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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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) July 27, 1998
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Alvey Systems, Inc.
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(Exact name of registrant as specified in charter)
Delaware 333-2600 43-0157210
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(State or other jurisdiction (Commission file number) (IRS employer
of incorporation) identification no.)
9301 Olive Boulevard, St. Louis, Missouri 63132
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (314) 993-4700
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Not applicable
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
(a) On July 27, 1998, Alvey Systems, Inc., a Delaware corporation (the
"Company"), announced that it will spin-off its wholly-owned subsidiary,
McHugh Software International, Inc. ("McHugh"), to Alvey's parent, Pinnacle
Automation, Inc. ("Pinnacle"). Pinnacle will in turn spin-off McHugh to
Pinnacle's common stockholders. Currently, McHugh is a direct, wholly-owned
subsidiary of Alvey and Alvey is a direct, wholly-owned subsidiary of
Pinnacle. Upon completion of the spin-off and the closing of the sale of a
minority interest in McHugh to affiliates of Advent International Corporation
for $30.0 million in cash, Alvey will receive a cash payment from McHugh of
approximately $17.4 million in repayment of certain intercompany indebtedness.
Together with its wholly-owned subsidiaries, Weseley Software
Development Corp., Software Architects, Inc. and Gagnon & Associates, Inc.,
McHugh develops, markets, implements and supports open architecture,
client/server planning and execution software products for warehouse and
transportation management (the "McHugh Business").
The spin-off and the minority investment in McHugh are each conditioned
upon, among other things, the receipt of consents from holders of a majority
in aggregate principal amount of Alvey's $100,000,000 of 11-3/8% Senior
Subordinated Notes Due 2003 (the "Notes"). Alvey is offering to pay a
consent premium of $45.00 in cash for each $1,000 principal amount of Notes
for which a consent is properly delivered prior to the expiration of the
consent solicitation at 5:00 p.m., New York City time, on August 14, 1998,
unless earlier terminated or extended.
Following consummation of the Spin-Off, Alvey will continue to own and
operate its business as a leading provider of automated materials handling
systems for manufacturing plants, distribution centers and warehouses (the
"Systems Business"), and McHugh will continue to own and operate the McHugh
Business. By separating businesses with distinctive needs relative to
capital investment, growth, financing, management and human resources, the
boards and management of Pinnacle, Alvey and McHugh believe the spin-off will
improve capital-raising efficiency and strategic focus at both the Systems
and McHugh Businesses.
Further details regarding the spin-off, the minority investment in
McHugh and the consent solicitation can be found in the Company's press
release relating to these developments, a copy of which is attached hereto as
Exhibit 99.1.
(b) On July 27, 1998, the Company issued a press release announcing
financial information for the three and six months ended June 30, 1998. A
copy of that press release is attached hereto as Exhibit 99.2.
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Item 7. Exhibits.
(c) Exhibits:
99.1 Press Release of Alvey Systems, Inc., dated July 27, 1998,
announcing the spin-off and related transactions
99.2 Press Release of Alvey Systems, Inc., dated July 27, 1998,
announcing financial information for the three and six months
ended June 30, 1998
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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.
Date: July 31, 1998
ALVEY SYSTEMS, INC.
By: /s/ James A. Sharp
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James A. Sharp
Secretary and Senior Vice President, Finance
Chief Financial Officer
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EXHIBIT INDEX
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SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION PAGE
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99.1 Press Release of Alvey Systems, Inc., dated July 27, 1998, 6
announcing the spin-off and related transactions
99.2 Press Release of Alvey Systems, Inc., dated July 27, 1998, 7
announcing financial information for the three and six months
ended June 30, 1998
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EXHIBIT 99.1
ST. LOUIS--(BUSINESS WIRE)--July 27, 1998--Alvey Systems, Inc. ("Alvey")
today announced that it will spin-off its wholly-owned subsidiary, McHugh
Software International, Inc. ("McHugh"), to Alvey's parent, Pinnacle
Automation, Inc. ("Pinnacle"). Pinnacle will in turn spin-off McHugh to
Pinnacle's common stockholders. Currently, McHugh is a direct, wholly-owned
subsidiary of Alvey and Alvey is a direct, wholly-owned subsidiary of
Pinnacle.
Upon completion of the spin-off and the closing of the sale of a
minority interest in McHugh, Alvey will receive a cash payment from McHugh of
approximately $17.4 million. The transactions are conditioned on receipt of
consents from holders of a majority in aggregate principal amount of Alvey's
$100,000,000 of 11-3/8% Senior Subordinated Notes Due 2003 (the "Notes").
Alvey is offering to pay a consent premium of $45.00 in cash for each
$1,000 principal amount of Notes for which a consent is properly delivered
prior to the expiration of the consent solicitation. The consent
solicitation will expire at 5:00 p.m., New York City time, on August 14,
1998, unless earlier terminated or extended. Holders of record as of 5:00
p.m., New York City time, on July 29, 1998, are eligible to participate in
the consent solicitation.
Following the spin-off, Alvey will continue to own and operate its
materials handling systems business. Alvey's continuing business is a
leading provider of automated materials handling systems for manufacturing
plants, distribution centers and warehouses. For the 12 months ending June
30, 1998, sales and EBITDA of Alvey's continuing systems business amounted to
approximately $315.4 million and $23.2 million, respectively.
NationsBanc Montgomery Securities LLC is serving as Solicitation Agent
in connection with the consent solicitation. Questions regarding the terms
of the consent solicitation may be directed to the Solicitation Agent at
888-292-0070 (Attention: Liability Management Group). MacKenzie Partners,
Inc. is serving as Information Agent in connection with the consent
solicitation. Questions regarding the delivery procedures for the consents
and requests for additional copies of documents may be directed to the
Information Agent at 800-322-2885. For a complete description of the terms
and conditions of the consent solicitation, holders should refer to the
Consent Solicitation Statement dated July 24, 1998.
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EXHIBIT 99.2
ST. LOUIS--(BUSINESS WIRE)--July 27, 1998--Pinnacle Automation, Inc. and
Alvey Systems, Inc. today announced record sales and bookings for the three
months and six months ended June 30, 1998.
For the second quarter ended June 30, 1998, the company reported record
sales of $107.5 million, an 18.4 percent increase over sales of $90.7 million
for the second quarter of 1997. Record sales at the Distribution Logistics
Group (DLG) and the Software Logistics Group (SLG) both contributed to the
year-over-year increase in revenues and were supported by record bookings at
both operating groups.
Sales for the six months ended June 30, 1998 were $200.2 million, a
record level for the company and a 14.7 percent increase over sales of $174.5
million for the first half of 1997.
On a consolidated basis, the company reported record bookings of $125.7
million for the quarter ended June 30, 1998, a 27.7 percent increase over the
comparable period of 1997. Year-to-date bookings were $217.3 million, a 7.2
percent increase over the same period in 1997. Consolidated backlog as of
June 30, 1998 increased to $160.8 million, second only to record backlog of
$163.6 million at June 30, 1997 and 11.9 percent above the December 31, 1997
level.
For the quarter ended June 30, 1998, earnings before interest, taxes,
depreciation and amortization (EBITDA) were $8.1 million, which excludes a
$2.7 million non-recurring/non-cash write-off for purchased in-process
research and development based on a preliminary purchase price allocation for
the acquisitions of Software Architects Inc. and Gagnon & Associates, Inc.
Second quarter 1998 EBITDA represents an 83.1 percent increase over the 1997
second quarter and was attributable primarily to higher sales, improved
operations and the elimination of one-time charges related to second quarter
1997 restructuring efforts.
EBITDA for the six months ended June 30, 1998 was $14.1 million, which
excludes the $2.7 million discussed above. This represents an increase of
50.9 percent over the first six months of 1997.
"We are pleased with the results of the first half and are proud to note
that the second quarter marked four consecutive quarters with extremely
positive results in sales, bookings and earnings,'' said Stephen J. O'Neill,
president and chief executive officer. "Pinnacle's continuing strong
performance is evidence of a sound strategy, effective implementation of that
strategy, and our focus on core operations - as outlined by the Board during
the restructuring one year ago - and we expect these trends to continue
through the remainder of fiscal 1998."
SAFE HARBOR STATEMENT
The statements contained in this release that are not historical facts
are forward-looking statements that involve certain risks and uncertainties.
These risks and uncertainties include, but are not limited to: the Company's
ability to address and improve operating efficiencies; its ability
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to continue its sales growth; its ability to enhance competitiveness and meet
increasing demand for its products; continued demand for and market
acceptance of the Company's products and services; continued expansion of the
Company's product offerings; and general economic conditions affecting the
Company and its customer base. Investors are also directed to other risks
discussed in documents filed by the Company with the Securities and Exchange
Commission.
Pinnacle Automation, Inc. is a leading integrator of material and
information flow capabilities, providing customers with solutions to meet all
their supply chain needs. The companies produce equipment and related software
and controls that enable manufacturers, distributors and retailers to operate
their manufacturing plants, distribution centers and warehouses more
efficiently.
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ALVEY SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net sales $107,454 $ 90,746 $200,174 $174,483
Cost of goods sold 78,213 69,445 147,855 131,302
Gross profit 29,241 21,301 52,319 43,181
Selling, general
and administrative expenses 19,342 15,949 35,507 31,978
Research and development
expenses 3,192 2,113 6,039 4,166
Write-off of purchased
in-process research and
development costs 2,700 -- 2,700 --
Restructuring costs -- 15,284 -- 15,284
Amortization expense 381 406 798 832
Other expense(income), net 55 14 (495) (7)
Operating income (loss) 3,571 (12,465) 7,770 (9,072)
Interest expense 3,244 3,552 6,702 6,975
Income (loss) before
income taxes 327 (16,017) 1,068 (16,047)
Income tax expense (benefit) 553 (5,486) 878 (5,373)
Net income (loss) $ (226) $(10,531) $ 190 $(10,674)
Earnings per share (1) -- -- -- --
</TABLE>
(1) Given the historical organization and capital structure of
Alvey Systems, Inc., earnings per share information is not considered
meaningful or relevant and therefore has not been presented.
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ALVEY SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
(dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
(Unaudited)
<S> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 5,151 $ 3,142
Receivables 70,003 66,440
Accumulated costs and earnings in
excess of billings 10,706 12,885
Inventories 15,779 17,178
Other current assets 15,164 14,000
Total current assets 116,803 113,645
Property, plant and equipment, net 35,967 35,459
Other assets 7,047 7,537
Goodwill 24,859 25,151
$184,676 $181,792
Liabilities and net investment of Parent:
Current liabilities:
Current portion of long-term debt $ 314 $ 274
Accounts payable 30,455 33,066
Accrued expenses 41,505 41,849
Customer deposits 5,492 7,153
Billings in excess of accumulated
costs and earnings 35,085 23,585
Deferred revenues 4,639 3,134
Taxes payable 2,347 967
Total current liabilities 119,837 110,028
Long-term debt 100,547 106,930
Deferred income taxes and other
long-term liabilities 12,622 13,362
Net investment of Parent (48,330) (48,528)
$184,676 $181,792
</TABLE>
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ALVEY SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Six months ended
June 30,
1998 1997
<S> <C> <C>
Operating activities:
Net income (loss) $ 190 $ (10,674)
Depreciation and software amortization 2,863 2,320
Amortization 798 832
Write-off of purchased in-process research
and development costs 2,700 --
Changes in operating assets and liabilities 8,389 (580)
Net cash provided by (used for) operating
activities 14,940 (8,102)
Investing activities:
Acquisition of subsidiaries (3,459) --
Payments for agreements not to compete (150) (150)
Cash payments to dispose of Diamond -- (363)
Additions to property, plant and
equipment (2,987) (3,006)
Net cash used for investing activities (6,596) (3,519)
Financing activities:
Proceeds of borrowings 36,910 55,600
Payments of debt and capital leases (43,253) (44,727)
Other 8 (103)
Net cash provided by (used for) financing
activities (6,335) 10,770
Net increase (decrease) in cash and cash
equivalents 2,009 (851)
Cash and cash equivalents, beginning of
period 3,142 5,025
Cash and cash equivalents, end of period $ 5,151 $ 4,174
</TABLE>
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