UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 11, 1997
INTERMAGNETICS GENERAL CORPORATION
(Exact name of registrant as specified in its charter)
Commission File Number 1-11344
New York 14-1537454
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
450 Old Niskayuna Road
Latham, New York 12110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (518) 782-1122
Item 7(a). Financial Statements of Business Acquired (Medical Advances, Inc.)
Audited financial statements as of December 31, 1996 together with
auditor's report.
MEDICAL ADVANCES, INC.
REPORT ON AUDIT OF FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996
BONFIELD & COMPANY, S.C.
Bonfield & Company,
S.C.
CERTIFIED PUBLIC ACCOUNTANTS
740 N. Plankinton
Milwaukee, Wisconsin 53203
REPORT OF INDEPENDENT AUDITORS
------------------------------
Board of Directors
Medical Advances, Inc.
Milwaukee, Wisconsin
We have audited the accompanying balance sheet of Medical Advances, Inc.
(an S corporation) as of December 31, 1996 and 1995, and the related statements
of earnings and retained earnings and cash flows for the years 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 Medical Advances, Inc. as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
/s/ Bonfield & Company, S.C.
-------------------------------
Certified Public Accountants
January 30, 1997
Milwaukee, Wisconsin
MEDICAL ADVANCES, INC.
BALANCE SHEET
December 31, 1996 and 1995
1996 1995
---- ----
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,253,811 $ 599,571
Short-term investment - Note B 100,000
Accounts receivable, less allowance for losses in
collection of $40,000 in both years 1,243,239 1,048,061
Inventories:
Finished goods 386,366 294,777
Work in progress 128,996 93,427
Purchased parts 219,515 273,852
----------- ------------
734,877 662,056
Prepaid expenses and other current assets 83,867 69,269
----------- ------------
TOTAL CURRENT ASSETS 3,415,794 2,378,957
EQUIPMENT:
Shop equipment 156,410 162,777
Research and development equipment 455,881 470,729
Office furniture and equipment 488,294 462,224
Transportation equipment 19,619 16,585
----------- ------------
1,120,204 1,112,315
Less accumulated depreciation 816,951 800,052
----------- ------------
303,253 312,263
OTHER ASSETS:
Patent and license agreements, less accumulated
amortization of $43,393 in 1996 and $35,534 in 1995 17,974 21,866
Split dollar insurance premiums due from officer 22,784
----------- ------------
17,974 44,650
$ 3,737,021 $ 2,735,870
=========== ============
See notes to financial statements.
- 2 -
1996 1995
---- ----
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 221,655 $ 151,677
Accrued expenses 482,645 448,753
Dividend payable - Note H 389,683
Upgrade and warranty accrual 60,000 30,000
Payments due within one year on long-term debt -
Note C 118,889
----------- -----------
TOTAL CURRENT LIABILITIES 1,153,983 749,319
STOCKHOLDERS'EQUITY:
Common stock, $.01 par value, 2,000,000 shares
authorized, 100,004 shares issued 1,000 1,000
Additional paid-in capital 336,316 336,316
Retained earnings 2,451,500 1,855,013
Treasury stock - 7,662 shares at cost (205,778) (205,778)
----------- -----------
2,583,038 1,986,551
COMMITMENTS - Note E
----------- -----------
$ 3,737,021 $ 2,735,870
============ ===========
MEDICAL ADVANCES, INC.
STATEMENT OF EARNINGS AND RETAINED EARNINGS
-------------------------------------------
Years ended December 31, 1996 and 1995
1996 1995
---- ----
REVENUES:
Net sales $ 7,604,071 $ 5,829,014
Other income 29,077 31,895
----------- -----------
7,633,148 5,860,909
COSTS AND EXPENSES:
Cost of sales *** ***
Research, engineering and development expenses *** ***
Selling, general and administrative expenses *** ***
Interest expense *** ***
----------- -----------
*** ***
----------- -----------
NET EARNINGS *** ***
RETAINED EARNINGS:
Beginning of year *** ***
Less dividends paid and payable *** ***
----------- -----------
End of year $ 2,451,500 $ 1,855,013
=========== ===========
***Confidential Treatment Requested
See notes to financial statements.
-3-
MEDICAL ADVANCES, INC.
STATEMENT OF CASH FLOWS
Years ended December 31, 1996 and 1995
1996 1995
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 1,835,705 $ 904,439
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 166,386 177,637
Loss (gain) on sale of assets 7,730 (6,468)
Change in allowance for losses in collection (10,000)
Change in accounts receivable (195,178) (135,712)
Change in inventories (72,821) 40,373
Change in other current assets (14,598) (21,552)
Change in accounts payable 69,978 (7,348)
Change in accrued expenses 33,892 78,010
Change in upgrade and warranty accrual 30,000 (30,000)
----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 1,861,094 989,379
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investment (100,000)
Purchases of equipment (159,947) (126,339)
Payments to acquire patents (3,967) (1,614)
Proceeds from sale of assets 2,700 11,334
Other 22,784
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (238,430) (116,619)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable to bank (118,889) (196,350)
Payment on note issued to purchase treasury stock (90,000)
Payments on notes payable to officers (20,000)
Dividends paid (849,535) (46,171)
----------- -----------
NET CASH USED BY FINANCING ACTIVITIES (968,424) (352,521)
----------- -----------
NET INCREASE IN CASH 654,240 520,239
CASH AND CASH EQUIVALENTS:
Beginning of year 599,571 79,332
----------- -----------
End of year $ 1,253,811 $ 599,571
=========== ===========
See notes to financial statements.
- 4 -
MEDICAL ADVANCES, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years ended December 31, 1996 and 1995
Note A - Description of Company and summary of significant accounting policies:
Description of Company:
The Company manufactures and sells products that enhance the images
produced by magnetic resonance equipment. Its sales are to medical
care providers located throughout North and South America, Asia and
Western Europe.
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and notes to financial statements. Actual results could
differ from those estimates.
Cash and cash equivalents:
The Company treats all investments in highly liquid debt instruments
purchased with a maturity of three months or less as cash
equivalents on the Company's balance sheet. The Company maintains
its cash in bank deposit accounts. The balances fluctuate greatly
during the year and can exceed the federally insured limit of
$100,000. Cash balances at December 31, 1996 exceeded the federally
insured limit by approximately $1,060,000.
Inventories:
Inventories are stated at the lower of cost (first-in, first-out
method) or market. Cost includes material, labor and manufacturing
overhead.
Depreciation:
Equipment is stated at cost and depreciated over its estimated useful
life using accelerated methods of depreciation.
Amortization:
Patent and license agreements are amortized over their estimated
useful lives (five years) under the straight-line method.
Taxes on income:
The Company elected S corporation status effective January 1, 1993.
Retained earnings at the date of the S election was $938,124.
Taxable income of an S corporation is allocated to its shareholders
who are personally liable for their share of income taxes.
Note B - Short term investment:
In December, 1996, the Company purchased a $100,000 corporate bond
that is classified as a security available for sale. The bond is
carried at cost, which approximates fair market value plus accrued
interest.
-5-
MEDICAL ADVANCES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Note C - Long term debt:
Long term debt at December 31, 1995 consisted of a $118,889 note
payable to bank that was repaid in 1996. The Company also has an
unused $400,000 bank line of credit available at December 31, 1996.
Substantially all of the Company's assets are pledged to support the
line of credit.
Note D - Profit-sharing plan:
The Company maintains a 401(k) profit-sharing plan that covers
substantially all employees. Company matching or voluntary
contributions are at the discretion of the Board of Directors. Costs
and expenses include matching contributions of $39,880 in 1996 and
$34,570 in 1995 and a voluntary contribution of $36,049 in 1996 and
$35,826 in 1995.
Note E - Lease commitments, stock agreement:
The Company rents its facilities under a lease that expires August 31,
1997. Costs and expenses include rent of $105,007 in 1996 and $101,695
in 1995. Future minimum rent payments due under the lease are
approximately $68,000 through August, 1997.
The Company has a right of refusal to purchase shares of stock offered
for sale by its stockholders. The Company may also be required to
purchase the stock of its stockholders upon their death at fair value
payable over three years.
Note F - Supplemental cash flow information:
Cash paid for interest expense was $*** in 1996 and $*** in 1995.
Note G - Major customer:
One customer accounted for 18% of 1996 sales and 24% of 1995 sales.
Accounts receivable from this customer totaled $276,882 at December
31, 1996 and $301,984 at December 31, 1995. Two other customers
accounted for 12% and 10% of 1996 sales. Accounts receivable from
these customers totaled $315,299 and $120,745 at December 31, 1996.
Note H - Dividends payable:
The Company's board of Directors approved a dividend payment in
December, 1996 of $389,683 which was paid in January, 1997.
***Confidential Treatment Requested
- 6 -
Item 7(b). Pro Forma Financial Information.
Pro Forma Combined Condensed Balance Sheet of Intermagnetics General
Corporation ("IGC") and Medical Advances, Inc. ("MAI") as of November 24, 1996
and Pro Forma Combined Condensed Summary of Operations for IGC and MAI for the
six months ended November 24, 1996 and the twelve months ended May 26, 1996.
INTRODUCTION
------------
On March 11, 1997, Intermagnetics General Corporation
("Intermagnetics") acquired Medical Advances, Inc. ("MAI"), a Wisconsin
corporation, pursuant to an Agreement and Plan of Reorganization and Merger,
dated March 11, 1997 (the "Agreement"), among Intermagnetics, Intermagnetics
Merger Sub, Inc., a wholly-owned subsidiary of Intermagnetics ("Merger Sub"),
MAI, and the 19 stockholders of MAI named therein (the "Stockholders"). Pursuant
to the Agreement, MAI was acquired by merger (the "Merger") of MAI into Merger
Sub. In the Merger, all of the 92,342 shares of the outstanding common stock of
MAI were exchanged for the Merger consideration, described below.
The Merger consideration was arrived at by arm's length negotiation and
consisted on an aggregate basis of approximately $4.5 million in cash, 652,168
shares of the common stock, par value $0.10 per share, of Intermagnetics (the
"Intermagnetics Common Stock") and certain additional contingent rights
("Rights"), described below. The total value of the Merger consideration
received by the Stockholders, exclusive of the Rights, was approximately $11.735
million. Each Stockholder received for each MAI share held by it approximately
$48.73 in cash and approximately seven shares of Intermagnetics Common Stock.
Pursuant to the rights, the Stockholders are entitled to receive up to
a maximum aggregate 97,826.09 additional shares (the "Adjustment Shares") of
Intermagnetics Common Stock if the average closing price of the Intermagnetics
Common Stock (the "Adjusted Closing Price"), as reported on the American Stock
Exchange for the period beginning on the first trading day after the Company
issues a release on its revenues and earnings for its 1997 fiscal year and
ending ninety calendar days later, is less than $11.50. The Adjustment Shares
shall be calculated as that number of shares equal to (a) $7,500,000 divided by
the greater of (i) $10.00 per share or (ii) the Adjusted Closing Price, minus
(b) $7,500,000 divided by $11.50 per share.
Prior to the Merger, MAI was engaged in the business of manufacturing
and distributing accessories used in Magnetic Resonance Imaging devices. All
plant and equipment assets acquired in the Merger will continue to be used
primarily as they were prior to the Merger .
Intermagnetics General Corporation and Medical Advances, Inc.
Pro Forma Combined Condensed Balance Sheet
November 24, 1996
(Dollars in Thousands except per share amounts)
(UNAUDITED)
The following unaudited Pro Forma Combined Condensed Balance Sheet, as of
November 24, 1996, gives effect to the acquisition by Intermagnetics General
Corporation (IGC) of Medical Advances, Inc. (MAI), which was consummated on
March 11, 1997. The Pro Forma Condensed Balance Sheet should be read in
conjunction with the related Pro Forma Condensed Summary of Operations and the
notes to the Pro Forma Combined Condensed Financial Statements appearing
elsewhere herein.
Historical Pro Forma IGC - MAI
---------- Adjustments Pro Forma
IGC MAI Note 1 Combined
--- --- ------ --------
IGC MAI
--- ---
ASSETS
Current Assets
Cash and short-term investments $ 15,084 $ 1,126 $(4,568) $ 0 $ 11,642
Trade accounts receivable 20,084 1,213 0 0 21,297
Unbilled revenue 3,345 0 0 0 3,345
Inventories 25,157 758 0 0 25,915
Prepaid expenses & other current assets 1,804 78 0 0 1,882
--------- ------- ------- -------- ---------
65,474 3,175 (4,568) 0 64,081
Buildings 15,403 0 0 15,403
Machinery & equipment 33,607 1,113 0 0 34,720
Other property, plants & equipment 5,305 0 0 0 5,305
--------- ------- ------- -------- ---------
54,315 1,113 0 0 55,428
Less allowance for depreciation (26,946) (820) 0 0 (27,756)
--------- ------- ------- -------- ---------
Property, plant & equipment (net) 27,369 303 0 0 27,672
Investments 7,796 0 0 0 7,796
Other Assets 7,825 30 9,368 0 17,223
--------- ------- ------- -------- ---------
$ 108,464 $ 3,508 $ 4,800 $ 0 $ 116,772
========= ======= ======= ======== =========
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 2,400 $ 0 $ 0 $ 0 $ 2,400
Accounts payable 4,074 163 0 0 4,237
Salaries, wages and related expenses 2,610 639 0 0 3,249
Customer advances 471 0 0 0 471
Other liabilities and accrued expenses 2,788 271 0 0 3,059
--------- ------- ------- -------- ---------
12,343 1,073 0 0 13,416
Long-Term Debt 29,275 0 0 0 29,275
Deferred Income Taxes 564 0 0 0 564
Shareholders' Equity
Other equity (3,187) 2,099 5,322 (2,099) 2,135
Additional paid-in capital 69,469 366 1,913 (336) 71,382
--------- ------- ------- -------- ---------
66,282 2,435 7,235 (2,435) 73,517
--------- ------- ------- -------- ---------
$ 108,464 $ 3,508 $ 7,235 $ (2,435) $ 116,772
========= ======= ======= ======== =========
Intermagnetics General Corporation and Medical Advances, Inc.
Pro Forma Combined Condensed Summary of Operations
Six Months Ended November 24, 1996
(Dollars in Thousands except per share amounts)
(UNAUDITED)
The following unaudited Pro Forma Combined Condensed Summary of Operations as of
November 24, 1996, gives effect to the acquisition by Intermagnetics General
Corporation (IGC) of Medical Advances, Inc. (MAI), using the purchase method of
accounting as if the acquisition had taken place at the beginning of IGC's
current fiscal year. The Pro Forma Combined Condensed Summary of Operations
should be read in conjunction with the related Pro Forma Combined Condensed
Balance Sheet and the notes to the Pro Forma Combined Condensed Financial
Statements appearing elsewhere herein.
Historical Pro Forma IGC - MAI
---------- Adjustments Pro Forma
IGC MAI (Note 2) Combined
--- --- -------- --------
Net Sales $ 44,630 $ 4,035 $ 0 $ 48,665
Other Revenue 1,573 10 (125) 1,458
---------- ------- ------- ----------
46,203 4,045 (125) 50,123
Costs and expenses:
Costs of products sold 31,109 *** *** ***
Product research and development 3,196 *** ***
Marketing, general and 7,968 *** ***
administrative
Interest and other expense 1,070 *** ***
Equity in net income of
unconsolidated affiliate (77) *** *** ***
----------
43,266 *** *** ***
Income before income taxes 2,937 *** *** ***
Provision for income taxes 1,057 *** *** ***
----------
NET INCOME $ 1,880 *** *** ***
==========
NET INCOME PER SHARE $ 0.15 $ 0.17
========== ==========
(Primary and Fully diluted)
Weighted average shares outstanding
during period (Primary and Fully Diluted) 12,331,267 12,331,267
Shares issued in acquisition 0 652,168 652,168
---------- ------- ----------
Pro Forma Weighted average shares
outstanding during period (Primary
and Fully Diluted) 12,331,267 652,168 12,983,435
========== ======= ==========
(Primary
and Fully Diluted)
*** Confidential Treatment Requested
Intermagnetics General Corporation and Medical Advances, Inc.
Pro Forma Combined Condensed Summary of Operations
Twelve Months Ended May 26, 1996
(Dollars in Thousands, except per share amounts)
(UNAUDITED)
The following unaudited Pro Forma Combined Condensed Summary of Operations as of
May 26, 1996 gives effect to the acquisition by Intermagnetics General
Corporation (IGC) of Medical Advances, Inc. (MAI), using the purchase method of
accounting as if the acquisition had taken place at the beginning of IGC's 1996
fiscal year. The Pro Forma Combined Condensed Summary of Operations should be
read in conjunction with the related Pro Forma Combined Condensed Balance Sheet
and the notes to the Pro Forma Combined Condensed Financial Statements appearing
elsewhere herein.
Pro Forma IGC - MAI
Historical Adjustments Pro Forma
IGC MAI (Note 3) Combined
--- --- -------- ----------
Net Sales $ 88,467 $ 5,998 $ 0 $ 94,465
Other Revenue 4,138 17 (250) 3,905
Realized gain on the sale of available for sale
securities 1,414 0 0 1,414
--------- -------- --------- ---------
94,019 6,015 (250) 99,784
Costs and expenses:
Costs of products sold 66,188 *** *** ***
Product research and development 5,075 *** ***
Marketing, general and administrative 12,502 *** ***
Interest and other expense 2,624 *** ***
Equity in net loss of unconsolidated affiliate 748 *** *** ***
---------
87,137 *** *** ***
Income before income taxes 6,882 *** *** ***
Provision for income taxes 2,455 *** *** ***
---------
NET INCOME $ 4,427 *** *** ***
---------
NET INCOME PER SHARE $ 0.36 $ 0.32
(Primary and Fully diluted) ========== ==========
Weighted average shares outstanding during period
(Primary and Fully Diluted) 12,322,047 0 12,322,047
Shares issued in acquisition 0 652,168 652,168
---------- -------- ----------
Pro Forma Weighted average shares outstanding during
period (Primary and Fully Diluted) 12,322,047 652,168 12,974,215
========== ======== ==========
*** Confidential Treatment Requested
Notes to Pro Forma Financial Statements
NOTE 1
The Pro Forma Combined Condensed Balance Sheet includes adjustments as of the
closing date to reflect the acquisition of MAI using the purchase method of
accounting. The Pro Forma adjustments reflected in the Balance Sheet are as
follows:
Consideration for MAI
---------------------
Cash $ 4,500
Common Stock 16
Paid in Capital 1,913
Treasury Stock 5,306
Related Expense 68
--------
Total Consideration $ 11,803
MAI Equity (2,435)
--------
Purchased Technology $ 9,368
========
NOTE 2
In connection with the Pro Forma Combined Condensed Summary of Operations for
period ended November 24, 1996, the following pro forma adjustments relating to
the acquisition of MAI were made using the purchase consideration described
elsewhere:
Decrease in interest income resulting from cash used in the transaction. ***
Amortization of excess purchase price over net assets acquired. ***
Decrease in income tax relating to reduced Interest Income. ***
Increase in income tax as MAI was a S Corporation. *** ***
Decrease in net income. ***
NOTE 3
In connection with the Pro Forma Combined Condensed Summary of Operations for
period ended May 26, 1996, the following pro forma adjustments relating to the
acquisition of MAI were made based on the purchase consideration described
elsewhere:
Decrease in interest income resulting from cash used in the transaction. ***
Amortization of excess purchase price over net assets acquired. ***
Decrease in income tax relating to reduced interest income. ***
Increase in income tax as MAI was a S Corporation. *** ***
Decrease in net income. ***
*** Confidential Treatment Requested
Item 7(c). Exhibits.
23. Consent of Independent Public Accountants.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTERMAGNETICS GENERAL CORPORATION
Date: May 23, 1997 By: /s/ Carl H. Rosner
-----------------------------
Carl H. Rosner
Chief Executive Officer
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
23 Consent of Independent Public Accountants