SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
AMENDMENT NO. 1
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
July 23, 1997
---------------------------------------------------
Date of Report (Date of earliest event reported)
CPAC, INC.
---------------------------------------------------
(Exact name of registrant as specified in charter)
New York 0-9600
---------------------------- ----------------------------
State or other jurisdiction Commission File Number
of incorporation
16-0961040
--------------------------------------------------
IRS Employer ID Number
2364 Leicester Road, Leicester, New York 14481
--------------------------------------------------
(Address of Principal Executive Offices)
(716) 382-3223
----------------------------------------------------
(Registrant's telephone number, including area code)
The Exhibit Index is located at page 23 of this report, as amended.
The Registrant hereby amends the following items, financial statements, and pro
forma information of its Current Report on Form 8-K filed August 5, 1997, as set
forth in the pages attached hereto:
Reference is made to the July 23, 1997 acquisition of The Industrial Cleaning
Chemicals Business of IVAX Industries, Inc., as previously reported on Form 8-K
as of August 5, 1997. The audited historical financial statements of the
Industrial Cleaning Chemicals Business of IVAX Industries, Inc. for the years
ended December 31, 1996 and 1995, and the unaudited condensed financial
statements for the quarters ended June 30, 1997 and 1996 included in this Form
8-K/A, have been prepared on a basis and for reporting periods that were
discussed with and pre-approved by the Securities and Exchange Commission. Such
financial statements are hereby submitted in satisfaction of the requirements of
Rule 3-05 of Regulation S-X, and in lieu of the full financial statements
ordinarily required by the Regulations. The following financial statements and
pro forma financial information is hereby provided:
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
A. Financial Statements of Business Acquired
Audited historical statements of net assets of The Industrial Cleaning
Chemicals Business of IVAX Industries, Inc., as of December 31, 1996 and
1995 and the related statements of revenues and expenses for the years
ended December 31, 1996 and 1995.
Unaudited condensed statement of net assets as of June 30, 1997 and
statements of revenue and expenses for the three months ended June 30,
1997 and 1996.
B. Pro Forma Financial Information
CPAC, Inc. pro forma financial information.
CPAC, Inc. pro forma condensed consolidated balance sheet (unaudited) and
pro forma condensed consolidated statement of income (unaudited) as of
and for the three months ended June 30, 1997.
CPAC, Inc. pro forma condensed consolidated statement of income
(unaudited) for the year ended March 31, 1997.
C. Exhibits
23.1 - Consent of Arthur Andersen LLP
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
CPAC, INC.
------------------------------
(Registrant)
Date October 3, 1997 By /s/ Thomas J. Weldgen
---------------------------- ------------------------------
Thomas J. Weldgen
Chief Financial Officer
INDUSTRIAL CLEANING CHEMICALS BUSINESS
OF IVAX INDUSTRIES, INC.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995
TOGETHER WITH AUDITORS' REPORT
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Management of
IVAX Industries, Inc.:
We have audited the accompanying statement of net assets of the Industrial
Cleaning Chemicals Business of IVAX Industries, Inc. (the "Business") as of
December 31, 1996 and 1995, and the related statements of revenues and expenses
for the years then ended. These financial statements are the responsibility of
the Business' management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
As described in Note 1, the accompanying financial statements were prepared to
present the net assets and the revenues and expenses of the Business, which does
not have a separate legal status or existence, and are not intended to be a
complete presentation of the assets and liabilities or the results of operations
of the Business.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets of the Business as of December 31, 1996
and 1995, and the revenues and expenses for the years ended December 31, 1996
and 1995, in conformity with generally accepted accounting principles.
/s/ Arthur Anderson LLP
Philadelphia, Pa.,
July 14, 1997
INDUSTRIAL CLEANING CHEMICALS BUSINESS
--------------------------------------
OF IVAX INDUSTRIES, INC.
------------------------
STATEMENTS OF NET ASSETS
------------------------
(in thousands)
December 31
---------------------------
1996 1995
------- -------
ASSETS:
Cash $ -- $ 43
Accounts receivable 3,177 2,893
Inventories 5,076 4,905
Prepaid assets 178 287
------- -------
Total current assets 8,431 8,128
Property and equipment, net 1,705 5,335
Goodwill, net of accumulated amortization
of $2,680 in 1995 -- 20,279
------- -------
Total assets 10,136 33,742
------- -------
LIABILITIES:
Accounts payable--trade $ 1,615 $ 1,871
Accrued liabilities 574 467
------- -------
Total liabilities 2,189 2,338
------- -------
Net assets $ 7,947 $31,404
======= =======
The accompanying notes are an integral part of these financial statements.
INDUSTRIAL CLEANING CHEMICALS BUSINESS
--------------------------------------
OF IVAX INDUSTRIES, INC.
------------------------
STATEMENTS OF REVENUES AND EXPENSES
------------------------------------
(in thousands)
For the Year Ended
December 31
----------------------------
1996 1995
------- --------
NET SALES $26,810 $ 26,318
------- --------
COSTS AND EXPENSES:
Cost of goods sold 17,823 17,183
Selling, general and administrative 10,309 9,649
Research and development 633 774
Write-down of assets (Note 4) 23,862 --
------- --------
Total costs and expenses 52,627 27,606
------- --------
OTHER INCOME 301 7
------- --------
Excess of expenses over revenues $(25,516) $ (1,281)
======== ========
The accompanying notes are an integral part of these financial statements.
INDUSTRIAL CLEANING CHEMICALS BUSINESS
--------------------------------------
OF IVAX INDUSTRIES, INC.
------------------------
NOTES TO FINANCIAL STATEMENTS
------------------------------
(AMOUNTS IN THOUSANDS, EXCEPT AS NOTED)
---------------------------------------
1. ORGANIZATION AND NATURE OF BUSINESS:
------------------------------------
The Industrial Cleaning Chemicals Business (the "Business") of IVAX Industries,
Inc. (IVAX Industries) is engaged in the manufacture of industrial and
institutional cleaning and maintenance products for sale to distributors and
large end-user accounts nationwide. Products manufactured include floor and
carpet care products, general purpose and germicidal cleaners, air fresheners
and janitorial maintenance chemical and accessory products.
2. BASIS OF PRESENTATION:
----------------------
The accompanying financial statements present, on a historical cost basis, the
statements of assets and liabilities and the statements of revenues and expenses
of the Business. The Business is part of the cleaning chemicals group of IVAX
Industries and does not have a separate legal status or existence. The
Business' results of operations have historically been commingled with the
cleaning chemicals group. These statements are presented as if the Business had
existed as a separate entity during the periods presented. The accompanying
financial statements are not intended to be a complete presentation of the
assets, liabilities or the result of operations of the Business on a stand-alone
basis.
The Business has incurred significant losses from operations in 1996 and 1995.
The working capital required to sustain the operations of the Business has been
provided by IVAX Corporation (IVAX), the parent company of IVAX Industries. The
continued existence of the Business is dependent upon improvement in the results
of operations or continued additional funding by IVAX. In the second half of
1996, the Business was restructured and selling, general and administrative
costs were significantly reduced. Further, in early 1997, the Business was
selected by its largest customer to supply 100% of its floor care chemical
requirements, thus securing additional business from that customer. For the six
months ended June 30, 1997 (unaudited), the Business' operations have been
profitable and have generated positive cash flow. Management of IVAX Industries
believes that it has taken the appropriate steps to ensure the long-term future
of the Business. In addition, management of IVAX has committed to providing the
necessary level of financial support to the Business to enable it to pay its
debts as they become due for a period ending on the earlier to occur of the date
of sale of the Business (see Note 10) or January 1, 1998, and believes IVAX has
the financial resources to fulfill that commitment.
- 2 -
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------
Accounts Receivable
- -------------------
Accounts receivables were net of allowances for doubtful accounts of $182 and
$154 at December 31, 1996 and 1995, respectively.
Inventories
- -----------
Inventories are stated at the lower of cost (first-in, first-out) or market.
Components of inventory cost include materials, labor and manufacturing
overhead.
Inventories consist of the following:
December 31
-----------------------------------
1996 1995
--------- ---------
Raw materials $ 2,148 $ 1,956
Finished goods 2,928 2,949
--------- ---------
$ 5,076 $ 4,905
========= =========
At December 31, 1994, the amount of product labels in inventory was
approximately $98. In 1995, the Business refined its practices for controlling
and measuring product labels in inventory. Consequently, at December 31, 1995,
the amount of product labels in inventory was approximately $447. The
comparable amount at December 31, 1996 was approximately $580.
Property and Equipment
- ----------------------
Property and equipment are recorded at cost (see Note 4). Additions,
improvements and betterments are capitalized when incurred. Maintenance and
repairs are charged to operations as the costs are incurred. When property and
equipment is retired or otherwise disposed, the related cost and accumulated
depreciation are eliminated from the accounts. Any gain or loss from
disposition of property and equipment is included in income. Depreciation is
computed using the straight-line method over the estimated useful life of the
related assets as follows:
Building and improvements 25 - 40 years
Machinery and equipment 10 years
Furniture and fixture and computer equipment 4 - 7 years
Vehicles 2 years
- 3 -
Property and equipment consist of the following:
December 31
-----------------------------------
1996 1995
--------- ---------
Land $ 45 $ 150
Buildings 826 3,155
Machinery and equipment 716 3,000
Furniture, fixtures and computer
equipment 64 389
Vehicles -- 3
Construction-in-progress 76 82
--------- ---------
1,727 6,779
--------- ---------
Less- Accumulated depreciation (22) (1,444)
--------- ---------
Property and equipment, net $ 1,705 $ 5,335
========= =========
Long-Lived Assets
- -----------------
On January 1, 1996, IVAX Industries adopted Statement of Financial Accounting
Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets To Be Disposed Of. SFAS No. 121 establishes accounting
standards for the impairment of long-lived assets, certain identifiable
intangibles and goodwill (see Note 4).
Revenue Recognition
- -------------------
The Company recognizes revenues at the time the product is shipped to the
customer.
Other Income
- ------------
Other Income represents an amount received for the sale of a brand name to an
unrelated third party in 1996.
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.
- 4 -
4. ASSET WRITE-DOWNS:
------------------
At September 30, 1996, management of IVAX Industries reevaluated the carrying
value of certain long-lived assets and goodwill related to those assets to be
held and used in the Business' operations. This reevaluation was required by
management's determination that, based on recent results of operations and
conditions and trends within the industry, the expected future cash flows
derived from the assets and related goodwill would be substantially lower than
had been previously expected. Consequently, management reduced the carrying
value of certain long-lived assets and goodwill of the Business by approximately
$4,249 and $19,613, respectively. Management determined the amount of the
charges based on a discounted cash flow analysis. The impairment loss
recognized in 1996 is included in the accompanying statement of revenues and
expenses.
5. SELECTED CASH FLOW INFORMATION:
-------------------------------
December 31
-----------------------------------
1996 1995
--------- ---------
Provision for bad debts $ 53 $ (71)
Provision for excess and obsolete
inventory 240 237
Capital expenditures 662 681
Depreciation and amortization 978 1,164
Write-down of assets 23,862 --
6. TRANSACTIONS WITH AFFILIATES:
-----------------------------
IVAX Industries performs certain services, including those related to finance
and accounting, information systems and administration on behalf of the
Business. IVAX Industries bills the Business for services performed on a
monthly basis. For the year ended December 31, 1996 and 1995, such charges
totaled approximately $982 and $996, respectively.
The Business purchases products from a related business of IVAX Industries at
the cost to manufacture such products by the related business, for resale to
certain of its customers. For the years ended December 31, 1996 and 1995, such
purchases totaled $3,469 and $3,848, respectively.
7. COMMITMENTS:
------------
The Business leases certain machinery and equipment and office equipment under
various operating leases. Future minimum lease payments under noncancellable
operating leases as of December 31, 1996, are as follows:
1997 $ 53
1998 52
1999 45
2000 14
2001 5
------
$ 169
======
Total rent expense included in operations was approximately $40 and $35 for the
years ended December 31, 1996 and 1995, respectively.
8. ENVIRONMENTAL:
--------------
In 1993, the Ohio Environmental Protection Agency (Ohio EPA) and Elf Atochem
North America, Inc. (Elf Atochem) entered into a Consent Order requiring Elf
Atochem to investigate and, where appropriate, remediate the environmental
condition of Elf Atochem's manufacturing site in Ohio. The site along with the
Business was subsequently acquired by IVAX from Elf Atochem pursuant to an asset
purchase agreement between IVAX and Elf Atochem dated June 6, 1993. Under the
asset purchase agreement, Elf Atochem remains responsible for performing any
remediation or other work required by the Ohio EPA or other governmental
authority arising under or relating to the Consent Order and for the costs
thereof. If a claim were to be asserted against the Business in connection with
the Consent Order, IVAX would evaluate the facts and circumstances existing at
the time in considering whether to seek enforcement of its rights against Elf
Atochem. The Business has not recorded any provision or accrual for any loss
related to this site in the accompanying 1996 and 1995 financial statements.
9. SIGNIFICANT CUSTOMER:
---------------------
One customer accounted for approximately 19% of net sales for each of the years
ended December 31, 1996 and 1995.
10. SUBSEQUENT EVENT:
----------------
On May 22, 1997, IVAX Industries entered into a letter of intent with CPAC, Inc.
(CPAC) to sell certain assets and liabilities of the Business to CPAC. The
purchase price of $17 million is subject to adjustment after closing on a
dollar-for-dollar basis to the extent that operating working capital, as
defined, at closing is not equal to the estimates used to determine the purchase
price. IVAX Industries expects to consummate this transaction during the
quarter ended September 30, 1997. In connection with this transaction, IVAX
Industries will retain title to the land and buildings of the Business. IVAX
Industries will lease the land and buildings to CPAC for a two year period from
the date of closing at an annual rental amount of $100,000.
- 6 -
A reconciliation of the net assets of the Business as reported to the net assets
of the Business to be acquired follows:
December 31
--------------------------
1996 1995
------- --------
Net assets as reported $ 7,947 $ 31,404
Assets not to be acquired:
Cash -- 43
Accounts receivable--chemical sales to institutional
customers 104 52
Inventory--related to toll manufacturing agreement 337 400
Land 45 150
Buildings 826 3,155
------- --------
Net assets to be acquired $ 6,635 $ 27,604
======= ========
THE INDUSTRIAL CLEANING CHEMICALS BUSINESS
OF IVAX INDUSTRIES, INC.
UNAUDITED CONDENSED FINANCIAL STATEMENTS
Basis of Presentation
- ---------------------
The unaudited condensed statement of net assets as of June 30, 1997 and
unaudited condensed statements of revenue and expenses for the three months
ended June 30, 1997 and 1996 set forth below, have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
Operating results for the three months ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the year ended March 31,
1998. Historically, there is seasonality with the business, and the period from
April 1 through June 30 shows stronger sales than the quarter October 1 through
December 31.
The Business is part of the cleaning chemicals group of IVAX Industries and does
not have a separate legal status or existence. The Business' results of
operations have historically been commingled with the cleaning chemicals group.
These statements are presented as if the Business had existed as a separate
entity during the periods presented. The accompanying financial statements are
not intended to be a complete presentation of the assets, liabilities or the
result of operations of the Business on a stand-alone basis. For further
information, refer to the audited financial statements and footnotes thereto of
The Industrial Cleaning Chemicals Business of IVAX Industries, Inc., contained
elsewhere herein.
The acquisition of the Industrial Cleaning Chemicals Business of IVAX
Industries, Inc. by CPAC, Inc. adds significant strategic market share in the
overall commercial cleaning industry. The acquired business manufactures and
distributes 177 chemical products for commercial and janitorial cleaning
including floor strippers, waxes, cleaners, carpet care, germicidal cleaners,
air deodorizers, industrial degreasers and hand soaps. The business has more
than fifty trademarks, and markets its products under national brand names
Franklin(R) and Masury ColumbiaTM and through private-label accounts.
The acquired business will operate as The Cleaning Technologies Group and will
be included in the results of The Fuller Brush Company, Inc., a wholly owned
subsidiary of CPAC, Inc.
<TABLE>
THE INDUSTRIAL CLEANING CHEMICALS BUSINESS
OF IVAX INDUSTRIES, INC.
CONDENSED STATEMENT OF NET ASSETS
JUNE 30, 1997
(UNAUDITED)
(AMOUNTS IN THOUSANDS - 000'S OMITTED)
<CAPTION>
ASSETS
------
1997
----
<S> <C>
Accounts receivable, net $ 3,697
Inventory 4,763
Other current assets 173
---------------
Total current assets 8,633
Property, plant and equipment, net 827
---------------
Total assets $ 9,460
===============
LIABILITIES AND NET ASSETS
--------------------------
Accounts payable - trade $ 1,180
Accrued liabilities 763
---------------
Total liabilities 1,943
---------------
Net assets $ 7,517
===============
</TABLE>
- ------------------------------------
Cash Flow Information
- ---------------------
There were no property, plant and equipment expenditures, no financing
activities, and no amortization expense during the quarter ended June 30, 1997.
Provision for bad debts $ 25
Provision for excess and obsolete inventory -0-
Depreciation 54
<TABLE>
THE INDUSTRIAL CLEANING CHEMICALS BUSINESS
OF IVAX INDUSTRIES, INC.
CONDENSED STATEMENTS OF REVENUE AND EXPENSES
FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
(AMOUNTS IN THOUSANDS - 000'S OMITTED)
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Net sales $ 7,349 $ 7,627
---------------- ---------------
Cost and Expenses:
Cost of goods sold 4,656 5,011
Selling, general and administrative 2,113 2,425
Research and development 140 162
---------------- ---------------
Total costs and expenses 6,909 7,598
---------------- ---------------
Excess of income over expenses $ 440 $ 29
================ ===============
</TABLE>
CPAC, INC.
Pro Forma Financial Information
- -------------------------------
The pro forma condensed consolidated balance sheet (unaudited) as of June 30,
1997 set forth below, presents the financial position of the Company as if the
acquisition of The Industrial Cleaning Chemicals Business of IVAX Industries,
Inc. [subsequently renamed as the Cleaning Technologies Group, (CTG)] had been
completed as of June 30, 1997. Such balance sheet combines, with appropriate
adjustments, the Company's unaudited consolidated balance sheet as of June 30,
1997 and CTG's unaudited balance sheet as of June 30, 1997.
The pro forma condensed consolidated statement of income (unaudited) for the
three months ended June 30, 1997 set forth below, presents the results of
operations of the Company for such period as if the Company had acquired CTG as
of April 1, 1996. Such statement combines, with appropriate adjustments, the
Company's unaudited consolidated results of operations for the three months
ended June 30, 1997 (the first quarter of fiscal 1998) and CTG's unaudited
results of operations for its comparable three months ended June 30, 1997.
The pro forma condensed consolidated statement of income (unaudited) for the
fiscal year ended March 31, 1997 set forth below, presents the results of
operations of the Company for such year as if the Company had acquired CTG as of
April 1, 1996, the beginning of fiscal 1997. Such statements combine, with
appropriate adjustments, the Company's audited consolidated results of
operations for its fiscal year ended March 31, 1997 and CTG's audited results of
operations for its fiscal year ended December 31, 1996.
The pro forma financial statements (unaudited) have been prepared on the basis
of preliminary assumptions and estimates which are subject to adjustment. The
pro forma financial statements (unaudited) may not be indicative of the results
that actually would have been achieved if the acquisition of CTG had been
effected on the dates indicated, or which may be achieved in the future.
Except for the historical financial data contained herein, pro forma financial
information and statements made in this Form 8-K/A that may be forward looking,
are made pursuant to the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. Readers are cautioned that forward looking
statements involve risks and uncertainties which may affect CPAC's business and
prospects, including economic, competitive, governmental, technological and
other factors discussed in CPAC's filings with the Securities and Exchange
Commission.
<TABLE>
CPAC, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(UNAUDITED)
(AMOUNTS IN THOUSANDS - 000'S OMITTED)
<CAPTION>
CPAC CTG Adjustments Pro Forma
---- ---- ---------- ---------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 18,304 $ $ (12,685)(1) $ 5,619
Accounts receivable, net 13,603 3,697 (50)(2) 17,250
Inventory 16,244 4,763 (450)(2) 20,557
Prepaid expenses & other current assets 2,132 173 2,305
------------ ------------ ------------ ------------
Total current assets 50,283 8,633 (13,185) 45,731
Property, plant & equipment, net 16,472 827 473(2) 17,772
Goodwill and intangibles 2,318 12,195(2) 14,513
Other assets 1,728 1,728
------------ ------------ ------------ ------------
Total assets $ 70,801 $ 9,460 $ (517) $ 79,744
============ ============ ============ ============
Current liabilities:
Current portion of long-term debt $ 125 $ $ $ 125
Accounts payable 4,455 1,180 5,635
Accrued payroll & related expenses 1,432 1,432
Other accrued expenses & liabilities 4,041 763 1,000(3) 5,804
------------ ------------ ------------ ------------
Total current liabilities 10,053 1,943 1,000 12,996
Long-term debt 6,682 6,000(1) 12,682
Other liabilities 2,957 2,957
Minority interest in foreign subsidiary 41 41
Shareholders' equity:
Common stock 72 72
Additional paid-in capital 26,708 26,708
Retained earnings (deficit) 25,388 7,517 (7,517)(4) 25,388
Foreign currency translation adjustment (510) (510)
------------ ------------ ------------ ------------
51,658 7,517 (7,517) 51,658
Treasury stock, at cost (590) (590)
------------ ------------ ------------ ------------
Total Shareholders' Equity 51,068 7,517 (7,517) 51,068
------------ ------------ ------------ ------------
Total Liabilities & Shareholders' Equity $ 70,801 $ 9,460 $ (517) $ 79,744
============ ============ ============ ============
</TABLE>
CPAC, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(UNAUDITED)
(AMOUNTS IN THOUSANDS - 000'S OMITTED)
LEGEND
(1)Amounts represent proceeds of $6,000 obtained through additional borrowings,
less cash used to acquire the assets of CTG amounting to $17,990, less
estimated acquisition expenses of $695.
(2)Represents adjustments to CTG's accounts receivable, inventory, property,
plant and equipment, and goodwill and intangibles, as required by purchase
accounting.
(3)Represents additional liabilities established at acquisition date.
(4)Represents elimination of CTG's equity.
Note 1: The preliminary purchase price allocation is based on draft acquisition
date financial statements for CTG that are expected to be finalized
within the next 60 days. Pro forma adjustments may change as a result
of the finalization of these amounts. Such changes are not expected to
have a material impact.
<TABLE>
CPAC, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
(AMOUNTS IN THOUSANDS - 000'S OMITTED)
<CAPTION>
CPAC CTG Adjustments Pro Forma
---- ---- ---------- ---------
<S> <C> <C> <C> <C>
Net Sales $ 22,023 $ 7,349 $ $ 29,372
Costs & expenses:
Cost of sales 11,734 4,656 17(1) 16,407
Selling, administrative
& engineering expenses 7,368 2,113 (98)(2) 9,383
Research & development expense 165 140 (67)(3) 238
Minority interest in consolidated
foreign subsidiary 2 2
Interest expense (income), net (68) 245(4) 177
------------ ------------ ------------ ------------
19,201 6,909 97 26,207
------------ ------------ ------------ ------------
Income before
income tax expense 2,822 440 (97) 3,165
------------ ------------ ------------ ------------
Provision for income tax expense 1,145 179 (39)(5) 1,285
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 1,677 $ 261 $ (58) $ 1,880
============ ============ ============ ============
Net income per common share:
Primary $ 0.23 $ 0.26
Fully diluted $ 0.23 $ 0.26
Weighted average number of
shares outstanding:
Primary 7,222,884 7,222,884
Fully diluted 7,265,473 7,265,473
</TABLE>
CPAC, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
(AMOUNTS IN THOUSANDS - 000'S OMITTED)
LEGEND
(1)Adjustment reflects an increase in historic depreciation
expense relating to the acquired assets of CTG, over their
remaining estimated useful lives. $ 17
(2)Adjustments reflect:
o Elimination of costs relating to CTG personnel and
administrative overhead that are not part of the
business acquired. $ (176)
o Additional goodwill amortization, based on preliminary
allocation of the purchase price. 78
---------
$ (98)
(3)Adjustment reflects elimination of CTG research and development personnel
and related overhead that are not part of the business acquired.
(4)Represents additional interest expense of $107 based on acquisition
borrowings of $6,000, coupled with a reduction of interest income of $138
based on use of cash of $11,000 for the acquisition.
(5)Reflects tax provision as a result of pro forma adjustments described above.
Note 1: The preliminary purchase price allocation is based on draft acquisition
date financial statements for CTG that are expected to be finalized
within the next 60 days. Pro forma adjustments may change as a result
of the finalization of these amounts. Such changes are not expected to
have a material impact.
Note 2: CPAC, Inc. and CTG have different fiscal reporting year ends (March 31
versus December 31). Because of this, the Pro Forma Condensed
Consolidated Statement of Income has been presented by combining CTG's
Statement of Income for the period April 1, 1997 to June 30, 1997, with
CPAC, Inc.'s Statement of Income for the same period, as included in
CPAC, Inc.'s 10-Q filing for the quarter ended June 30, 1997. The
period January 1, 1997 to March 31, 1997 for CTG has not been presented
in any of the pro forma analyses. Revenues and operating income (loss)
for that period amounted to $6,471 and $(42), respectively.
<TABLE>
CPAC, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED MARCH 31, 1997
(UNAUDITED)
(AMOUNTS IN THOUSANDS - 000'S OMITTED)
<CAPTION>
CPAC CTG Adjustments Pro Forma
---- ---- ---------- ---------
<S> <C> <C> <C> <C>
Net Sales $ 92,966 $ 26,810 $ (1,122)(1) $ 118,654
Costs & expenses:
Cost of sales 49,022 17,823 (891)(2) 65,954
Selling, administrative
& engineering expenses 30,483 10,309 (2,700)(3) 38,092
Research & development expense 690 633 (267)(4) 1,056
Minority interest in consolidated
foreign subsidiary 5 5
Interest expense, net 20 981(5) 1,001
Other (income) expense 23,561 (23,561)(6)
------------ ------------ ------------ ------------
80,220 52,326 (26,438) 106,108
------------ ------------ ------------ ------------
Income (loss) before
income tax expense 12,746 (25,516) 25,316 12,546
------------ ------------ ------------ ------------
Provision for income tax expense 5,218 (677) 595(7) 5,136
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 7,528 $ (24,839) $ 24,721 $ 7,410
============ ============ ============ ============
Net income per common share:
Primary $ 1.02 $ 1.01
Fully diluted $ 1.02 $ 1.01
Weighted average number of
shares outstanding:
Primary 7,343,090 7,343,090
Fully diluted 7,364,476 7,364,476
</TABLE>
CPAC, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED MARCH 31, 1997
(UNAUDITED)
(AMOUNTS IN THOUSANDS - 000'S OMITTED)
LEGEND
(1)Adjustment reflects elimination of manufacturing and selling of specific
product lines not acquired.
(2)Adjustments reflect:
o Increase in historic depreciation expense relating to
the acquired assets of CTG, over their remaining useful
lives. $ 68
o Elimination of costs related to discontinued
manufacturing of specific product lines. (959)
---------
$ (891)
(3)Adjustments reflect:
o Elimination of costs relating to CTG personnel and
administrative overhead that are not part of the
business acquired. $ (3,012)
o Additional goodwill amortization, based on preliminary
allocation of the purchase price. 312
---------
$ (2,700)
(4)Adjustment reflects elimination of CTG research and development personnel
and related overhead that are not part of the business acquired.
(5)Represents additional interest expense of $431 based on acquisition
borrowings of $6,000, coupled with a reduction of interest income of $550
based on use of cash of $11,000 for the acquisition.
(6)Adjustments reflect:
o Reversal of historical SFAS 121 adjustment recorded in
1996 by CTG. $(23,862)
o Elimination of CTG's non-recurring income resulting
from the previous sale of a brand name to an unrelated
third party. 301
---------
$(23,561)
(7)Reflects tax provision as a result of pro forma adjustments described above.
Note 1: The preliminary purchase price allocation is based on draft acquisition
date financial statements for CTG that are expected to be finalized
within the next 60 days. Pro forma adjustments may change as a result
of the finalization of these amounts. Such changes are not expected to
have a material impact.
INDEX TO EXHIBITS
Item Description Page
- ---- ---------- ----
1. Underwriting agreement N/A
2. Plan of acquisition, reorganization, arrangement, liquidation, or
succession
2.1 Asset Purchase Agreement dated as of July 22, 1997
by and among CPAC, Inc., The Fuller Brush Company,
Inc., IVAX Industries, Inc. and IVAX Corporation N/A
4. Instruments defining the rights of security holders, including
indentures N/A
16. Letter re change in certifying accountant N/A
17. Letter re director resignation N/A
20. Other documents or statements to security holders N/A
23. Consents of experts and counsel
23.1 Consent of Arthur Andersen LLP 24
24. Power of attorney N/A
27. Financial data schedule N/A
99. Additional exhibits N/A
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation
of our report included in this Form 8-K/A into CPAC, Inc.'s previously
filed Registration Statements File Nos. 333-06987, 33-52164, 333-06965,
0-9600, 333-13361 and 333-13365.
/s/ Arthur Andersen LLP
Philadelphia, Pa.,
October 3, 1997
