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: March 19, 1996
(Date of earliest event reported)
Aeroflex Incorporated
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-8037 11-1974412
- ------------------------------------------------------------------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
35 South Service Road, Plainview, New York 11803
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number
including area code (516) 694-6700
-----------------------------
- ------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 7. Financial Statements, Pro Forma Financial
Information and Exhibits
------------------------------------------
(a) Financial Statements of Business Acquired
-----------------------------------------
Audited Financial Statements of MIC Technology Corporation as of
October 31, 1995, 1994 and 1993 and for the three years then ended
and unaudited Financial Statements as of and for the three months
ended January 31, 1996 and 1995.
(b) Pro Forma Financial Information (Unaudited)
-------------------------------------------
Pro Forma Balance Sheet
- Aeroflex Incorporated and Subsidiaries as of December 31, 1995
Pro Forma Statements of Operations
- Aeroflex Incorporated and Subsidiaries for the year ended
June 30, 1995
- Aeroflex Incorporated and Subsidiaries for the six months
ended December 31, 1995
Notes to Pro Forma Financial Statements
Exhibit 11 - Computation of Pro Forma Income per common share
<PAGE>
MIC TECHNOLOGY CORPORATION AND SUBSIDIARY
Consolidated Financial Statements
October 31, 1995 and 1994
(With Independent Auditors' Report Thereon)
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
MIC Technology Corporation:
We have audited the accompanying consolidated balance sheets of MIC
Technology Corporation and subsidiary as of October 31, 1995 and 1994, and
the related consolidated statements of earnings and accumulated earnings,
and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of MIC
Technology Corporation and subsidiary as of October 31, 1995 and 1994, and
the results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Short Hills, New Jersey
November 30, 1995
<PAGE>
MIC TECHNOLOGY CORPORATION AND SUBSIDIARY
Consolidated Balance Sheets
October 31, 1995 and 1994
<TABLE>
<CAPTION>
Assets (Note 4) 1995 1994
--------------- ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,447,798 675,095
Accounts receivable - trade,
net of allowance for doubtful
accounts of $47,000 and $0 in
1995 and 1994, respectively 3,385,902 3,755,434
Inventories (note 2) 681,629 606,172
Prepaid expenses and other current assets 167,940 200,189
Prepaid Federal taxes 280,786 -
Deferred taxes (note 8) 181,758 -
----------- ----------
Total current assets 6,145,813 5,236,890
Machinery, equipment, furniture and
improvements, net (note 3) 3,881,353 3,654,201
Other assets 214,115 161,000
----------- -----------
$10,241,281 9,052,091
=========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Current portion of long-term debt (note 4) 1,320,000 250,000
Current portion of long-term debt payable
to related parties (notes 4 and 10) 480,000 -
Accounts payable 1,043,873 680,945
Income taxes payable 84,253 19,344
Accrued payroll, profit sharing and bonuses 621,419 128,826
Accrued warranty costs 129,104 164,659
Other accrued expenses 867,837 668,094
Current portion of capital lease (note 5) 134,742 76,007
---------- ----------
Total current liabilities 4,681,228 1,987,875
Long-term portion of capital lease (note 5) 493,512 361,257
Long-term debt (note 4) 958,235 1,428,235
Long-term debt payable to related parties
(notes 4 and 10) - 842,420
Minority interest in subsidiary - 24,846
--------- ----------
Total liabilities 6,132,975 4,644,633
--------- ----------
Stockholders' equity (notes 6 and 7):
Common stock, at stated value. Authorized
500,000 shares; issued 393,952 shares
and 391,652 shares in 1995 and 1994,
respectively 456,556 456,210
Accumulated earnings 3,655,475 3,962,808
Treasury stock - 436 shares and 2,736 shares
in 1995 and 1994, respectively (26,056) (55,590)
Cumulative currency translation adjustment 22,331 44,030
---------- ----------
Total stockholders' equity 4,108,306 4,407,458
---------- ----------
Commitments and contingencies (notes 3 and 5) 10,241,281 9,052,091
========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
MIC TECHNOLOGY CORPORATION AND SUBSIDIARY
Consolidated Statements of Earnings
and Accumulated Earnings
Years ended October 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Net sales $24,881,042 19,789,833
Cost of goods sold 15,100,944 11,015,627
----------- -----------
Gross profit 9,780,098 8,774,206
----------- -----------
Operating expenses:
Selling, general and administrative 3,696,146 3,620,458
Research and development 2,399,225 1,938,302
----------- -----------
6,095,371 5,558,760
----------- -----------
Operating income 3,684,727 3,215,446
Other income (expense):
Interest expense, net of interest income (353,177) (229,465)
Other income 13,757 19,286
----------- -----------
Income before income taxes 3,345,307 3,005,267
Income taxes (note 8) 1,281,971 87,999
----------- -----------
Income before minority interest 2,063,336 2,917,268
Minority interest - (26,010)
----------- -----------
Net income 2,063,336 2,891,258
Accumulated earnings at beginning of year 3,962,808 3,042,066
Cash dividend/distribution to stockholders (2,370,669) (1,970,516)
----------- -----------
Accumulated earnings at end of year $ 3,655,475 3,962,808
=========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
MIC TECHNOLOGY CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years ended October 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $2,063,336 2,891,258
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 859,316 761,586
Loss on disposal of machinery, equipment,
furniture and improvements, net 13,805 -
Minority interests in net income of
consolidated subsidiary - 26,010
Increase in deferred tax asset (181,758) -
Changes in assets and liabilities:
Decrease (increase) in accounts receivable,
net 369,532 (1,511,839)
Increase in inventories (75,457) (135,417)
Decrease (increase) in prepaid expenses
and other current assets 32,249 (89,225)
Increase in prepaid Federal taxes (280,786) -
Decrease (increase) in other assets 116,885 (79,428)
Increase in accounts payable 362,928 78,439
Increase in accrued expenses and
income taxes payable 721,690 160,077
----------- -----------
Net cash provided by operating
activities 4,001,740 2,101,461
----------- -----------
Cash flows from investing activities:
Purchase of machinery, equipment,
furniture and improvements (801,493) (468,265)
Deposits for purchase of machinery (note 3) (170,000) -
Purchase of minority interest (24,846) -
----------- -----------
Net cash used in investing activities (996,339) (468,265)
----------- -----------
Cash flows from financing activities:
Cash dividend/distribution to stockholders (2,370,669) (1,970,516)
Borrowings under long-term debt 1,148,780 400,000
Borrowings under long-term debt payable to
related parties 449,496 1,291,720
Repayment of long-term debt (548,780) (656,142)
Repayment of long-term debt payable to
related parties (811,916) (449,300)
Principal payments on capital lease
obligations (107,790) (12,223)
Proceeds from issuance of common stock
and exercise of stock options 49,230 59,104
Shares purchased for treasury (19,350) (8,600)
----------- -----------
Net cash used in financing
activities (2,210,999) (1,345,957)
----------- -----------
Effect of foreign currency exchange rate
changes on cash and cash equivalents (21,699) 52,899
----------- -----------
Net increase in cash and cash equivalents 772,703 340,138
Cash and cash equivalents at beginning of year 675,095 334,957
----------- -----------
Cash and cash equivalents at end of year $ 1,447,798 675,095
=========== ===========
Cash payments for:
Interest $ 370,371 232,402
=========== ===========
Income taxes $ 1,611,592 101,627
=========== ===========
Supplemental disclosure of noncash activity -
machinery and equipment purchased under
capitalized lease $ 298,780 461,270
=========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
MIC TECHNOLOGY CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
October 31, 1995 and 1994
(1) Organization and Summary of Significant Accounting Policies
Basis of Presentation
---------------------
The consolidated financial statements include the accounts of MIC
Technology Corporation (the Company) and its French subsidiary, MIC
Technology SARL. The Company acquired the minority interest in MIC
Technology SARL during fiscal year 1995. Upon consolidation, all
intercompany accounts, transactions and profits are eliminated. Certain
1994 amounts have been reclassified to conform with the current year's
presentation.
Cash and Cash Equivalents
-------------------------
The Company considers all short-term investments with maturities of three
months or less at time of purchase to be cash equivalents.
Inventories
-----------
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method.
Machinery, Equipment, Furniture and Improvements, Net
-----------------------------------------------------
Machinery, equipment, furniture and improvements, net is stated at cost.
The cost of repairs and maintenance is charged to expense as incurred;
significant renewals and betterments are capitalized.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets. The cost of leasehold improvements is amortized
using the straight-line method over the shorter of the lease term or the
estimated useful life of the asset.
The useful lives for purposes of computing depreciation and amortization
are as follows:
<TABLE>
<S> <C>
Computers 3-5 years
Machinery, equipment, furniture
and fixtures 5-7 years
Leasehold improvements 6-7 years
=========
</TABLE>
Income Taxes
------------
In November 1989, the Company elected to be taxed under the provisions of
Subchapter S of the Internal Revenue Code. Under those provisions, the
Company did not pay Federal corporate income taxes on its taxable income.
The provision for income taxes for the year ended October 31, 1994
represents various state and foreign income taxes due. Effective for the
fiscal year beginning November 1, 1994, the Company elected to be taxed
under the provisions of Subchapter C of the Internal Revenue Code. Under
these provisions, the Company pays Federal corporate income taxes on its
taxable income.
<PAGE>
(1) Organization and Summary of Significant Accounting Policies, cont.
Income Taxes, cont.
-------------------
During fiscal year 1993, the Company adopted the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (Statement 109), relative to the various
state taxes to which it is subject. The Company adopted Statement 109 for
Federal income taxes effective November 1, 1994 when it elected to be taxed
under the provisions of Subchapter C of the Internal Revenue Code. Adoption
of Statement 109 did not have a material effect on the Company's
consolidated financial position or results of operations.
(2) Inventories
-----------
The components of inventories at October 31, 1995 and 1994 consist of the
following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Raw materials $ 585,006 441,844
Work in process 96,623 164,328
----------- -----------
$ 681,629 606,172
=========== ===========
</TABLE>
(3) Machinery, Equipment, Furniture and Improvements, Net
-----------------------------------------------------
Machinery, equipment, furniture and improvements, net consists of the
following at October 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Machinery, equipment and
test fixtures $5,562,388 4,545,137
Furniture and fixtures 191,394 174,016
Leasehold improvements 2,172,705 2,164,175
Computer software 25,180 -
---------- ----------
7,951,667 6,883,328
Less accumulated depreciation
and amortization 4,070,314 3,229,127
---------- ----------
Machinery, equipment,
furniture and
improvements, net $3,881,353 3,654,201
========== ==========
</TABLE>
As of October 31, 1995, the Company had entered into an agreement to
purchase machinery for approximately $1.7 million. The related deposit for
approximately $170,000 is classified in other assets as of October 31,
1995.
(4) Long-term Debt
--------------
The Company has a note payable with a bank in the original amount of
$1,750,000, of which $1,208,000 and $1,458,000 are outstanding at
<PAGE>
(4) Long-term Debt, cont.
October 31, 1995 and 1994, respectively. The note is secured by
substantially all corporate assets, payable in equal monthly install-
ments of approximately $21,000 plus interest at prime plus 1% (9.75%
and 8.75% as of October 31, 1995 and 1994, respectively) through
September 1, 1998, with the remaining principal balance of approximately
$520,000, together with all accrued interest outstanding, payable on
September 1, 1998.
In addition, the Company has a $2,750,000 three-year revolving line of
credit, which is secured by the Company's accounts receivable. The interest
is currently payable at prime plus .75% (9.50% and 8.50% as of October 31,
1995 and 1994, respectively), with the principal balance due in August
1996. The outstanding balances are $1,070,000 and $220,000 at October 31,
1995 and 1994, respectively.
The Company also has loan agreements with related parties of the Company
(see note 10), of which $480,000 and $842,000 are outstanding at October
31, 1995 and 1994, respectively. Interest is payable monthly at a rate of
prime plus 2.5% (11.25% and 10.25% as of October 31, 1995 and 1994,
respectively), with the principal balance due on June 30, 1996. These loan
agreements dictate that interest related to these loans be calculated using
the prime rate at July 1 and November 1.
Scheduled maturities for the above notes during the forthcoming fiscal
years are as follows:
<TABLE>
<S> <C> <C>
1996 $1,800,000
1997 250,000
1998 708,000
==========
</TABLE>
(5) Lease Commitments
-----------------
Operating Lease
---------------
At October 31, 1995, the Company is obligated under operating leases which
expire through 2003 for office space and equipment. The aggregate minimum
rental commitments under noncancellable operating leases are as follows:
<TABLE>
<S> <C> <C>
1996 $ 453,000
1997 352,000
1998 164,000
1999 122,000
2000 122,000
Thereafter 344,000
-----------
Total minimum
lease pay-
ments 1,557,000
===========
</TABLE>
Rental expense for operating leases during 1995 and 1994 approximated
$447,000 and $404,000, respectively.
<PAGE>
(5) Lease Commitments, cont.
------------------------
Capital Lease
-------------
In August 1994, the Company entered into a lease line of credit available
in the amount of $1,500,000. At October 31, 1995, $760,000 of this line of
credit has been used for the lease of capital equipment. The lease is
capitalized at prime plus .75% (9.5% at October 31, 1995). The lease term
is 60 months with future minimum lease payments as follows:
<TABLE>
<S> <C> <C>
1996 $ 187,000
1997 187,000
1998 187,000
1999 177,000
2000 22,000
----------
Total 760,000
Less amount representing
interest 132,000
----------
Present value of net
minimum lease
payments under
capital leases 628,000
==========
</TABLE>
(6) Common Stock - Stock Options and Stock Warrants
-----------------------------------------------
The Company grants stock options to key employees and nonemployee directors
to purchase common stock. The Company has issued stock warrants to officers
who are also significant stockholders of the Company. The stock options and
warrants are granted at the estimated fair market value at the date of
grant as determined by the Board of Directors. Options and warrants include
those immediately exercisable and those which vest over a five-year period,
all at prices ranging from $10.00 to $27.94 per share.
A summary of stock options and stock warrants activity is as follows:
<TABLE>
<CAPTION>
Option/warrant
Warrants Options price
-------- ------- ---------------
<S> <C> <C> <C>
Outstanding at October 31, 1993 48,000 10,000 $10.00 - 17.01
Granted - 6,200 21.50
Exercised - (2,800) 13.43
Cancelled/expired - (800) 17.01 - 21.50
------ ------
Outstanding at October 31, 1994 48,000 12,600
Granted - 22,800 11.18 - 27.94
Exercised - (3,200) 15.17 - 17.01
Cancelled/expired - (800) 21.50 - 27.94
------ ------ ===============
Outstanding at October 31, 1995 48,000 31,400
====== ======
</TABLE>
<PAGE>
(7) Stockholders' Equity
--------------------
The following outlines the Company's consolidated stockholders' equity
activity for the years ended October 31, 1995 and 1994:
<TABLE>
<CAPTION>
Cumu-
lative
cur-
rency
Treasury stock trans-
Accu- Amount lation
Common stock mulated (no par adjust-
Shares Amount earnings Shares value) ment Total
------ ------ -------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1993 391,652 $456,210 3,042,066 6,136 $(106,094) (8,869) 3,383,313
Cash distributions to stock-
holders - - (1,970,516) - - - (1,970,516)
Shares reissued - - - (3,800) 59,104 - 59,104
Shares purchased for trea-
sury - - - 400 (8,600) - (8,600)
Translation adjustment - - - - - 52,899 52,899
Net income - - 2,891,258 - - - 2,891,258
-------- -------- --------- ------ -------- ------ ---------
Balance at October 31, 1994 391,652 456,210 3,962,808 2,736 (55,590) 44,030 4,407,458
Cash dividends to stock-
holders - - (2,370,669) - - - (2,370,669)
Sales of common stock, at
stated value 2,300 346 - - - - 346
Shares reissued - - - (3,200) 48,884 - 48,884
Shares purchased for trea-
sury - - - 900 (19,350) - (19,350)
Translation adjustment - - - - - (21,699) (21,699)
Net income - - 2,063,336 - - - 2,063,336
-------- -------- --------- ------ -------- ------- ---------
Balance at October 31, 1995 393,952 456,556 3,655,475 436 $(26,056) 22,331 4,108,306
======== ======== ========= ====== ======== ======= =========
</TABLE>
The Company reissues treasury shares to fulfill its obligations under the
stock option plan.
(8) Income Taxes
------------
As discussed in note 1, the Company elected to be taxed under the
provisions of Subchapter C of the Internal Revenue Code for the fiscal year
beginning November 1, 1994. Under those provisions, the Company pays
Federal corporate income taxes on its taxable income. In fiscal 1994 and
prior years, the Company was taxed under the provisions of Subchapter S of
the Internal Revenue Code and the Company did not pay Federal corporate
income taxes on its taxable income. As a result, the Company had no
deferred taxes as of October 31, 1994.
<PAGE>
(8) Income Taxes, cont.
-------------------
The components of income tax expense for the year ended October 31, 1995
are as follows:
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- -----
<S> <C> <C> <C>
U.S. Federal $1,119,214 (157,394) 961,820
State and local 246,495 (24,364) 222,131
Foreign 98,020 - 98,020
---------- ---------- ---------
$1,463,729 (181,758) 1,281,971
========== ========== =========
</TABLE>
The Company recorded a deferred tax asset of $181,758 as of October 31,
1995. A valuation allowance is not deemed necessary, as the Company
believes that it is more likely than not that the results of future
operations will generate sufficient taxable income to realize the deferred
tax asset. Due to the nature of the items giving rise to the deferred tax
asset and the current level of profitability of the Company, management
believes that the recorded deferred tax asset will be realized during the
upcoming year.
The significant components of the deferred tax asset for the year ended
October 31, 1995 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Nondeductible accruals $154,880
Inventory costs capitalized under
Section 263(a) 26,878
--------
$181,758
========
</TABLE>
Actual income tax expense for the years ended October 31, 1995 and 1994
differs from the expected tax expense (computed by applying the U.S.
Federal income tax rate of 34% to pretax income from operations) as a
result of the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Computed "expected" tax expense $1,137,404 1,021,791
Increase (decrease) in income taxes
resulting from:
Subchapter S exemption from Federal
corporate tax - (1,021,791)
State and local income taxes,
net of Federal income tax
benefit 146,606 77,357
Foreign income tax at greater
than U.S. rate 53,059 10,642
Research credits (50,757) -
Other, net (4,341) -
---------- ----------
$1,281,971 87,999
========== ==========
</TABLE>
<PAGE>
(8) Income Taxes, cont.
---------------------
At October 31, 1994, the components of income tax expense are $77,357 for
state income taxes and $10,642 for foreign income taxes. At October 31,
1994 the amount of deferred tax assets and liabilities relating to timing
differences was not material to the consolidated financial statements.
(9) Profit Sharing and Section 401(k) Plans
---------------------------------------
The Company has adopted qualified defined contribution profit sharing and
Section 401(k) plans covering all of its full-time employees who meet
specific eligibility requirements. The plans are funded on a current basis.
Employees must be at least 21 years of age and have one year of service
with the Company in order to participate in both plans. For both plans,
employer contributions are discretionary as determined by the Company's
Board of Directors. Such amounts were $103,786 and $89,129 for the Section
401(k) plan and $331,712 and $291,648 for the profit sharing plan for
fiscal 1995 and 1994, respectively.
(10) Related-party Transactions
--------------------------
The Company leases one of its facilities from an entity controlled by
certain stockholders of the Company. Rent paid to this entity is $121,590
for each of the years ended October 31, 1995 and 1994.
In March 1995, the Company entered into an additional subordinated debt
agreement with one of its major stockholders in the amount of $415,096. At
October 31, 1995, the Company has a total of three subordinated debt
agreements with major stockholders, with the amounts outstanding totaling
$480,000. Interest on all agreements is due monthly at a rate of prime plus
2.5% per annum, and all notes are due on June 30, 1996.
(11) Concentrations of Credit Risk
-----------------------------
From time to time during the years ended October 31, 1995 and 1994, the
Company maintained cash balances with financial institutions in excess of
Federally insured limits.
In 1995, three customers accounted for 33%, 17% and 11%, respectively, of
net sales. In 1994, two customers accounted for 41% and 15%, respectively,
of net sales. Most sales are made to large, well-established companies. The
Company does not believe that this concentration of sales and credit risk
represents a material risk of loss with respect to its consolidated
financial position as of October 31, 1995.
(12) Subsequent Events (Unaudited)
-----------------------------
On February 13, 1996, the Company entered into an agreement with Aeroflex
Incorporated (Aeroflex) to be acquired. The acquisition was completed on
March 19, 1996 when Aeroflex acquired all of the outstanding stock of the
<PAGE>
(12) Subsequent Events (Unaudited), cont.
-----------------------------------
Company for $36,000,000 in cash and 300,000 shares of common stock and
warrants to purchase 400,000 shares of common stock. Total consideration
paid by Aeroflex was approximately $37,000,000. The agreement also provides
for a contingent payment of $4,000,000 based upon certain future operating
results.
<PAGE>
MIC TECHNOLOGY CORPORATION
FINANCIAL STATEMENTS
OCTOBER 31, 1993 AND 1992
<PAGE>
MIC TECHNOLOGY CORPORATION
FINANCIAL STATEMENTS
I N D E X
- - - - -
Page
----
Auditor's Report 1
Financial Statements
Balance Sheets 2
Statements of Income and Retained Earnings 3
Statements of Cash Flows 4
Notes to Financial Statements 5 - 8
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
MIC Technology Corporation
1101 Commerce Drive
Richardson, Texas 75081
We have audited the accompanying balance sheets of MIC Technology Corporation as
of October 31, 1993 and 1992 and the related statements of income 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 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 MIC Technology Corporation as
of October 31, 1993 and 1992, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
/s/ Cohen, Friedman, Dorman, Spector & Co.
COHEN, FRIEDMAN, DORMAN, SPECTOR & CO.
Certified Public Accountants
Union, New Jersey
December 10, 1993
<PAGE>
MIC TECHNOLOGY CORPORATION
BALANCE SHEETS
OCTOBER 31,
<TABLE>
<CAPTION>
ASSETS
------
1993 1992
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash $ 281,279 $1,102,390
Accounts receivable 2,308,695 1,911,446
Inventories 459,763 455,308
Prepaid expenses and other current assets 82,473 98,230
---------- ----------
Total Current Assets 3,132,210 3,567,374
---------- ----------
PROPERTY AND EQUIPMENT 3,495,398 2,801,641
---------- ----------
OTHER ASSETS
Other investments 20,799 37,472
Security deposits 81,572 18,326
---------- ----------
Total Other Assets 102,371 55,798
---------- ----------
$6,729,979 $6,424,813
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Current portion of long term debt $ 250,000 $ 287,603
Accounts payable 602,222 510,914
Accrued expenses 774,368 612,033
Income taxes payable 32,972 7,291
---------- ----------
Total Current Liabilities 1,659,562 1,417,841
LONG TERM DEBT 1,678,235 2,323,333
---------- ----------
Total Liabilities 3,337,797 3,741,174
---------- ----------
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock, Voting, no par value
Authorized: 500,000 shares
Issued: 388,252 shares 1993
386,552 shares 1992 456,210 456,040
Retained earnings 3,042,066 2,356,526
---------- ----------
3,498,276 2,812,566
Less: Treasury stock 1993-6,136 shares at cost
1992-7,836 shares at cost (106,094) (128,927)
---------- ----------
3,392,182 2,683,639
---------- ----------
$6,729,979 $6,424,813
========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
MIC TECHNOLOGY CORPORATION
STATEMENTS OF INCOME AND RETAINED EARNINGS
YEARS ENDED OCTOBER 31,
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
SALES $13,745,272 $10,569,976
COST OF SALES 8,249,641 6,352,264
----------- -----------
GROSS PROFIT 5,495,631 4,217,712
----------- -----------
OPERATING EXPENSES
Selling 1,382,082 1,151,151
Development 1,008,587 818,056
General and administrative 842,028 905,787
Depreciation and amortization 678,826 600,514
Interest expense, net of interest income 223,995 246,026
----------- -----------
4,135,518 3,721,534
----------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES 1,360,113 496,178
PROVISION FOR INCOME TAXES 49,573 18,865
----------- -----------
NET INCOME 1,310,540 477,313
RETAINED EARNINGS - November 1, 2,356,526 2,072,039
DISTRIBUTIONS TO STOCKHOLDERS (625,000) (192,826)
----------- -----------
RETAINED EARNINGS - October 31, $ 3,042,066 $ 2,356,526
=========== ===========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
MIC TECHNOLOGY CORPORATION
STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31,
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net income $ 1,310,540 $ 477,313
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and amortization 678,826 600,514
(Increase) in accounts receivable (397,249) (195,564)
(Increase) in inventories (4,455) (128,846)
Decrease (increase) in prepaid expenses
and other current assets 15,757 (30,777)
Decrease (increase) in purchase option - 50,000
Decrease (increase) in other investments 16,673 (37,472)
(Increase) in security deposits (63,246) (465)
Increase in accounts payable 91,308 3,907
Increase in accrued expenses 162,335 73,425
Increase (decrease) in income taxes payable 25,681 (19,105)
---------- ----------
Net Cash Provided by Operating Activities 1,836,170 792,930
---------- ----------
CASH FLOW USED FOR INVESTING ACTIVITIES:
Net Acquisition of Property and Equipment (1,372,584) (46,741)
---------- ----------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Increase in debt 1,969,902 -
Payment of debt (2,652,603) (327,935)
Distributions to stockholders (625,000) (192,826)
Net issuance of common and treasury stock 23,004 4,651
---------- ----------
Net Cash Provided by Financing Activities: (1,284,697) (516,110)
---------- ----------
NET INCREASE (DECREASE) IN CASH (821,111) 230,079
CASH - November 1, 1,102,390 872,311
---------- ----------
CASH - October 31, $ 281,279 $1,102,390
========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
MIC TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1993 and 1992
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Accounts Receivable - Bad Debts
-------------------------------
The Company has elected to use the direct write-off method of accounting
for bad debts and, accordingly, an allowance for doubtful accounts has
not been recorded. At October 31, 1993 and 1992, the difference between
the two methods was deemed immaterial.
Inventories
-----------
Inventories are valued at the lower of cost or market with cost
determined on a first-in, first-out (FIFO) basis.
Property and Equipment
----------------------
Property and equipment are stated at cost, including betterments which
extend useful life. Maintenance and repairs are charged to expense as
incurred. Gains and losses on sales of property and equipment are
reflected in income. Depreciation is computed using straight-line and
accelerated methods for machinery and equipment over a 3 to 7 year
estimated asset life. Leasehold improvements are amortized on a
straight-line basis over either the lease term or the assets estimated
useful life.
Cash Flows
----------
Cash paid for interest expense was $237,846 and $271,556, and cash paid
for state income taxes was $27,066 and $12,789, for fiscal years 1993 and
1992 respectively.
Income Taxes
------------
Effective November 1, 1989, the Company elected to be taxed under the
provisions of Subchapter S of the Internal Revenue Code. Under those
provisions, the Company does not pay federal corporate income taxes on
its taxable income. The provision for income taxes for the periods ended
October 31, 1993 and 1992 represent various state income taxes due.
NOTE 2. RELATED PARTY TRANSACTIONS
--------------------------
As included in note 7, the Company leases one of its facilities from
another entity controlled by certain stockholders of the Company. Rent
paid to this entity was $121,590 and $30,398 in the fiscal years ended
October 31, 1993 and 1992, respectively.
In March 1992 the Company established a French corporation in which it
retains a majority interest. Transactions with this entity have not been
consolidated. The amount recorded in other investments represents the
Company's capital contribution as well as its pro-rata share of net
income. The following is a summary of the transactions with this entity
for the years ended October 31, 1993 and 1992:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Accounts receivable $139,213 $265,994
========= =========
Sales $259,424 $299,337
========= =========
</TABLE>
<PAGE>
MIC TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1993 and 1992
NOTE 3. INVENTORIES
-----------
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Raw material $ 379,382 $ 428,959
Work in process 80,381 26,349
--------- ---------
$ 459,763 $ 455,308
========= =========
</TABLE>
NOTE 4. PROPERTY AND EQUIPMENT
----------------------
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Furniture and office equipment $ 151,042 $ 151,042
Machinery and equipment 3,719,198 3,545,629
Leasehold improvements 2,111,192 1,128,025
---------- ----------
5,981,432 4,824,696
Less: Accumulated depreciation and
amortization 2,486,034 2,023,055
---------- ----------
$3,495,398 $2,801,641
========== ==========
</TABLE>
NOTE 5. LONG-TERM DEBT
--------------
<TABLE>
<S> <C>
Note payable - Bank, secured by
substantially all corporate assets,
payable in equal monthly installments
of $20,833 plus interest at prime
plus 1% through August 2000 $1,708,333
Note payable - Bank, $1,750,000 available,
3-year revolving line of credit, secured
by accounts receivable, payable interest
only at prime plus .75%, due August 1996 219,902
----------
1,928,235
Less: Current portion 250,000
----------
Long-term portion $1,678,235
==========
</TABLE>
Schedule maturities for the above notes are as follows:
<TABLE>
<CAPTION>
Year
----
<S> <C>
Fiscal year 1994 $ 250,000
1995 250,000
1996 469,902
1997 and thereafter 958,333
----------
$1,928,235
==========
</TABLE>
<PAGE>
MIC TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1993 and 1992
NOTE 6. COMMITMENTS
-----------
(A) The Company leases certain of its facilities under noncancellable
operating leases expiring in 1997 and 2003. The Company also leases
equipment under noncancellable operating leases expiring in 1996.
Aggregate minimum rental commitments are:
<TABLE>
<S> <C>
Fiscal year 1994 $ 409,182
1995 409,182
1996 313,454
1997 253,590
1998 and thereafter 709,275
----------
$2,094,683
==========
</TABLE>
(B) Concurrent with the purchase of the stock of Hybrid Enclosures
Corporation, the Company entered into other agreements with the prior
shareholders of Hybrid Enclosures Corporation. The remaining
commitment amounts to $36,359 and will be paid through August 1994.
NOTE 7. EMPLOYEE STOCK AND PROFIT SHARING
---------------------------------
Stock Options
-------------
The Company grants options to key employees and non-employee directors to
purchase common stock. During the current year, options to purchase 1200
shares were exercised; in addition, options for 4400 shares were granted
for three years through January 1996. Options for 50,000 shares of stock
are outstanding, all are immediately exercisable at prices ranging from
$10.00 to $17.01 per share.
Treasury Stock
--------------
The Company offers annually to repurchase part of its common stock.
During the year no shares were redeemed and 1,700 shares were reissued
for a consideration of $23,004, leaving a balance of 6,136 shares in the
treasury.
Profit Sharing and Section 401K Plan
------------------------------------
The Company has adopted qualified defined contribution and section 401K
plans covering all of its full time employees who meet specific
eligibility requirements. The plans are funded on a current basis.
<PAGE>
MIC TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1993 and 1992
NOTE 8. CONCENTRATIONS OF CREDIT RISK
-----------------------------
Cash
----
From time to time during the years ended October 31, 1993 and 1992, the
Company maintained cash balances in excess of federally insured limits.
NOTE 9. INCOME TAXES
------------
During 1993, the Company adopted FASB Statement 109 on accounting for
income taxes. The adoption of FASB 109 resulted in no material changes to
the financial statement amounts for the years presented.
At October 31, 1993 and 1992, the components of income tax expense are:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Income taxes currently payable:
State $49,573 $18,865
======= =======
</TABLE>
Temporary differences giving rise to deferred tax liabilities and
deferred tax assets consist primarily of differences between book and tax
inventory valuations due to Sec. 263(a) adjustments. At October 31, 1993
and 1992 the amount of deferred tax assets and liabilities relating to
timing differences were not material to the financial statement.
<PAGE>
MIC TECHNOLOGY CORPORATION
FINANCIAL STATEMENTS
JANUARY 31, 1996 and 1995
(Unaudited)
<PAGE>
MIC TECHNOLOGY CORPORATION AND SUBSIDIARY
Consolidated Balance Sheets
January 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Assets 1996 1995
------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,214,495 $ 1,218,768
Accounts receivable - trade, net of allowance
for doubtful accounts of $47,000 and $0 in
1996 and 1995, respectively 2,354,093 2,967,277
Inventories 657,420 543,781
Prepaid expenses and other current assets 248,933 290,257
Prepaid income taxes 282,056 -
Deferred taxes 181,758 -
----------- -----------
Total current assets 4,938,755 5,020,083
Machinery, equipment, furniture and improvements,
net 3,736,074 3,646,153
Other assets 214,115 91,969
----------- -----------
$ 8,888,944 $ 8,758,205
=========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Current portion of long-term debt $ 1,600,000 $ 250,000
Accounts payable 599,693 542,792
Income taxes payable - 365,850
Accrued expenses 900,173 540,653
Current portion of capital lease 134,742 76,007
------------ -----------
Total current liabilities 3,234,608 1,775,302
Long-term portion of capital lease 460,979 342,332
Long-term debt 895,834 2,658,253
------------ -----------
Total liabilities 4,591,421 4,775,887
Stockholders' equity 4,297,523 3,982,318
------------ -----------
$ 8,888,944 $ 8,758,205
============ ===========
<FN>
See accompanying notes to consolidated financial statements
</FN>
</TABLE>
<PAGE>
MIC TECHNOLOGY CORPORATION AND SUBSIDIARY
Consolidated Statements of Operations
Three Months Ended January 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net sales $ 4,643,583 $ 5,613,762
Cost of goods sold 3,155,034 3,202,112
----------- -----------
Gross profit 1,488,549 2,411,650
Operating expenses:
Selling, general and administrative 1,012,422 875,990
Research and development 505,482 546,261
----------- -----------
Operating income (loss) (29,355) 989,399
Other income (expense):
Interest expense, net of interest income (78,237) (68,461)
Other expense - (11,729)
----------- -----------
Income (loss) before income taxes (107,592) 909,209
Income taxes 12,073 373,359
----------- -----------
Net income (loss) $ (119,665) $ 535,850
=========== ===========
<FN>
See accompanying notes to consolidated financial statements
</FN>
</TABLE>
<PAGE>
MIC TECHNOLOGY CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
Three Months Ended January 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (119,665) $ 535,850
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 221,217 195,433
Changes in assets and liabilities:
Decrease (increase) in accounts receivable, net 1,031,809 788,157
Decrease (increase) in inventories 24,209 62,391
Decrease (increase) in prepaid expenses and
other current assets (80,993) (90,068)
Decrease (increase) in prepaid income taxes (1,270) -
Decrease (increase) in other assets - 69,031
Increase (decrease) in accounts payable (444,180) (138,153)
Increase (decrease) in accrued expenses (661,521) (420,828)
Increase (decrease) in income taxes payable (84,253) 346,506
----------- -----------
Net cash provided by (used in) operating
activities (114,647) 1,348,319
----------- -----------
Cash flows from investing activities:
Purchase of machinery, equipment, furniture and
improvements (75,938) (187,385)
Purchase of minority interest - (24,846)
----------- -----------
Net cash provided by (used in)
investing activities (75,938) (212,231)
----------- -----------
Cash flows from financing activities:
Cash distribution to stockholders - (950,000)
Borrowings under long-term debt - 450,000
Repayment of long-term debt (94,934) (81,425)
Proceeds from issuance of common stock and exercise
of stock options 64,657 33,040
----------- -----------
Net cash provided by (used in)
financing activities (30,277) (548,385)
----------- -----------
Effect of foreign currency exchange rate changes on
cash and cash equivalents (12,441) (44,030)
----------- -----------
Net increase (decrease) in cash and
cash equivalents (233,303) 543,673
Cash and cash equivalents at beginning of period 1,447,798 675,095
----------- -----------
Cash and cash equivalents at end of period $ 1,214,495 $ 1,218,768
=========== ===========
<FN>
See accompanying notes to consolidated financial statements
</FN>
</TABLE>
<PAGE>
MIC TECHNOLOGY CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
---------------------
It is suggested that these unaudited consolidated financial statements be
read in conjunction with the financial statements and notes thereto
included in the fiscal year end reports which are included herein.
<PAGE>
AEROFLEX INCORPORATED AND SUBSIDIARIES
PRO FORMA FINANCIAL INFORMATION
(Unaudited)
<PAGE>
AEROFLEX INCORPORATED AND SUBSIDIARIES
PRO FORMA BALANCE SHEET (Unaudited)
The following pro forma balance sheet (unaudited) adjusts the
historical consolidated balance sheet of Aeroflex Incorporated and
subsidiaries as of December 31, 1995 for the effects of the acquisition of
MIC Technology Corporation. The acquisition has been accounted for under
the purchase method of accounting.
The pro forma balance sheet gives effect to the acquisition described
in Item 2 of the Form 8-K filed on March 19, 1996, as if it had occurred on
December 31, 1995. The balance sheet should be read in conjunction with
the notes to the pro forma financial statements.
<PAGE>
AEROFLEX INCORPORATED AND SUBSIDIARIES
PRO FORMA BALANCE SHEET (UNAUDITED)
REFLECTING THE ACQUISITION OF MIC TECHNOLOGY CORPORATION
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Historical Acquisition Pro Forma Pro Forma
of MIC (1) Adjustments (2) Results
----------- ----------- --------------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 9,576,000 $ 931,000 $ (9,000,000) $ 1,507,000
Accounts receivable, net 17,090,000 2,769,000 19,859,000
Refundable income taxes - 237,000 750,000 987,000
Inventories 15,878,000 2,001,000 17,879,000
Deferred income taxes 630,000 - 630,000
Prepaid expenses and other current assets 1,209,000 253,000 1,462,000
----------- ------------ ------------ -----------
Total Current Assets 44,383,000 6,191,000 (8,250,000) 42,324,000
Invested Cash 658,000 658,000
Property, Plant and Equipment, net 12,518,000 3,807,000 900,000 17,225,000
Intangible Assets Acquired in Connection with
the Purchase of Businesses 10,208,000 7,977,000 18,185,000
Deferred Income Taxes 589,000 182,000 771,000
Other Assets 2,220,000 214,000 703,000 3,137,000
----------- ----------- ----------- -----------
Total Assets $ 70,576,000 $ 10,394,000 $ 1,330,000 $ 82,300,000
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 412,000 $ 385,000 $ 3,600,000 $ 4,397,000
Accounts payable 3,900,000 2,051,000 5,951,000
Accrued expenses and other current
liabilities 4,448,000 981,000 675,000 6,104,000
Income taxes payable 901,000 - 901,000
----------- ----------- ------------ -----------
Total Current Liabilities 9,661,000 3,417,000 4,275,000 17,353,000
------------ ----------- ------------ -------------
Long-Term Debt 1,651,000 2,458,000 23,400,000 27,509,000
------------ ----------- ------------ -------------
Other Long-Term Liabilities 956,000 956,000
------------ ----------- ------------ -------------
7-1/2% Senior Subordinated Convertible
Debentures 9,990,000 9,990,000
------------ ----------- ------------ -------------
Stockholders' Equity:
MIC Equity 4,519,000 (4,519,000) -
Common stock, par value $.10 per share;
authorized 25,000,000 shares; issued
11,960,000 shares historical and 12,360,000
shares upon the acquisition of MIC 1,196,000 40,000 1,236,000
Additional paid-in capital 56,408,000 1,334,000 57,742,000
Accumulated deficit (8,979,000) (23,200,000) (32,179,000)
------------ ------------ ------------ ------------
48,625,000 4,519,000 (26,345,000) 26,799,000
Less: Treasury stock, at cost
(76,000 shares) 307,000 307,000
------------ ------------ ------------ -------------
48,318,000 4,519,000 (26,345,000) 26,492,000
------------ ------------ ------------ -------------
Total Liabilities and Stockholders' Equity $ 70,576,000 $ 10,394,000 $ 1,330,000 $ 82,300,000
============ ============ ============ =============
<FN>
(1) (2) See Notes to Pro Forma Financial Statements
</FN>
</TABLE>
<PAGE>
AEROFLEX INCORPORATED AND SUBSIDIARIES
PRO FORMA STATEMENTS OF OPERATIONS (Unaudited)
The following pro forma statements of operations (unaudited) adjust the
historical consolidated statements of operations of Aeroflex Incorporated
and subsidiaries for the year ended June 30, 1995 and for the six months
ended December 31, 1995 for the effects of the acquisition of all
outstanding stock of MIC Technology Corporation ("MIC") on March 19, 1996.
The acquisition of MIC was accounted for under the purchase method of
accounting. The pro forma statements of operations give effect to the
acquisition described in Item 2 of the Form 8-K filed on March 19, 1996, as
if it had occurred on July 1, 1994.
The pro forma statements of operations are not necessarily indicative of
future operating results and should not be used as a forecast of future
operations. These statements should be read in conjunction with the notes
to the pro forma financial statements.
<PAGE>
AEROFLEX INCORPORATED AND SUBSIDIARIES
PRO FORMA STATEMENTS OF OPERATIONS (UNAUDITED)
REFLECTING THE ACQUISITION OF MIC TECHNOLOGY CORPORATION
YEAR ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
Historical Acquisition Pro Forma Pro Forma
of MIC Adjustment (3) Results after
Acquisition
---------- ----------- -------------- --------------
<S> <C> <C> <C> <C>
Sales $ 71,113,000 $ 24,187,000 $ $ 95,300,000
Cost of Sales 47,542,000 14,198,000 180,000 61,920,000
------------ ------------ ------------ ------------
Gross Profit 23,571,000 9,989,000 (180,000) 33,380,000
Selling, General and
Administrative Costs 15,752,000 5,348,000 600,000 21,700,000
Restructuring Charge 1,669,000 - - 1,669,000
------------ ------------ ------------ ------------
Operating Income 6,150,000 4,641,000 (780,000) 10,011,000
------------ ------------ ------------ ------------
Other Income (Expense)
Life insurance proceeds 2,000,000 - - 2,000,000
Interest Expense (1,464,000) (338,000) (2,300,000) (4,102,000)
Interest and Other
Income 751,000 9,000 (560,000) 200,000
------------ ------------ ------------ ------------
Total Other Income
(Expense) 1,287,000 (329,000) (2,860,000) (1,902,000)
------------ ------------ ------------ ------------
Income Before Income Taxes 7,437,000 4,312,000 (3,640,000) 8,109,000
Provision for Income Taxes 850,000 1,680,000 (1,150,000) 1,380,000
------------ ------------ ------------ ------------
Income From Continuing
Operations $ 6,587,000 $ 2,632,000 $ (2,490,000) $ 6,729,000
============ ============ ============ ============
Income From Continuing
Operations Per
Common Share
Primary $ .53 $ .53
====== ======
Fully Diluted $ .52 $ .51
====== ======
Weighted Average Number
of Common Shares Outstanding
Primary 12,352,000 12,752,000
========== ==========
Fully Diluted 14,249,000 14,649,000
========== ==========
<FN>
(3) See Notes to Pro Forma Financial Statements
</FN>
</TABLE>
<PAGE>
AEROFLEX INCORPORATED AND SUBSIDIARIES
PRO FORMA STATEMENTS OF OPERATIONS (UNAUDITED)
REFLECTING THE ACQUISITION OF MIC TECHNOLOGY CORPORATION
SIX MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Historical Acquisition Pro Forma Pro Forma
of MIC Adjustment (3) Results
---------- ----------- -------------- ----------
<S> <C> <C> <C> <C>
Sales $ 28,344,000 $ 11,975,000 $ $ 40,319,000
Cost of Sales 19,715,000 8,317,000 90,000 28,122,000
------------ ------------ ------------ ------------
Gross Profit 8,629,000 3,658,000 (90,000) 12,197,000
Selling, General and
Administrative Costs 6,341,000 2,723,000 300,000 9,364,000
------------ ------------ ------------ ------------
Operating Income 2,288,000 935,000 (390,000) 2,833,000
------------ ------------ ------------ ------------
Other Expense (Income)
Interest expense 616,000 178,000 1,195,000 1,989,000
Interest and other
income (333,000) - 275,000 (58,000)
------------ ------------ ------------ ------------
Total Other Expense
(Income) 283,000 178,000 1,470,000 1,931,000
------------ ------------ ------------ ------------
Income Before Income Taxes 2,005,000 757,000 (1,860,000) 902,000
Provision for Income Taxes 400,000 330,000 (470,000) 260,000
------------ ------------ ------------ ------------
Net Income $ 1,605,000 $ 427,000 $ (1,390,000) $ 642,000
============ ============ ============ ============
Net Income Per Common Share
Primary $ .13 $ .05
====== ======
Fully Diluted $ .13 $ .05
====== ======
Weighted Average Number
of Common Shares Outstanding
Primary 12,671,000 13,071,000
============ ============
Fully Diluted 14,459,000 14,859,000
============ ============
<FN>
(3) See Notes to Pro Forma Financial Statements
</FN>
</TABLE>
<PAGE>
AEROFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO PRO FORMA FINANCIAL STATEMENTS (Unaudited)
A. BASIS OF PRESENTATION
---------------------
The accompanying pro forma financial statements (unaudited) present the
financial position and results of operations of Aeroflex Incorporated and
subsidiaries ("ARX") giving effect to the acquisition of MIC Technology
Corporation ("MIC"). The acquisition of MIC by ARX will be accounted for
as a purchase and accordingly, the purchase price will be allocated to the
assets and liabilities of MIC based on their fair values at March 19, 1996
(the effective date of acquisition).
For the purpose of the pro forma balance sheet and the pro forma
statements of operations, it is assumed that the acquisition occurred on
December 31, 1995 and July 1, 1994, respectively. The pro forma statements
of operations for the year ended June 30, 1995 and for the six months ended
December 31, 1995 do not include a one-time charge of $23,200,000 which was
recorded upon acquisition to reflect the write-off of the purchase price
allocated to acquired in-process research and development.
B. PRO FORMA ADJUSTMENTS AND ASSUMPTIONS
-------------------------------------
The pro forma financial statements of ARX give effect to the following
pro forma adjustments and assumptions:
1. To record the acquisition of MIC stock by ARX as described in Item 2
on Form 8-K filed on March 19, 1996.
2. To record the a) purchase price of $36,000,000 in cash, ($9,000,000
from available cash and $27,000,000 from borrowings under the
registrant's revolving line of credit and term loans), and
$1,074,000 in stock and warrants, b) capitalized financing costs
including the issuance of stock valued at $300,000 c) elimination of
MIC's equity accounts, d) capitalized acquisition costs, and e)
allocation of the purchase price to the fair value of the assets
acquired, including, for purposes of the pro forma balance sheet,
the aforementioned $23,200,000 write-off of the fair value of the
assets acquired.
3. To record a) depreciation and amortization based on estimated
remaining lives of assets and adjustment to fair value of assets
acquired, b) interest expense on additional bank borrowings and
interest income forgone due to the use of cash for the acquisition,
and c) the tax benefit of a) and b).
<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 thereunto duly authorized.
Aeroflex Incorporated
/s/ Michael Gorin
By: Michael Gorin
President and Chief Financial Officer
Date: May 10, 1996
AEROFLEX INCORPORATED AND SUBSIDIARIES
COMPUTATION OF PRO FORMA INCOME FROM CONTINUING OPERATIONS
PER COMMON SHARE (UNAUDITED)
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<CAPTION>
Year Ended Six Months Ended
June 30, 1995 December 31, 1995
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Historical Pro Forma Historical Pro Forma
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<S> <C> <C> <C> <C>
COMPUTATION OF FULLY DILUTED INCOME
FROM CONTINUING OPERATIONS:
Income from continuing operations for
primary earnings per common share $ 6,587,000 $ 6,729,000 $ 1,605,000 $ 642,000
Add: 7-1/2% debenture interest and
amortization expense, net of
income taxes 757,000 757,000 304,000 (Note 1)
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Adjusted income from continuing operations
for fully diluted earnings per
common share $ 7,344,000 $ 7,486,000 $ 1,909,000
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COMPUTATION OF ADJUSTED WEIGHTED AVERAGE
SHARES OUTSTANDING:
Weighted average shares outstanding 11,733,000 12,133,000 11,845,000 12,245,000
Add: Effect of options and warrants
outstanding 619,000 619,000 826,000 (Note 1)
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Weighted average shares and common share
equivalents used for computation of
primary earnings per common share 12,352,000 12,752,000 12,671,000
Add: Effect of additional options and
warrants outstanding for fully diluted
computation 119,000 119,000 11,000
Add: Shares assumed to be issued upon
conversion of 7-1/2% debentures 1,778,000 1,778,000 1,777,000
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Weighted average shares and common share
equivalents used for computation of fully
diluted earnings per common share 14,249,000 14,649,000 14,459,000
============ ============ ============
INCOME FROM CONTINUING OPERATIONS PER
COMMON SHARE AND COMMON SHARE EQUIVALENT:
Primary $ .53 $ .53 $ .13 $ .05
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Fully Diluted $ .52 $ .51 $ .13 (Note 1)
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<FN>
Note 1 - For fully diluted purposes, the effect of all options, warrants and convertible debentures are anti-dilutive
for the pro forma six months ended December 31, 1995.
</FN>
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