<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 3, 1998
--------------
inTEST Corporation
- -----------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 0-22529 22-2370659
- -----------------------------------------------------------------
(State or Other (Commission File Number) (I.R.S. Employer
Jurisdiction of Identification No.)
Incorporation)
2 Pin Oak Lane, Cherry Hill, New Jersey 08003
- -----------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (609)424-6886
-------------
<PAGE>
The Current Report on Form 8-K filed by inTEST Corporation (the "Company") on
August 5, 1998 is hereby amended to include the financial information required
in Item 7.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
(a) Financial Statements of Business Acquired:
TESTDESIGN CORPORATION
INDEX TO FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report 1
Balance Sheets 2
Statements of Earnings 3
Statements of Shareholder's Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6 - 11
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder
TestDesign Corporation
We have audited the accompanying balance sheets of TestDesign Corporation (the
"Company") as of May 31, 1998 and June 30, 1997, and the related statements of
earnings, shareholder's equity, and cash flows for the eleven months ended May
31, 1998, and for the year ended June 30, 1997. 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 TestDesign Corporation as of
May 31, 1998 and June 30, 1997, and the results of its operations and its cash
flows for the eleven months ended May 31, 1998, and for the year ended June
30, 1997, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Mountain View, California
July 2, 1998
1
<PAGE>
TESTDESIGN CORPORATION
BALANCE SHEETS
(In thousands, except for share data)
<TABLE>
<CAPTION>
May 31, June 30,
1998 1997
------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 49 $ 318
Marketable securities - 81
Trade accounts and notes receivable, net of allowance
for doubtful accounts of $54 as of May 31, 1998 and
June 30, 1997 1,272 939
Inventories 943 892
Deferred tax asset 200 28
Other current assets 37 95
------ ------
Total current assets 2,501 2,353
------ ------
Property and equipment:
Machinery and equipment 1,037 953
Leasehold improvements 33 30
------ ------
1,070 983
Accumulated depreciation (708) (548)
------ ------
Net property and equipment 362 435
------ ------
Total assets $2,863 $2,788
====== ======
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 284 $ 480
Accrued expenses 436 192
Warranty reserve 20 20
Line of credit - 201
Payable to related party 115 386
Income taxes payable 268 115
------ ------
Total current liabilities 1,123 1,394
------ ------
Commitments (Note 6)
Subsequent event (Note 10)
Shareholder's equity:
Common stock, no par value, 1,000,000 shares authorized;
70,000 shares issued and outstanding 9 9
Retained earnings 1,731 1,380
Unrealized gain on securities - 5
------ ------
Total shareholder's equity 1,740 1,394
------ ------
Total liabilities and shareholder's equity $2,863 $2,788
====== ======
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
TESTDESIGN CORPORATION
STATEMENTS OF EARNINGS
(In thousands)
<TABLE>
<CAPTION>
Eleven
Months Ended Year Ended
May 31, 1998 June 30, 1997
------------ -------------
<S> <C> <C>
Revenues $7,713 $9,471
Cost of revenues 4,825 6,135
------ ------
Gross profit 2,888 3,336
Expenses:
Selling 538 414
Research and development 403 327
General and administrative 1,357 1,738
------ ------
Operating income 590 857
------ ------
Other income (expense):
Interest income 1 -
Interest expense (12) (27)
Other, net 17 (38)
------ ------
Total other income (expense), net 6 (65)
------ ------
Earnings before income taxes 596 792
Income tax expense 245 325
------ ------
Net earnings $ 351 $ 467
====== ======
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
TESTDESIGN CORPORATION
STATEMENTS OF SHAREHOLDER'S EQUITY
ELEVEN MONTHS ENDED MAY 31, 1998 AND YEAR ENDED JUNE 30, 1997
(In thousands, except for share data)
<TABLE>
<CAPTION>
Common Stock Unrealized Total
------------------ Retained Gain On Shareholder's
Shares Amount Earnings Securities Equity
------ ------ -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Balances, July 1, 1996 70,000 $ 9 $ 913 $ - $ 922
Unrealized gain on securities - - - 5 5
Net earnings - - 467 - 467
------ ----- ------ ----- ------
Balances, June 30, 1997 70,000 9 1,380 5 1,394
Realized gain on securities - - - (5) (5)
Net earnings - - 351 - 351
------ ----- ------ ----- ------
Balances, May 31, 1998 70,000 $ 9 $1,731 $ - $1,740
====== ===== ====== ===== ======
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
TESTDESIGN CORPORATION
STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Eleven
Months Ended Year Ended
May 31, 1998 June 30, 1997
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 351 $ 467
Adjustments to reconcile net earnings to net cash
(used in) provided by operating activities:
Depreciation and amortization 166 196
Gain on sale of assets (5) -
Gain on sale of securities (5) -
Write-down of investment - 50
Changes in operating assets and liabilities:
Trade receivables (333) 99
Inventories (51) 221
Deferred income taxes (173) 91
Other current assets 58 20
Accounts payable (196) (1,331)
Accrued expenses 244 (8)
Payable to related party (271) 249
Income taxes payable 153 (19)
------ ------
Net cash (used in) provided by operating activities (62) 35
------ ------
Cash flows from investing activities:
Short-term investments, net 81 (10)
Proceeds from sale of property and equipment 7 -
Purchase of property and equipment (94) (217)
------ ------
Net cash used in investing activities (6) (227)
------ ------
Cash flows (used in) provided by financing activities -
(repayments of) proceeds from line of credit (201) 201
------ ------
(Decrease) increase in cash and cash equivalents (269) 9
Cash and cash equivalents at beginning of period/year 318 309
------ ------
Cash and cash equivalents at end of period/year $ 49 $ 318
====== ======
Supplemental disclosures of cash flow information:
Cash paid during the period/year for:
Income taxes $ 262 $ 197
====== ======
Interest $ 12 $ 27
====== ======
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
TESTDESIGN CORPORATION
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998 AND JUNE 30, 1997
(In thousands, except share data)
(1) NATURE OF OPERATIONS
TestDesign Corporation (the "Company") was incorporated in the state of
California in 1985 and is wholly owned by one shareholder who is also
the President. The Company designs prototypes and fabricates high
technology electronic test hardware products used in the semiconductor
manufacturing industry worldwide. The major customers of the Company
include Hewlett-Packard, Intel, Motorola, National Semiconductor,
Philips, Cypress Semiconductor, and other semiconductor manufacturers.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Cash and Cash Equivalents
Short-term investments, which have maturities of three months or
less when purchased, are considered to be cash equivalents and are
carried at cost, which approximates market value.
(b) Marketable Securities
The Company accounts for marketable securities in accordance with
Statement of Financial Accounting Standards (SFAS) No. 115. These
investments are classified as "available-for-sale." Such
investments are recorded at fair value, with unrealized gains and
losses reported as a separate component of shareholder's equity.
The cost of securities sold is based upon the specific
identification method.
(c) Inventories
Inventories consist of raw materials, work in progress, and
finished goods. Inventories are stated at lower of cost (first
in, first out) or market value (net realizable value).
(d) Property and Equipment
Machinery and equipment are stated at cost. The estimated useful
lives range from five to seven years. Leasehold improvements are
recorded at cost and amortized over the shorter of the lease term
or estimated useful life of the asset. Depreciation is based upon
the estimated useful life of the assets using the double declining
balance method.
(e) Income Taxes
Income taxes are accounted for by the asset and liability method.
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
6
<PAGE>
TESTDESIGN CORPORATION
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998 AND JUNE 30, 1997
(In thousands, except share data)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(e) Income Taxes (Continued)
years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date. Valuation
allowances are established when necessary to reduce deferred tax
assets to the amounts expected to be realized.
(f) Revenue Recognition
Revenues from sales of products are recognized upon shipment to
customers.
(g) Research and Development
Research and development costs are expensed as incurred.
(h) Product Warranties
The Company generally provides product warranties and records
estimated warranty expense at the time of sale based upon
historical claims experience.
(i) 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 reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(3) CONCENTRATIONS OF CREDIT RISK
The Company's customers are in the semiconductor industry. During 1998
and 1997, the Company had sales to certain customers that exceeded 10%
of the Company's revenues. Those sales as a percentage of total revenue
were as follows:
<TABLE>
<CAPTION>
Customers 1998 1997
--------- ---- ----
<S> <C> <C>
A 34% 56%
B 11% 3%
C 1% 12%
</TABLE>
7
<PAGE>
TESTDESIGN CORPORATION
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998 AND JUNE 30, 1997
(In thousands, except share data)
(3) CONCENTRATIONS OF CREDIT RISK (Continued)
Additionally, as of May 31, 1998 and June 30, 1997, these three
customers accounted for a total of 44% and 58% of trade receivables,
respectively.
(4) INVENTORIES
Inventories held as of May 31, 1998 and June 30, 1997, were comprised of
the following:
<TABLE>
<CAPTION>
May 31, 1998 June 30, 1997
------------ -------------
<S> <C> <C>
Raw materials $ 750 $ 457
Work in process 188 264
Finished goods 43 171
Reserve for slow moving and obsolete
inventory (38) -
----- -----
$ 943 $ 892
===== =====
</TABLE>
(5) LINE OF CREDIT
In 1997, the Company entered into a line of credit agreement dated June
10, 1997, with a credit limit of $500 and an interest rate of 9.25% as
of June 30, 1997. The debt is personally guaranteed by the sole owner
of the Company. The Company has $-0- and $201 outstanding under the
line of credit as of May 31, 1998 and June 30, 1997, respectively.
Borrowings under this line of credit are principally used for working
capital purposes. The line of credit was terminated in February 1998.
(6) COMMITMENTS
The company leases premises in Sunnyvale, California, which commenced on
January 1, 1998, under a noncancelable operating lease expiring in the
year 1999. The Company rents its offices and warehouse space under term
leases expiring in December 1999. The aggregate minimum rental
commitments under the noncancelable operating lease in effect as of May
31, 1998, are as follows:
<TABLE>
<CAPTION>
Year Ending
May 31,
---------
<S> <C>
1999 $ 146
2000 and thereafter 79
-----
$ 225
=====
</TABLE>
8
<PAGE>
TESTDESIGN CORPORATION
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998 AND JUNE 30, 1997
(In thousands, except share data)
(6) COMMITMENTS (Continued)
Rental expense for the eleven months ended May 31, 1998, and for the
year ended June 30, 1997, was $124 and $121, respectively.
(7) INCOME TAXES
The components of income tax expense, as presented in the accompanying
statements of earnings, are comprised of federal and state taxes. The
components of income taxes for the eleven months ended May 31, 1998, and
for the year ended June 30, 1997, are as follows:
<TABLE>
<CAPTION>
Eleven
Months Ended Year Ended
May 31, 1998 June 30, 1997
------------ -------------
<S> <C> <C>
Income taxes:
Current:
Federal $ 337 $ 180
State 81 54
------- -------
418 234
------- -------
Deferred:
Federal (146) 61
State (27) 30
------- -------
(173) 91
------- -------
$ 245 $ 325
======= =======
</TABLE>
The following reconciles the expected corporate federal income tax
expense (computed by multiplying the Company's income before taxes by
34%) to the Company's income tax expense for the eleven months ended May
31, 1998, and for the year ended June 30, 1997:
<TABLE>
<CAPTION>
May 31, 1998 June 30, 1997
------------ -------------
<S> <C> <C>
Expected income tax expense $ 201 $ 243
State income tax, net of
federal benefit 36 56
Other 8 26
------ ------
$ 245 $ 325
====== ======
</TABLE>
9
<PAGE>
TESTDESIGN CORPORATION
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998 AND JUNE 30, 1997
(In thousands, except share data)
(7) INCOME TAXES (Continued)
The tax effects of temporary differences between the carrying amount of
assets and liabilities for financial reporting purposes and the amount
used for income tax purposes that give rise to significant portions of
deferred tax assets and liabilities as of May 31, 1998 and June 30,
1997, are presented below:
<TABLE>
<CAPTION>
May 31, 1998 June 30, 1997
------------ -------------
<S> <C> <C>
Deferred tax assets:
Accruals and reserves $ 185 $ 24
Capital loss carryforwards 36 36
Deferred state taxes 15 4
------ ------
Total gross deferred tax assets 236 64
Valuation allowance (36) (36)
------ ------
Net deferred tax assets $ 200 $ 28
====== ======
</TABLE>
Capital loss carryforwards are fully offset by the valuation allowance.
Based on the Company's history of prior operating earnings and its
expectation of the future, management believes that taxable income will
more likely than not be sufficient to realize the net deferred tax
assets of $200 as of May 31, 1998.
(8) EMPLOYEE BENEFIT PLANS
On July 1, 1994, the Company adopted its 401(k) Savings and Profit
Sharing Plan (the Plan), which is open to all of its employees who
exceed 18 years of age and have 6 months of service.
A feature of the Plan includes a mandatory matching requirement equal to
25% of an employee's contribution for employee contributions up to 5% of
gross salary. Matching contributions for the Plan accrued during the
eleven months ended May 31, 1998, and for the year ended June 30, 1997,
were $7 and $5, respectively.
A feature of the Plan allows the Company to make discretionary matching
contributions up to 6.5% of an employees' gross salary for the year.
Contributions accrued for profit sharing during the eleven months ended
May 31, 1998, and for the year ended June 30, 1997, were $-0- and $48,
respectively. During 1998, due to the implementation of the new bonus
and commission plan, the Company has not elected to make profit sharing
matching contributions.
10
<PAGE>
TESTDESIGN CORPORATION
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998 AND JUNE 30, 1997
(In thousands, except share data)
(9) ACCRUED EXPENSES
Accrued expenses as of May 31, 1998 and June 30, 1997, consisted of the
following:
<TABLE>
<CAPTION>
May 31, 1998 June 30, 1997
------------ -------------
<S> <C> <C>
Accrued commissions $ 69 $ 107
Accrued vacation 39 28
Accrued management fee to Prim 250 -
Other 78 57
------ ------
$ 436 $ 192
====== ======
</TABLE>
(10) SUBSEQUENT EVENT
In July 1998, TestDesign's sole shareholder entered into an agreement to
sell all of the Company's common stock to inTEST Corporation. The
purchase agreement provides for certain representations,
indemnifications, and warranties for items which may eventuate including
tax and litigation.
(11) RELATED PARTY
Prim Distribution, Inc. ("Prim") is a subchapter S corporation wholly
owned by the sole shareholder of TestDesign and was organized primarily
to provide management services to the Company. Prim invoiced TestDesign
for management fees in respect of services provided during 1998 and 1997
of $250 and $950, respectively.
The balances owed to Prim of $115 and $386 as of May 31, 1998 and June
30, 1997, respectively, are reflected as current liabilities as there
are no written loan agreements and no fixed repayment terms specified
for these amounts.
(12) INVESTMENT
During 1997, $50 representing an investment in the stock of Triple S
Engineering Corporation (the "Corporation") carried at historical cost
was written off as the Corporation declared bankruptcy. Management
believes the write-off was necessary to reflect a permanent impairment
in the value of this investment.
11
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS (Continued)
(b) Pro Forma Financial Information:
Background
----------
On August 3, 1998, the Company acquired 100% of the issued and
outstanding common shares of TestDesign Corporation ("TestDesign").
The acquisition price consisted of a cash payment of $4.4 million and
the issuance of 625,000 shares of the Company's common stock. Although
the Company's common stock had a market price of $4.75 per share on the
closing date of the transaction, all of the 625,000 shares issued in
connection with the acquisition are subject to legal restrictions on
transfer and have been valued at a 10% discount to the market price of
the shares. In addition, the Company incurred transaction costs of an
estimated $425,000 in completing the acquisition. The following
allocation of the purchase price is preliminary and subject to change:
Cash payment $4,400
625,000 common shares at $4.28 2,672
Transaction costs 425
------
Total purchase price 7,497
Estimated fair market value of
identifiable assets acquired 1,683
------
Goodwill to be amortized $5,814
======
The goodwill of $5.8 million resulting from the acqusition of
TestDesign will be amortized over a period of 15 years. In June 1997, in
connection with the Company's initial public offering (the "Offering"),
the Company terminated its status as an S corporation. Simultaneous
with the closing of the Offering, the Company acquired the 21% minority
interests in each of its three foreign subsidiaries, which resulted in
goodwill of $1.3 million, which is being amortized over 15 years.
The following pro forma balance sheet and statements of earnings reflect
the combination as if it had occurred on June 30, 1998 for purposes of
the pro forma balance sheet and as of January 1, 1997 for purposes of
the pro forma statements of earnings and include certain pro forma
adjustments which gives effect to these events.
<PAGE>
(b) Pro Forma Financial Information: (Continued)
inTEST Corporation
Pro Forma Consolidated Balance Sheet
As of June 30, 1998
(In thousands, except share data)
<TABLE>
<CAPTION>
Historical
---------------------
inTEST TestDesign Adjustments Pro Forma
------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $13,215 $ 114 $(4,825) $ 8,504
Trade accounts and notes receivable 3,472 957 4,429
Allowance for doubtful accounts (143) (54) (197)
Inventories 1,645 937 2,582
Other current assets 474 235 709
------- ------- ------- -------
Total current assets 18,663 2,189 (4,825) 16,027
------- ------- ------- -------
Net property and equipment 472 347 819
Other assets 139 - 139
Goodwill 1,245 - 5,814 7,059
------- ------- ------- -------
Total assets $20,519 $ 2,536 $ 989 $24,044
======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,054 $ 348 $ 1,402
Accrued expenses 648 190 838
Payable to related parties - 115 115
Domestic and foreign income taxes payable 259 200 459
------- ------- ------- -------
Total current liabilities 1,961 853 2,814
------- ------- ------- -------
Stockholders' equity:
Preferred stock, $.01 par value; 5,000 shares
authorized; no shares issued or outstanding - - -
Common stock, $.01 par value; 20,000,000 shares
authorized; 6,536,034 shares issued and outstanding 59 3 3 65
Additional paid-in capital 13,981 6 2,660 16,647
Retained earnings 4,705 1,674 (1,674) 4,705
Accumulated other comprehensive expense (187) - (187)
------- ------- ------- -------
Total stockholders' equity 18,558 1,683 989 21,230
------- ------- ------- -------
Total liabilities and stockholders' equity $20,519 $ 2,536 $ 989 $24,044
======= ======= ======= =======
</TABLE>
<PAGE>
(b) Pro Forma Financial Information: (Continued)
PRO FORMA ADJUSTMENTS DETAIL
- ----------------------------
<TABLE>
<S> <C>
Cash
inTEST-Cash payment for purchase of TestDesign $(4,400)
inTEST-Payment of transaction costs (425)
-------
$(4,825)
=======
Goodwill
inTEST-Establish goodwill from purchase of TestDesign $ 5,814
-------
$ 5,814
=======
Common Stock
inTEST-Record par value of shares issued in purchase of
TestDesign $ 6
TestDesign-Eliminate common shares purchased (3)
-------
$ 3
=======
Additional Paid in Capital
inTEST-Record difference between par value and market
value of shares issued less 10% illiquidity discount $ 2,666
TestDesign-Eliminate paid in capital (6)
-------
$ 2,660
=======
Retained Earnings
TestDesign-Eliminate prior retained earnings $(1,674)
-------
$(1,674)
=======
</TABLE>
<PAGE>
(b) Pro Forma Financial Information: (Continued)
inTEST Corporation
Pro Forma Consolidated Statements of Earnings
(In thousands, except share data)
<TABLE>
<CAPTION>
Year Ended December 31, 1997 Six Months Ended June 30, 1998
-------------------------------------------- --------------------------------------------
Historical Historical
-------------------- --------------------
inTEST TestDesign Adjustments Pro Forma inTEST TestDesign Adjustments Pro Forma
--------- ---------- ----------- --------- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $20,746 $ 8,943 $29,689 $10,789 $ 3,892 $14,681
Cost of revenues 7,808 5,700 13,508 4,334 2,457 6,791
------- ------- ------- ------- ------- ------- ------- -------
Gross profit 12,938 3,243 16,181 6,455 1,435 7,890
------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Selling expense 2,789 500 3,289 1,419 307 1,726
Research and development
expense 1,737 384 2,121 855 215 1,070
General and administrative
expense 2,225 1,609 $ (22) 3,812 1,176 702 $ 144 2,022
------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses 6,751 2,493 (22) 9,222 3,450 1,224 144 4,818
------- ------- ------- ------- ------- ------- ------- -------
Operating income 6,187 750 22 6,959 3,005 211 (144) 3,072
------- ------- ------- ------- ------- ------- ------- -------
Other income (expense):
Interest income 349 1 350 266 - 266
Interest expense (15) (21) (36) (2) (5) (7)
Other (74) (10) (84) 11 8 19
------- ------- ------- ------- ------- ------- ------- -------
Total other income (expense) 260 (30) 230 275 3 278
------- ------- ------- ------- ------- ------- ------- -------
Earnings before income taxes
and minority interest 6,447 720 22 7,189 3,280 214 (144) 3,350
Income tax expense 2,090 297 770 3,157 1,218 88 20 1,326
------- ------- ------- ------- ------- ------- ------- -------
Earnings before minority
interest 4,357 423 (748) 4,032 2,062 126 (164) 2,024
Minority interest (25) - 25 - - - -
------- ------- ------- ------- ------- ------- ------- -------
Net earnings $ 4,332 $ 423 $ (723) $ 4,032 $ 2,062 $ 126 $ (164) $ 2,024
======= ======= ======= ======= ======= ======= ======= =======
Pro forma earnings per
share-basic $0.74 $0.71 $0.35 $0.31
Pro forma weighted average
common shares outstanding-
basic 5,068,349 625,000 5,693,349 5,911,034 625,000 6,536,034
Pro forma earnings per
share-diluted $0.73 $0.71 $0.35 $0.31
Pro forma weighted average
common and common stock
equivalent shares
outstanding-diluted 5,092,490 625,000 5,717,490 5,921,862 625,000 6,546,862
</TABLE>
<PAGE>
(b) Pro Forma Financial Information: (Continued)
PRO FORMA ADJUSTMENTS DETAIL
- ----------------------------
The pro forma statements of earnings of the Company for the year ended
December 31, 1997 and the six months ended June 30, 1998 reflect:
(a) the amortization of goodwill resulting from the acquisition of TestDesign
and the acquisition of the minority interests in the Company's three
foreign subsidiaries which occurred concurrent with the closing of the
Company's initial public offering in June, 1997.
(b) the adjustment to administrative expense to reflect the reductions in
salary expense that will occur as a result of the acquisition of
TestDesign.
(c) the increase in income tax expense resulting from the termination of the
Company's status as an S corporation shortly before the closing of its
initial public offering and from the aforementioned reduction in
administrative expense. TestDesign was a C corporation prior to its
acquisition by the Company.
(d) the elimination of the minority interest charge reflected in the Company's
historical financial statements, as if the acquisition of the minority
interest in its three foreign subsidiaries had occurred on January 1,
1997.
<TABLE>
<CAPTION>
Six Months
Year Ended Ended
12/31/97 6/30/98
---------- ----------
<S> <C> <C>
General and Administrative Expense:
inTEST-Goodwill adjustment from acquisition of
minority interest in three foreign subsidiaries $ 40
inTEST-Goodwill adjustment from acquisition of
TestDesign 388 $ 194
TestDesign-Adjust administrative expense -
1/1/97-6/30/98 (450) (50)
------ ------
$ (22) $ 144
====== ======
Income Tax Expense:
inTEST-Increase in tax provision resulting from
change from S corp to C corp for period 1/1/97-
6/19/97 $ 590
TestDesign-Increase in tax provision resulting from
decrease in administrative expense - 1/1/97-
6/30/98 180 $ 20
------ ------
$ 770 $ 20
====== ======
Minority Interest:
inTEST-Elimination of minority interest resulting
from acquisition of minority interests in three
foreign subsidiaries $ 25
------
$ 25
======
</TABLE>
<PAGE>
(c) Exhibits:
23. Consent of KPMG Peat Marwick LLP
<PAGE>
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.
inTEST CORPORATION
By: /s/ Hugh T. Regan, Jr.
---------------------------
Hugh T. Regan, Jr.
Treasurer and
Chief Financial Officer
Date: October 2, 1998
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<PAGE>
EXHIBIT INDEX
23. Consent of KPMG Peat Marwick
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
TestDesign Corporation
We consent to the inclusion of our report dated July 2, 1998, with respect to
the balance sheets of TestDesign Corporation as of May 31, 1998 and June 30,
1997, and the related statements of earnings, shareholder's equity, and cash
flows for the eleven months ended May 31, 1998 and for the year ended June 30,
1997, which report appears in the Form 8-K/A of inTEST Corporation dated
August 3, 1998.
KPMG Peat Marwick LLP
Mountain View, California
September 24, 1998
