<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) January 2, 1997
FURON COMPANY
(Exact name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
California 0-8088 95-1947155
- ---------------------------------------------------------------------------------------------------------------
(State or other (Commission (IRS Employer
Jurisdiction of File Number) Identification
Incorporation) Number)
</TABLE>
<TABLE>
<S> <C>
29982 Ivy Glenn Drive, Laguna Niguel, California 92677
- ---------------------------------------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code:
(714) 831-5350
Not applicable
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
Item 7. Financial Statements and Exhibits
A current report on Form 8-K was filed on January 17, 1997 by
Furon Company ("Furon") describing the merger of Medex, Inc.
("Medex") as required under Item 2 of Form 8-K. Pursuant to
Item 7(b)(2), the report omitted the unaudited pro forma
financial information for Furon on a combined basis, reflecting
the acquisition of Medex. This Form 8-K/A provides that
information.
Pro forma financial information:
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
Unaudited Pro Forma Condensed Consolidated Statement of Income
for the Nine Months Ended November 2, 1996 4
Unaudited Pro Forma Condensed Consolidated Statement of Income
for the Fiscal Year Ended February 3, 1996 5
Notes to Unaudited Pro Forma Condensed Consolidated Statements
of Income 6
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
November 2, 1996 8
Notes to Unaudited Pro Forma Condensed Consolidated Balance
Sheet 9
</TABLE>
<PAGE> 3
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following Pro Forma Condensed Consolidated Statements of Income for the nine
months ended November 2, 1996 and for the fiscal year ended February 3, 1996
present unaudited pro forma operating results for Furon as if the Agreement and
Plan of Merger ("Merger") between Furon and Medex had occurred as of the
beginning of the periods presented. The following Pro Forma Condensed
Consolidated Balance Sheet presents the unaudited pro forma financial condition
of Furon as if the Merger occurred as of November 2, 1996. Of the total
purchase price, $53.7 million represented the value of in-process research and
development. The excess of the purchase price of Medex (exclusive of the amount
allocated to in-process research and development) over the net identifiable
assets and liabilities of Medex is reported as goodwill. The carrying values of
Medex's net assets are assumed to equal their fair values for purposes of these
unaudited pro forma financial statements, unless indicated otherwise in the
Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet. These values
are subject to revision. However, management believes that any resulting
adjustments will not have a material effect on the financial position or results
of operations.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet and Statements of
Income were prepared assuming the consummation of: (i) the Merger, which is
accounted for under the purchase method of accounting; and (ii) the New Credit
Agreement, as defined in Note (a) of Notes to Unaudited Pro Forma Condensed
Consolidated Balance Sheet. The unaudited pro forma adjustments are described
in the accompanying notes. The unaudited pro forma adjustments represent
Furon's preliminary determination of the necessary adjustments and are based
upon certain assumptions Furon considers reasonable under the circumstances.
Final amounts may differ from those set forth below.
The unaudited pro forma financial information presented does not consider any
future events which may occur after the Merger. The unaudited pro forma
financial information presented does not attempt to quantify any operating
expense synergies or cost reductions of the combined operations of Furon
and Medex that may be realized after the Merger. Nor does the unaudited pro
forma financial information consider the incremental expense, capital or
conversion costs which may be incurred as a result of the Merger.
THE UNAUDITED PRO FORMA FINANCIAL INFORMATION IS PRESENTED FOR INFORMATIONAL
PURPOSES ONLY AND IS NOT NECESSARILY INDICATIVE OF THE OPERATING RESULTS OR
FINANCIAL POSITION THAT WOULD HAVE OCCURRED HAD THE MERGER BEEN CONSUMMATED AT
THE DATES INDICATED, NOR IS IT NECESSARILY INDICATIVE OF FUTURE OPERATING
RESULTS OR FINANCIAL POSITION OF FURON FOLLOWING THE MERGER.
The unaudited pro forma condensed financial information should be read in
conjunction with the consolidated financial statements of each of Furon and
Medex and the related notes thereto contained in (i) Furon's Annual Report on
Form 10-K for the fiscal year ended February 3, 1996, (ii) Furon's Quarterly
Report on Form 10-Q for the quarter ended November 2, 1996, (iii) Medex's
Annual Report on Form 10-K for the fiscal years ended June 30, 1996 and 1995,
respectively, and (iv) Medex's Quarterly Report on Form 10-Q for the quarters
ended March 31, 1996 and September 30, 1996.
<PAGE> 4
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the nine months ended November 2, 1996
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
PRO FORMA
FURON MEDEX COMBINED ADJUSTMENTS PRO FORMA
----- ----- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 287,206 $ 77,066 $ 364,272 $ - $364,272
Cost of sales 208,995 46,086 255,081 (979) (a) 254,102
--------- ---------- ---------- ---------- --------
Gross profit 78,211 30,980 109,191 979 110,170
Selling, general and
administrative expenses 60,239 28,542 88,781 1,685 (b) 90,466
Medex restructuring costs - 1,658 1,658 - 1,658
Gain on sale of product line - (3,098) (3,098) - (3,098)
Other (income) expense, net (2,918) 374 (2,544) - (2,544)
Interest expense 1,939 332 2,271 8,018 (c) 10,289
--------- ---------- ---------- ---------- --------
Income (loss) before taxes 18,951 3,172 22,123 (8,724) 13,399
Provision (benefit) for
income taxes 6,443 1,729 8,172 (2,738) (d) 5,434
--------- ---------- ---------- ---------- --------
Net income (loss) $ 12,508 $ 1,443 $ 13,951 $ (5,986) (e) $ 7,965
========= ========== ========== ========== ========
Net income per share $ 1.37 $ 0.87
========= ========
Weighted average common
shares outstanding 9,125 9,125
===== =====
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Condensed Consolidated Statements
of Income.
<PAGE> 5
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the fiscal year ended February 3, 1996
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
PRO FORMA
FURON MEDEX COMBINED ADJUSTMENTS PRO FORMA
----- ----- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net sales $ 344,886 $ 97,750 $ 442,636 $ - $ 442,636
Cost of sales 249,102 51,923 301,025 (1,305) (a) 299,720
Discontinued items - 1,678 1,678 - 1,678
---------- ---------- ---------- -------- ----------
Gross profit 95,784 44,149 139,933 1,305 141,238
Selling, general and
administrative expenses 78,337 41,046 119,383 2,298 (b) 121,681
Medex restructuring costs - 2,699 2,699 - 2,699
Other (income), net (3,866) (224) (4,090) - (4,090)
Interest expense 2,899 255 3,154 10,897 (c) 14,051
---------- ---------- ---------- -------- ----------
Income (loss) before taxes 18,414 373 18,787 (11,890) 6,897
Provision (benefit) for
income taxes 5,245 1,083 6,328 (3,733) (d) 2,595
---------- ---------- ---------- -------- ----------
Net income (loss) $ 13,169 $ (710) $ 12,459 $ (8,157) (e) $ 4,302
========== ========== ========== ======== ==========
Net income per share $ 1.46 $ 0.48
========== ==========
Weighted average common
shares outstanding 9,040 9,040
===== =====
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Condensed Consolidated Statements
of Income.
<PAGE> 6
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
Basis of Consolidation
Furon's fiscal year ends on the Saturday closest to January 31. The fiscal
year refers to the year in which the period ends. Fiscal year 1996 ended
February 3, 1996 and includes 53 weeks. Medex's fiscal year ends on June 30.
For purposes of the Unaudited Pro Forma Condensed Consolidated Statement of
Income for the nine months ended November 2, 1996, results of operations for
Medex are for the three quarters ended December 31, 1996. For purposes of the
Unaudited Pro Forma Condensed Consolidated Statement of Income for Furon's
fiscal year ended February 3, 1996, results of operations for Medex are for the
four quarters ended March 31, 1996.
The results of operations for Medex included in the Unaudited Pro Forma
Condensed Consolidated Statements of Income contain certain reclassification
entries in order to present cost of sales and operating expense information on
a basis consistent with the presentation used by Furon.
Pro Forma Adjustments
(a) Reflects the decrease in depreciation and amortization expense resulting
from the write-down of tangible assets to fair market value. The estimated
useful lives of these assets are 25 years for buildings and a range of 3 to 18
years for machinery and equipment.
(b) Reflects the effect on depreciation and amortization expense resulting
from the adjustments below (in thousands):
<TABLE>
<CAPTION>
Nine Months Fiscal Year
Ended Ended
November 2, 1996 February 3, 1996
---------------- ----------------
<S> <C> <C>
Amortization of goodwill (utilizing a 25 year
life) related to the Merger and purchase
price accounting adjustments $ 900 $ 1,223
Net increase in amortization expense resulting
from the step-up of intangible assets to fair
market value (utilizing amortization periods
ranging from 8 to 25 years) 1,094 1,487
Decrease in depreciation and amortization
expenses resulting from the write-down of
tangible assets to fair market value. Estimated
useful lives are 25 years for buildings and a
range of 3 to 5 years for research and develop-
ment equipment, computer hardware/software, etc. (309) (412)
------------ -----------
$ 1,685 $ 2,298
============ ===========
</TABLE>
<PAGE> 7
(c) Reflects the effect on interest expense resulting from the adjustments
below (in thousands):
<TABLE>
<CAPTION>
Nine Months Fiscal Year
Ended Ended
November 2, 1996 February 3, 1996
---------------- ----------------
<S> <C> <C>
Interest expense on an incremental debt level
under the New Credit Agreement of $166.3 million
as a result of the Merger with an assumed
interest rate of 6.3% $7,858 $10,680
Elimination of the amortization of debt issuance
costs related to Furon's existing bank credit facilities (39) (53)
Amortization of debt issuance costs related to the
New Credit Agreement (utilizing a 5 year term) 199 270
------ -------
$8,018 $10,897
====== =======
</TABLE>
(d) Reflects the decrease in income tax expense resulting from the combined
pro forma adjustments of Furon and Medex at Furon's statutory tax rate, but
reflecting the non-deductibility of Medex's goodwill amortization for tax
purposes.
(e) The pro forma adjustments exclude the effect of $53.7 million of purchased
in-process research and development which is expected to be expensed by Furon
in the fourth quarter of fiscal year ended February 1, 1997. If the write-off
had been reflected, net income (loss) per share would decrease from $0.87 to
$(5.01) for the nine months ended November 2, 1996 and net income (loss) per
share would decrease from $0.48 to $(5.46) for the fiscal year ended
February 3, 1996.
<PAGE> 8
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of November 2, 1996
(In Thousands)
<TABLE>
<CAPTION>
PRO FORMA
FURON MEDEX COMBINED ADJUSTMENTS PRO FORMA
----- ----- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,872 $ 10,832 $ 14,704 $ - $ 14,704
Accounts receivable, net 54,073 19,524 73,597 - 73,597
Inventories 41,437 23,325 64,762 - 64,762
Deferred income taxes 5,102 2,796 7,898 - 7,898
Prepaid expenses and other assets 3,593 1,498 5,091 - 5,091
--------- ------------ ----------- ---------- ----------
Total current assets 108,077 57,975 166,052 - 166,052
Property, plant and equipment, at cost:
Land and land improvements 2,478 2,370 4,848 2,350 7,198
Buildings and leasehold improvements 20,031 19,631 39,662 (7,427) 32,235
Machinery and equipment 137,084 41,295 178,379 (24,475) 153,904
--------- ------------ ----------- ---------- ----------
159,593 63,296 222,889 (29,552) 193,337
Less accumulated depreciation and
amortization (76,633) (28,321) (104,954) 28,321 (76,633)
--------- ------------ ----------- ---------- ----------
Net property, plant and equipment 82,960 34,975 117,935 (1,231) 116,704
Goodwill - 4,608 4,608 25,392 30,000
Intangible assets, net 24,769 - 24,769 20,260 45,029
Other assets 5,879 2,430 8,309 1,123 9,432
--------- ------------ ----------- ---------- ----------
$ 221,685 $ 99,988 $ 321,673 $ 45,544 $ 367,217
========= ============ =========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 19,430 $ 4,953 $ 24,383 $ - $ 24,383
Salaries, wages and related
benefits payable 10,823 3,438 14,261 - 14,261
Current portion of long-term debt 177 600 777 - 777
Facility rationalization and - 223 223 6,898 7,121
severance
Other current liabilities 10,750 7,441 18,191 (4,187) 14,004
--------- ------------ ----------- ---------- ----------
Total current liabilities 41,180 16,655 57,835 2,711 60,546
Long-term debt 35,228 6,175 41,403 166,317 207,720
Other long-term liabilities 22,009 - 22,009 282 22,291
Deferred income taxes 7,603 491 8,094 6,804 14,898
Commitments and contingencies
Stockholders' equity:
Common stock 38,853 43,359 82,212 (43,359) 38,853
Foreign currency translation 883 830 1,713 (830) 883
adjustment
Unearned ESOP shares (3,316) - (3,316) - (3,316)
Unearned compensation (314) - (314) - (314)
Additional pension liability (1,649) - (1,649) - (1,649)
Retained earnings 81,208 32,478 113,686 (86,381) 27,305
--------- ------------ ----------- ---------- ----------
Total stockholders' equity 115,665 76,667 192,332 (130,570) 61,762
--------- ------------ ----------- ---------- ----------
$ 221,685 $ 99,988 $ 321,673 $ 45,544 $ 367,217
========= ============ =========== ========== ==========
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Condensed Consolidated Balance
Sheet.
<PAGE> 9
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
For purposes of the Unaudited Pro Forma Condensed Consolidated Balance Sheet,
the financial position of Medex is as of December 31, 1996, the end of Medex's
second quarter. The following table reflects a detailed breakdown of the pro
forma adjustments in the Unaudited Pro Forma Condensed Consolidated Balance
Sheet:
Unaudited Pro Forma Adjustments (In Thousands)
<TABLE>
<CAPTION>
ADJUSTMENT TO
MEDEX
TRANSACTION CARRYING
MERGER (A) COSTS (B) VALUES (C) TOTAL
---------- --------- ---------- -----
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ - $ - $ - $ -
Accounts receivable, net - - - -
Inventories - - - -
Deferred income taxes - - - -
Prepaid expenses and other assets - - - -
------------ ------------ ---------- ---------
Total current assets - - - -
Property, plant and equipment, at cost
Land and land improvements - - 2,350 2,350
Buildings and leasehold
improvements - - (7,427) (7,427)
Machinery and equipment - - (24,475) (24,475)
------------ ------------ ---------- ---------
- - (29,552) (29,552)
Less accumulated depreciation
and amortization - - 28,321 28,321
------------ ------------ ---------- ---------
Net property, plant and equipment - - (1,231) (1,231)
Goodwill 79,841 5,639 (60,088) 25,392
Intangible assets, net - - 20,260 20,260
Other assets - 1,123 - 1,123
------------ ------------ ---------- ---------
$ 79,841 $ 6,762 $ (41,059) $ 45,544
============ ============ ========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ - $ - $ - $ -
Salaries, wages and related
benefits payable - - - -
Facility rationalization
and severance - - 6,898 6,898
Other current liabilities (4,431) - 244 (4,187)
------------ ------------ ---------- ---------
Total current liabilities (4,431) - 7,142 2,711
Long-term debt 159,352 6,965 - 166,317
Other long-term liabilities - - 282 282
Deferred income taxes 1,587 - 5,217 6,804
Commitments and contingencies
Stockholders' equity:
Common stock (43,359) - - (43,359)
Foreign currency translation
adjustment (830) - - (830)
Retained earnings (32,478) (203) (53,700) (86,381)
------------ ------------ ---------- ---------
Total stockholders' equity (76,667) (203) (53,700) (130,570)
------------ ------------ ---------- ---------
$ 79,841 $ 6,762 $ (41,059) $ 45,544
============ ============ ========== ==========
</TABLE>
<PAGE> 10
(a) Reflects the purchase of all outstanding Medex common stock and common
stock options at a purchase price of $23.50 per share of common stock and the
difference between the $23.50 and the exercise price for each share of common
stock covered by each stock option, net of any applicable tax withholding, or a
total of $159.4 million. The excess of the purchase price of Medex stock over
the net book value of Medex as of the pro forma balance sheet date represents
goodwill in the amount of $79.8 million. See note (c) below for further
adjustments to goodwill.
To finance the Merger, Furon entered into a Credit Agreement dated as of
November 12, 1996 (the "New Credit Agreement"), by and among Furon, the lenders
party thereto (the "Lenders") and the Bank of New York ("BNY"), as swing line
lender and as administrative agent. The New Credit Agreement provides that
Furon may borrow up to an aggregate principal amount not to exceed $200,000,000
(the "Facility") (such amount subject to increase to $250,000,000 in aggregate
principal amount upon request of Furon and the agreement of lenders to provide
such additional amounts).
Amounts borrowed under the New Credit Agreement will mature November 12, 2001
and may be prepaid by Furon at any time in whole, or from time to time in part.
Borrowings under the New Credit Agreement will bear interest, at Furon's option,
at a rate per annum equal to either; (i) the greater of (a) BNY's prime
commercial lending rate as publicly announced to be in effect from time to time
and (b) 1/2% plus the federal funds rate (as published by the Federal Reserve
Bank of New York); or (ii) LIBOR (adjusted for reserves) plus an applicable
margin determined on the basis of Furon's leverage ratio for interest periods of
one, two, three or six months; or (iii) with respect to swing line loans a rate
negotiated between BNY and Furon. Any amounts not paid when due bear interest
at the rate otherwise applicable plus two percent.
The New Credit Agreement provides for the payment of a commitment fee of a
certain rate per annum based on Furon's leverage ratio on the average daily
unused amount of the Facility, payable to BNY as administrative agent, for the
pro rata account of the Lenders, quarterly in arrears and on maturity or
termination. The New Credit Agreement also contains representations and
warranties, covenants, conditions to borrowing and events of default customary
for a facility of its type.
(b) Reflects Furon's estimate of costs associated with the Merger and related
financing requirements as follows (in thousands):
<TABLE>
<S> <C>
Debt issuance costs related to the New Credit Agreement $ 1,326
Legal and other professional fees (allocated to goodwill) 5,639
---------
6,965
Debt issuance costs related to Furon's prior bank
credit facilities (203)
---------
$ 6,762
=========
</TABLE>
<PAGE> 11
(c) Reflects adjustments to the carrying values of Medex's net assets to
equal their estimated fair values. These values are subject to revision.
However, management believes that any resulting adjustments will not
have a material effect on the financial position or results of operations.
Land reflects a write-up of $2.6 million and the net book value of buildings
reflects a write-down of $2.9 million based on independent appraisals. The net
book value of machinery and equipment reflects a write-down of $0.9 million
based upon management's best estimate of the fair market value.
Other intangible assets, including developed technology, were valued at fair
market value based on independent appraisals.
Furon estimates that expenses associated with closing certain Medex facilities
and other severance costs will approximate $6.9 million.
The deferred tax liability is associated with certain adjustments to Medex's
carrying values which result in temporary differences under SFAS No. 109,
"Accounting for Income Taxes".
The fair market value of purchased in-process research and development of $53.7
million was determined by an independent appraisal. The entire amount is
expected to be expensed by Furon in the fourth quarter of fiscal year ended
February 1, 1997.
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
FURON COMPANY,
a California corporation
March 18, 1997 By: /S/ MONTY A. HOUDESHELL
----------------------------------------
Name: Monty A. Houdeshell
Title: Vice President, Chief
Financial Officer and Treasurer
