTRUMENT COMPANY
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(000 Omitted)
Three months
Year ended December 31, Ended March 31,
--------------------------- -----------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
(Unaudited)
Revenues
Product sales ........................... $5,296 $4,744 $7,867 $1,312 $1,528
Product support ......................... 217 246 505 94 87
------ ------ ------ ------ ------
5,513 4,990 8,372 1,406 1,615
Cost of sales .............................. 3,118 2,773 4,721 793 845
------ ------ ------ ------ ------
Gross profit ......................... 2,395 2,217 3,651 613 770
Operating expenses
Selling, general and administrative ..... 2,073 2,413 2,598 576 713
Research and development ................ 653 744 874 198 139
------ ------ ------ ------ ------
2,726 3,157 3,472 774 852
------ ------ ------ ------ ------
Operating profit (loss) ............... (331) (940) 179 (161) (82)
Interest expense ........................... 216 274 318 82 74
------ ------ ------ ------ ------
Loss before income taxes (benefit) and
discontinued operations ............. (547) (1,214) (139) (243) (156)
Income taxes (benefit)
Current ................................. (290) (463) 176 (14) (62)
Deferred ................................ 1 (2) (184) -- --
------ ------ ------ ------ ------
(289) (465) (8) (14) (62)
------ ------ ------ ------ ------
Loss from continuing operations ....... (258) (749) (131) (229) (94)
Discontinued operations (note B)
Income (loss) from discontinued operations
(less applicable income taxes) ......... 315 (124) 691 109 281
------ ------ ------ ------ ------
NET EARNINGS (LOSS) ................... 57 (873) 560 (120) 187
Retained earnings - beginning of year ...... 2,171 2,228 1,355 1,667 1,915
------ ------ ------ ------ ------
Retained earnings - end of year ............ $2,228 $1,355 $1,915 $1,547 $2,102
====== ====== ====== ====== ======
The accompanying notes are an integral part of these statements.
8
TECHNICAL INSTRUMENT COMPANY
STATEMENTS OF CASH FLOW
(000 Omitted)
Year Ended December 31, Three Months Ended
--------------------------------------- ------------------
1993 1994 1995 March 31, 1996
------ ------ ------ --------------
(Unaudited)
Increase (decrease) in cash
Cash flows from operating activities
Net earnings (loss) .......................................... $ 57 $ (873) $ 560 $ 187
(Income) loss of discontinued operations ..................... (315) 124 (691) (281)
Adjustments to reconcile net earnings (loss)
to net cash provided by (used in)
continuing operations
Depreciation and amortization ............................ 26 17 39 6
Deferred taxes ........................................... 1 (2) (184) --
Changes in assets and liabilities
Accounts receivable .................................... (345) (94) (182) (469)
Inventories ............................................ (436) 105 (1,458) (546)
Other current assets ................................... (4) (1) (17) 32
Accounts payable ........................................ 244 1,113 (434) 534
Accrued expenses ........................................ (29) 32 187 252
------- ------- ------- -------
Net cash provided by (used in)
continuing operations ................................. (801) 421 (2,180) (285)
Income (loss) of discontinued
operations ............................................ 315 (124) 691 281
Net assets of discontinued operations ...................... (1,007) (51) 1,530 (41)
------- ------- ------- -------
Net cash provided by (used in)
operating activities .................................. (1,493) 246 41 (45)
Cash flows from investing activities
Purchase of equipment ........................................ (7) -- (73) (72)
Investment ................................................... -- -- -- (60)
------- ------- ------- -------
Net cash used in investing activities ................... (7) -- (73) (132)
Cash flows from financing activities
Net proceeds from (payment of) bank note ..................... 350 (33) 336 250
Proceeds from (payment of) long-term debt .................... 1,150 (213) (304) (73)
Net cash provided by (used in)
financing activities .................................. 1,500 (246) 32 177
------- ------- ------- -------
NET INCREASE IN CASH .................................... -- -- -- --
Cash - beginning of period ..................................... -- -- -- --
------- ------- ------- -------
Cash - end of period ........................................... $ -- $ -- $ -- $ --
------- ------- ------- -------
Cash paid during the period for:
Interest ..................................................... $ 389 $ 334 $ 469 $ 84
Income taxes ................................................. -- 129 -- --
The accompanying notes are an integral part of these statements.
9
TECHNICAL INSTRUMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 1993, 1994 and 1995
NOTE A - SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Technical Instrument Company (the Company) designs, manufactures and distributes
microscopes and other precision optical instruments and equipment. The Company
has two divisions: a proprietary products division and a distribution division
(see Note B).
The Company's proprietary products division designs, manufactures and
distributes precision optical equipment used by semiconductors and other high
technology industries. The proprietary products division derives approximately
45% of its revenues from international sales. The Company's distribution
division has an exclusive license to distribute microscopes and other precision
optical instruments in Northern California.
A summary of the Company's significant accounting policies applied in the
preparation of the accompanying financial statements follows:
o Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
o Property and Equipment
Property and equipment are stated at cost and depreciated by the
straight-line method over their estimated useful lives (3 to 10 years).
o Goodwill
The excess of cost over the fair value of net assets acquired of purchased
business at the date of acquisition is amortized by the straight-line
method over 15 years.
o Income Taxes
Income taxes are determined using the liability method of accounting. Under
this method, deferred tax assets and liabilities are determined based on
differences between the financial reporting and tax basis of assets and
liabilities. Additionally, the deferred tax items are measured using
current tax rates. The principal types of differences between assets and
liabilities for financial statement and tax return purposes are allowances,
inventory and certain accrued liabilities.
o Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements, as well as revenues and expenses during the period.
Significant estimates made by management include the allowance for doubtful
accounts and inventory obsolescence. Actual results could differ from those
estimates.
10
TECHNICAL INSTRUMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1993, 1994 and 1995
NOTE B - DISCONTINUED OPERATIONS
In March 1996, the Company entered into discussions to sell all of its
outstanding common stock. The transaction is expected to be completed in July
1996. In connection with this transaction, the Company's shareholders will form
a new company and purchase the assets and assume liabilities of the Distribution
Division at net book value. The Distribution Division has been treated as a
discontinued operation. Net assets of the Distribution Division are summarized
as follows:
December 31,
--------------------------
1994 1995
------- -----
(000) Omitted
ASSETS
Current assets
Accounts receivable, less allowance for
doubtful accounts ............................................. $1,512 $1,667
Inventories ..................................................... 4,071 3,128
Deferred income taxes ........................................... 720 621
Refundable income taxes ......................................... 338 -
Prepaid and other ............................................... 195 221
------ ------
Total current assets ....................................... 6,836 5,637
Non-current assets .................................................. 692 683
------ ------
7,528 6,320
LIABILITIES
Current liabilities ................................................. 2,046 2,485
Non-current liabilities ............................................. 2,304 2,187
----- -----
4,350 4,672
------ ------
NET ASSETS ................................................................ $3,178 $1,648
====== ======
The net assets of the Distribution Division have been classified a current asset
because of the pending sale. Included in net assets of the discontinued
operations is a liability under a defined benefit pension plan (Plan) amounting
to approximately $1 million. Management has notified its employees of the
Company's intent to freeze the Plan as of June 30, 1996, with the intent of
liquidating the Plan. Any benefit or obligation resulting from the liquidation
of the Plan will accrue to the Distribution Division.
11
TECHNICAL INSTRUMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1993, 1994 and 1995
NOTE B - DISCONTINUED OPERATIONS (continued)
The condensed statements of operations for the Distribution Division are
summarized as follows:
(000 omitted)
Year ended December 31,
--------------------------------
1993 1994 1995
------ ------- -------
Sales ..................................... $ 7,346 $ 8,008 $ 9,567
Cost of sales ............................. 5,002 6,362 6,894
------- ------- -------
Gross profit ........................... 2,344 1,646 2,673
Operating expenses ........................ 1,477 1,719 1,852
------- ------- -------
Operating profit (loss) ............. 867 (73) 821
Other expenses - net ...................... 199 128 87
------- ------- -------
Income (loss) before income taxes ...... 668 (201) 734
Income taxes (benefit) .................... 353 (77) 43
------- ------- -------
INCOME (LOSS) ........................ $ 315 $ (124) $ 691
======= ======= =======
12
TECHNICAL INSTRUMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1993, 1994 and 1995
NOTE C - INVENTORIES
Inventories comprise:
(000 omitted)
December 31,
---------------------
1994 1995
------ ------
Purchased parts and subassemblies ................ $1,778 $2,970
Finished instruments ............................. 346 612
------ ------
$2,124 $3,582
====== ======
13
TECHNICAL INSTRUMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1993, 1994 and 1995
NOTE D - SHORT-TERM BORROWINGS
The Company has a revolving line of credit for $2.5 million with a bank with
interest at 1.5% above the bank's prime rate (8.5% at December 31, 1995),
payable on a monthly basis. At December 31, 1995, $2 million was outstanding
under the line of credit, which is scheduled to expire on June 1, 1996. The
borrowings are collateralized by accounts receivable and inventory (of both the
continued and discontinued operations), and have been personally guaranteed by
the Company's president. The Company is required to maintain a minimum tangible
net worth, minimum working capital and a minimum quick ratio, in addition to
other covenants, under the line of credit. The Company is in violation of
certain financial covenants as of December 31, 1995. The Bank has not formally
extended the line of credit nor has it waived the covenant violations, but has
indicated it will do so during the week of July 1, 1996, subject to final
approval by the appropriate bank committee.
NOTE E - LONG-TERM DEBT
Long-term debt as of December 31, 1994 and 1995 is as follows:
(000 omitted)
1994 1995
-------- ------
Note payable to a bank, collateralized by all corporate assets and a personal
guarantee by an officer of the Company. Payments are $22 monthly plus interest
at 1.5% above the bank's prime rate (8.5% at December 31, 1995). The loan
matures on October 15, 1998. ...................................................... $1,009 $746
9% unsecured note payable ......................................................... 26 14
Other ............................................................................. 69 40
------ ----
1,104 800
Less current portion .............................................................. 304 306
------ ----
$ 800 $494
====== ====
The aggregate annual maturities of long-term debt at December 31, 1995 are as
follows:
Year ending December 31,
- ------------------------
1996 .......................................... $306
1997 .......................................... 274
1998 .......................................... 220
----
Total future payments ......................... $800
====
14
TECHNICAL INSTRUMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1993, 1994 and 1995
NOTE F - COMMITMENTS
Operating Lease
The Company leases facilities under an operating lease expiring in 2000. Under
terms of the lease, the Company is responsible for common area maintenance
expenses including taxes, insurance and other operating costs. Future minimum
lease payments required under the operating lease are $182,400 per year through
2000.
Total rent expense for the years ended December 31, 1993, 1994 and 1995 were
$122,200, $115,800 and $120,400, respectively.
Other
The Company has an option, for an indefinite period of time, to purchase 50%
interest in a German company for 100 thousand deutsche marks.
Subsequent Event (unaudited)
In July 1996 the Company exercised its option to purchase a 50% interest in
Syncotec GmbH, and accordingly paid DM100,000 ($67,500) to Syncotec's owner.
This 50% interest is an asset of the continuing operations of the Company.
NOTE G - INCOME TAXES
The Company's overall effective income tax rate on its operations is different
from the federal statutory income tax rate because of the following factors:
(000 omitted)
Year ended December 31,
----------------------------------------
1993 1994 1995
------- ------- -------
Statutory rate ...................................... 34.0% (34.0)% 34.0%
Nondeductible items ................................. 15.7 1.0 5.2
State taxes ......................................... 25.6 (2.4) 5.2
Tax credits ......................................... (60.3) (50.9) --
Valuation allowance on deferred tax assets .......... 60.3 50.9 (32.8)
Adjustment for overaccruals ......................... -- (2.1) (7.4)
Other ............................................... (22.4) (.8) 1.6
---- ---- ----
Effective tax rate .................................. 52.9% (38.3)% 5.8%
==== ==== ====
15
TECHNICAL INSTRUMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1993, 1994 and 1995
Income tax expense (benefit) has been allocated to continuing and discontinued
operations proportionately based on their income (loss) before income tax
(benefit).
NOTE G - INCOME TAXES (continued)
Deferred federal and state tax assets and valuation allowance are as follows:
(000 omitted)
Year ended December 31,
--------------------------------------
1993 1994 1995
---- ---- ----
Inventory .............................................. $ 38 $ 37 $ 58
Reserve for bad debt ................................... 18 20 42
Vacation accrual ....................................... 15 16 34
Warranty accrual ....................................... 21 21 21
Research and development credits ....................... 125 197 123
---- ---- ----
217 291 278
Valuation allowance .................................... 125 197 --
---- --- ----
$ 92 $ 94 $278
==== ==== ====
The valuation allowance increased by $125 and $72 in 1993 and 1994,
respectively, and decreased by $197 in 1995.
NOTE H - STOCK OPTIONS
As of December 31, 1995 there are options to purchase 29,815 shares of common
stock at $4.50 per share, with 20% vesting each year commencing January 1, 1994.
As of December 31, 1995, options to purchase 11,926 shares of common stock are
exercisable.
Accounting for Stock Issued to Employees
The Company has not elected early adoption of Financial Accounting Standard No.
123 ("FAS 123"), Accounting for Stock-Based Compensation. Upon adoption of FAS
123, the Company will continue to measure compensation expense for its
stock-based employee compensation plans using the intrinsic value method
prescribed by APB Opinion No. 25, Accounting for Stock Issued to Employees and
will provide pro forma disclosures of net income and earnings per share as if
the fair value method prescribed by FAS 123 had been applied in measuring
compensation expense.
Subsequent Event (unaudited)
The Company has been informed by the holder of the outstanding stock options
that he
16
TECHNICAL INSTRUMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1993, 1994 and 1995
intends to exercise all options in July 1996.
NOTE I - PRIOR PERIOD ADJUSTMENT
The financial statements for the year ended December 31, 1994 have been adjusted
to reverse the recording of the 50% equity interest in the net earnings of a
foreign subsidiary. In 1995 it was determined that the option to purchase the
50% interest was not properly exercised. The adjustment is as follows:
(000 omitted)
Retained Net
Earnings Loss
-------- ----
As previously reported ..................................... $1,463 $765
Adjustment for investment recorded on the
equity method ............................................. 108 108
------ ----
As adjusted ................................................ $1,355 $873
====== ====
NOTE J - FAIR VALUE OF FINANCIAL INSTRUMENTS
The financial instruments of the Company consist mainly of current receivables,
short-term credit, accounts payable, accrued liabilities and long-term debt. In
view of their short-term nature, the fair value of the items included in current
assets and current liabilities approximates their carrying value. The fair value
of the long-term loans approximates their carrying value, since they bear
interest at rates at or close to the prevailing market rates.
17
EXHIBIT INDEX
No. Description
- ---- -----------
2. The Agreement and Plan of Merger, dated as of August 7, 1996, by
and among Technical Instrument Company, Zygo Corporation, Zygo
Acquisition Corporation, Francis E. Lundy, The Lundy 1996 Charitable
Trust, The Sherman Family Living Trust, Frank J. Scheufele Trust,
David Lytle, and Inspectron Development Partners L.P., a California
Limited Partnership.
99.1 Press Release dated August 20, 1996.