UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarter ended September 30, 1994
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number: 1-7234
NATIONAL PATENT DEVELOPMENT CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-1926739
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
9 West 57th Street, New York, NY 10019
(Address of principal executive offices) (Zip code)
(212) 826-8500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange act of 1934 during the preceding 12 months
(or for such shorter period) that the registrant was required to
file such reports and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Number of shares outstanding of each of issuer's classes of
common stock as of November 11, 1994:
Common Stock 24,610,683 shares
Class B Capital 250,000 shares
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
Page No.
Part I. Financial Information
Consolidated Condensed Balance Sheets -
September 30, 1994 and December 31, 1993 1
Consolidated Condensed Statements of Operations-
Three Months and Nine Months Ended September 30,
1994 and 1993 3
Consolidated Condensed Statements of Cash Flows -
Nine Months Ended September 30, 1994 and 1993 4
Notes to Consolidated Condensed Financial
Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Qualification Relating to Financial Information 15
Part II. Other Information 16
Signatures 22
PART I. FINANCIAL INFORMATION
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited)
(in thousands)
September 30, December 31,
1994 1993
ASSETS
Current assets
Cash and cash equivalents $ 13,689 $ 10,976
Accounts and other receivables,
of which $5,205 and $7,694 is from
government contracts 56,871 36,285
Inventories 24,327 22,605
Costs and estimated earnings in
excess of billings on uncompleted
contracts, of which $8,957 and $2,913
relates to government
contracts 13,764 13,081
Prepaid expenses and other
current assets 4,639 4,160
Total current assets 113,290 87,107
Investments 14,070 28,303
Property, plant and equipment,
at cost 37,775 33,873
Less accumulated depreciation (23,019) (20,035)
14,756 13,838
Intangible assets, net of
amortization 37,768 30,104
Investment in financed assets 1,200 2,797
Other assets 3,469 3,908
$184,553 $166,057
See accompanying notes to the consolidated condensed financial
statements.
1
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (Continued)
(unaudited)
(in thousands)
September 30, December 31,
1994 1993
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 15,301 $ 6,750
Short-term borrowings 33,545 21,390
Accounts payable and accrued expenses 27,654 20,256
Billings in excess of costs and
estimated earnings on uncompleted
contracts 4,086 5,487
Total current liabilities 80,586 53,883
Long-term debt less current maturities 17,687 36,638
Notes payable for financed assets 579
Minority interests and other 11,876 3,277
Common stock issued subject to
repurchase obligation 1,510 4,242
Stockholders' equity
Common stock 240 190
Class B capital stock 2 2
Capital in excess of par value 119,890 106,274
Deficit (46,255) (39,028)
Net unrealized loss on
available-for-sale securities (983)
Total stockholders' equity 72,894 67,438
$184,553 $166,057
See accompanying notes to the consolidated condensed financial
statements.
2
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
Three months Nine months
ended September 30, ended September 30,
1994 1993 1994 1993
Revenues
Sales $ 52,340 $ 47,250 $149,763 $ 147,328
Investment and other
income, net (139) (1,163) (2,149) 2,305
52,201 46,087 147,614 149,633
Costs and expenses
Costs of goods sold 44,332 39,649 124,009 124,574
Selling, general &
administrative 8,654 9,042 26,021 27,237
Research & development 124 223 349 2,539
Interest 1,453 2,173 4,407 7,133
54,563 51,087 154,786 161,483
Minority interests 86 45 (18) 2,048
Gain on disposition of
stock of a subsidiary
and an affiliate 3,795 229 3,795
Loss before income taxes
and extraordinary item (2,276) ( 1,160) (6,961) (6,007)
Income tax benefit
(expense) (183) 579 (301) 534
Loss before
extraordinary item (2,459) (581) (7,262) (5,473)
Extraordinary item
Early extinguishment
of debt, net of
income tax 35 929 35 1,156
Net income (loss) $ (2,424) $ 348 $ (7,227) $(4,317)
Income (loss) per share
Loss before
extraordinary item $ (.11) $(.03) $ (.35) $ (.33)
Extraordinary item .05 .07
Income (loss) per
share $ (.11) $ .02 $ (.35) $ (.26)
Dividends per share none none none none
See accompanying notes to the consolidated condensed financial
statements.
3
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine months
ended September 30,
1994 1993
Cash flows from operations:
Net loss $ (7,227) $(4,317)
Adjustments to reconcile net income
to net cash provided by (used for)
operating activities:
Depreciation and amortization 3,232 4,169
Gains from early extinguishment of debt (35) (1,156)
Gain from disposition of stock in
subsidiaries (3,795)
Change in other operating assets and
liabilities (6,989) 2,004
Total adjustments (3,792) 1,222
Net cash used for operations (11,019) (3,095)
Cash flows from investing activities:
Sales of certain net assets and
businesses of a susidiary 4,470
Marketable securities 651
Additions to property, plant & equipment (2,266) (3,245)
Additions to intangible assets (3,626) (110)
Change in investments and other assets, net 2,331 (81)
Net cash provided by (used for)
investing activities $ 909 $(2,785)
See accompanying notes to the consolidated condensed financial
statements.
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
(in thousands)
Nine months
ended September 30,
1994 1993
Cash flows from financing activities:
Proceeds from short-term borrowings $17,810 $21,624
Repayments of short-term borrowings (5,655) (28,244)
Decrease in restricted cash 1,200
Increase in long-term debt 3,871 11,801
Reduction of long-term debt (3,491) (9,340)
Exercise of common stock options and
warrants 100 118
Proceeds from issuance of stock
by a previously consolidated
subsidiary 1,408
Proceeds from issuance of common stock 188
Net cash provided by (used for)
financing activities 12,823 (1,433)
Net increase (decrease) in cash
and cash equivalents 2,713 (7,313)
Cash and cash equivalents at the
beginning of the periods 10,976 17,921
Cash and cash equivalents at the
end of the periods $ 13,689 $ 10,608
Supplemental disclosures of cash
flow information:
Cash paid during the periods for:
Interest $ 3,198 $ 4,615
Income taxes $ 480 $ 576
See accompanying notes to the consolidated condensed financial
statements.
5
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Inventories
Inventories are valued at the lower of cost or market,
principally using the first-in, first-out (FIFO) method.
Inventories consisting of material, labor, and overhead are
classified as follows (in thousands):
September 30, December 31,
1994 1993
Raw materials $ 2,842 $ 2,836
Work in process 421 675
Finished goods 18,364 16,394
Land held for resale 2,700 2,700
$ 24,327 $ 22,605
2. Long-term debt
Long-term debt consists of the following (in thousands):
September 30, December 31,
1994 1993
8% Swiss bonds $ 3,299 $ 4,572
Swiss convertible bonds 10,425 15,300
New 5% Swiss bonds 2,080 2,300
12% Subordinated debentures 6,788 6,829
Other 9,296 11,857
31,888 40,858
Less current maturities 14,201 4,220
$ 17,687 $ 36,638
6
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
2. Long-term debt (Continued)
On June 10, 1994, the Company commenced an Exchange Offer
for up to 60% of its Swiss denominated 8% Bonds due March 1,
1995, 6% Convertible Bonds due March 7, 1995, 5 % Convertible
Bonds due May 9, 1995, 5 % Convertible Bonds due March 18, 1996
and 7% Dual Currency Bonds due March 18, 1996, ("the Bonds").
The Company offered for exchange its Common Stock with a value of
$1,000 for each $1,000 principal amount of the Bonds. In
addition, the Company offered for exchange its Common Stock with
a value of SFr. 1,000 for each SFr. 1,000 principal amount of the
Bonds. Accrued interest on the Bonds accepted for exchange by
the Company was paid in Common Stock of the Company. The purpose
of the Exchange Offer is to reduce the Company's long-term
indebtedness and related interest expense.
In July, as a result of the Exchange Offer, the Company
received an aggregate of SFr. 2,569,000 principal amount of its
Swiss denominated bonds and $1,377,000 of its 7% Dual Currency
Convertible Bonds. In addition, the Company completed two
private transactions for SFr. 6,515,000 principal amount of its
Swiss denominated bonds and $45,000 of its 7% Dual Currency
Convertible Bonds.
As a result of the above transactions, the Company issued
approximately 3,222,000 shares of its common stock, reduced its
long-term debt by approximately $8,100,000, increased
shareholders' equity by approximately $9,100,000 and will reduce
its interest expense by approximately $750,000 on an annual
basis. For the nine months ended September 30, 1994, the Company
realized an extraordinary gain on the early extinguishment of
debt, net of taxes, of $35,000.
7
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
3. General Physics Corporation
On August 31, 1994, General Physics Corporation, a formerly
28% owned subsidiary, (GP) acquired substantially all of the
operations and assets of SGLG, Inc. (SGLG) (formerly GPS
Technologies, Inc.), a 92% owned subsidiary, and assumed certain
liabilities of SGLG, related to its business of providing
management and technical training services, and specialized
engineering consulting services, to various commercial industries
and to the United States government. However, for accounting and
financial reporting purposes, the transaction will be treated as
a reverse acquisition of GP by SGLG since, among other factors,
the Company became the beneficial owner of approximately 54% of
the outstanding shares of GP's common stock as a result of the
transaction. The assets acquired by GP also included all of the
outstanding common stock of four wholly-owned subsidiaries of
SGLG: GPS Technologies, Inc. Federal Systems Group ("GPSTFSG"),
which provides technical services to the U.S. Department of the
Navy and other federal government agencies; GP Environmental
Services, Inc. (GPES), which provides environmental laboratory
analytical services; and General Physics Asia Pte. Ltd., located
in Singapore, and General Physics (Malaysia) Sdn. Bhd., located
in Malaysia, which provide operations support, engineering and
technical services to power and process industries in Southeast
Asia.
The consideration paid by GP totalled approximately
$36,000,000 and consisted of (a) $10,000,000 in cash, (b)
3,500,000 shares of GP common stock, (c) GP's 6% Senior
Subordinated Debentures due 2004 in the aggregate principal
amount of $15,000,000 ($1,500,000 of which was paid into escrow),
(valued at $10,700,000 after a $4,300,000 discount), (d) warrants
to purchase an aggregate of 1,000,000 shares of GP common stock
at $6.00 per share, and (e) warrants to purchase an aggregate of
475,664 shares of GP common stock at $7.00 per share. In
addition, GP entered into a lease with SGLG of certain fixed
assets of SGLG for a period of 10 years for an aggregate rent of
$2,000,000, payable in equal quarterly installments of $50,000.
8
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
3. General Physics Corporation (Continued)
The cash portion of the purchase price for the SGLG
operations and assets was derived from funds borrowed by GP under
a $20,000,000 revolving credit facility secured by liens on the
assets of GPC, GPSTFSG, GPES and Inventory Management
Corporation, all wholly-owned subsidiaries of GPC. The revolving
credit facility was established with a bank on August 31, 1994,
and permits GPC to borrow funds at a rate of interest equal to
the bank's prime rate or LIBOR, plus 2.5% as determined by GP.
Prior to the transaction, the Company directly and
indirectly owned approximately 28% of the outstanding common
stock of GP, and approximately 92% of the outstanding common
stock of SGLG. As a result of the transaction, the Company
directly or indirectly owns approximately 54% of the outstanding
common stock of GP. The Company did not recognize a gain or loss
on this transaction.
The following information shows on a pro-forma basis, the
results of operations as if the above transactions had occurred
as of January 1, 1993 (in thousands):
Nine months ended September 30,
1994 1993
Revenues $184,064 $197,929
Loss before extraordinary
item (7,103) (4,879)
Net loss (7,068) (3,723)
Loss per share before
extraordinary item (.34) (.29)
Loss per share (.34) (.22)
9
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
4. Adoption of new Accounting Principle - Accounting for
Certain Investments in Debt and Equity Securities
In 1994 the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities: ("SFAS No. 115"). The Company's
marketable securities consist of corporate equity securities.
Under SFAS No. 115, the Company classifies these equity
securities as available-for-sale and records the securities at
their fair value. Unrealized holding gains and losses on
available-for-sale securities are excluded from earnings and are
reported as a separate component of stockholders' equity until
realized.
A decline in the market value of any available-for-sale
security below cost that is deemed other than temporary is
charged to earnings resulting in the establishment of a new cost
basis for the security.
Realized gains and losses for securities classified as
available-for-sale are included in earnings and are derived using
the specific identification method for determining the cost of
securities sold.
Marketable investment securities at December 31, 1993
consist of common stocks. Equity securities at that date are
stated at the lower of aggregate cost or market value.
The amortized cost, gross unrealized holding losses and fair
value for available-for-sale securities at September 30, 1994,
were as follows:
Gross
Amortized Unrealized
Cost Holding Losses Fair Value
Available-for-sale:
Equity Securities $3,117,000 $(983,000) $2,134,000
10
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company incurred a loss before income taxes and
extraordinary item of $2,276,000 and $6,961,000 for the quarter
and nine months ended September 30, 1994, as compared with a loss
of $1,160,000 and $6,007,000 for the corresponding periods of
1993. The increase in the Company's loss before income taxes and
extraordinary item is due to several factors. Included in
investment and other income, net for the quarter and nine months
ended September 30, 1994, is $351,000 and $2,363,000,
respectively, of foreign currency transaction losses compared to
losses of $1,442,000 and $61,000 for the corresponding periods of
1993. The reduced currency loss for the third quarter has been
offset by increased losses incurred by Interferon Sciences, Inc.
(ISI), the Company's approximately 36% owned affiliate. In
addition, as a result of an Exchange Offer in July 1993 for a
significant portion of its Swiss Denominated Debt, the Company
realized a gain of $3,795,000 from the issuance of a portion of
the Company's holdings of shares of common stock of ISI and GTS
Duratek, Inc. (Duratek) during the third quarter of 1993, due to
such shares being included as part of the consideration for the
Exchange Offer. For the quarter and nine months ended September
30, 1994, the effect of the gain realized in 1993 was partially
offset by reduced interest expense at the corporate level, as a
result of reduced long-term debt, as well as increased operating
profits achieved by the Optical Plastics and Physical Science
Groups. At September 30, 1994, there was an aggregate of SFr.
16,672,000 of Swiss denominated indebtedness outstanding, of
which SFr. 14,630,000 represents principal amount outstanding and
SFr. 2,042,000 represents interest accrued thereon. At September
30, 1994, the Company had not hedged its Swiss Franc obligations.
If the value of the Swiss Franc to the U.S. dollar increases, the
Company will recognize transaction losses on its Swiss Franc
obligations. On September 30, 1994, the value of the Swiss Franc
to the U.S. dollar was approximately 1.2882 to 1. There can be
no assurance that the Company will be able to swap or hedge
obligations denominated in foreign currencies at prices
acceptable to the Company or at all. The Company will continue
to review this policy on a continuing basis.
Sales
For the quarter ended September 30, 1994, consolidated sales
increased by $5,090,000 to $52,340,000 from the $47,250,000
recorded in the corresponding quarter of 1993. For the nine
months ended September 30, 1994, consolidated sales increased by
11
$2,435,000 to $149,763,000 from $147,328,000 recorded for the
nine months ended September 30, 1993. The increased sales for
the 1994 periods were primarily the result of increased sales
within the Optical Plastics, Physical Science and the
Distribution Groups, partially offset by reduced sales within the
Electronics Group. The increased sales within the Physical
Science Group were the result of the inclusion of General Physics
Corporation (GP) in the consolidated results of the Company as of
September 1, 1994 (see Note 3 to the Consolidated Condensed
Financial Statements), offset by the end of a long-term staff
augmentation contract at Duratek, which in turn was partially
offset by increased Environmental Services revenues at Duratek,
as well as the sale by SGLG, Inc. (SGLG), formerly GPS
Technologies, Inc., of its interest in General Physics
International Engineering and Simulation, Inc. (GPI) to a new
joint venture in which GPS has a minority position, in 1994. For
the quarter and nine months ended September 30, 1993, GPI had
sales of $2,425,000 and $5,833,000, respectively.
Gross margin
Consolidated gross margin of $8,008,000, or 15%, for the
quarter ended September 30, 1994 increased by $407,000 when
compared to the consolidated gross margin of $7,601,000, or 16%,
for the quarter ended September 30, 1993. For the nine months
ended September 30, 1994, consolidated gross margin of
$25,754,000 or 17% of consolidated sales increased by $3,000,000
when compared to $22,754,000 or 15% of consolidated sales earned
in the nine months ended September 30, 1993. The increased gross
margin for the quarter and six months ended September 30, 1994,
was primarily the result of increased sales and gross margin
percentage achieved by the Optical Plastics Group, as well
increased gross margin achieved by the Physical Science Group due
to the higher gross margin generated by Duratek's Environmental
Services business, a more profitable mix of services generated by
SGLG, and the gross margin earned by GP in September 1994.
Selling, general and administrative expenses
For the quarter and nine months ended September 30, 1994,
selling, general and administrative expenses (SG&A) of $8,654,000
and $26,021,000 were $388,000 and $1,216,000 lower than the
$9,042,000 and $27,237,000 of SG&A expenses incurred during the
quarter and nine months ended September 30, 1993. The decrease
in SG&A for the nine months ended September 30, 1994 was due to
ISI being accounted for on the equity basis since the third
quarter of 1993 and reduced costs incurred at the corporate
level, partially offset by increased costs incurred by the
Distribution Group.
12
Research and development
Research and development costs of $124,000 and $349,000 for
the quarter and nine months ended September 30, 1994, were
reduced significantly when compared to costs of $223,000 and
$2,539,000 for the quarter and nine months ended September 30,
1993, as a result of ISI being accounted for on the equity basis
since June 1993.
Interest expense
For the quarter and nine months ended September 30, 1994,
interest expense was $1,453,000 and $4,407,000, compared to
$2,173,000 and $7,133,000 for the third quarter and nine months
ended September 30, 1993. The decreased interest expense for the
periods was the result of reduced long-term debt.
Investment and other income, net
Investment and other income, net of $(139,000) and
$(2,149,000) for the quarter and nine months ended September 30,
1994, increased by $1,024,000 and decreased by $4,454,000,
respectively, as compared to $(1,163,000) and $2,305,000 for the
corresponding periods of 1993. The change was principally due to
the following factors; $(351,000) and $(2,363,000) of foreign
currency transaction losses recognized during the quarter and
nine months ended September 30, 1994, compared to losses of
$(1,442,000) and $(61,000) for the corresponding periods of 1993.
In addition, for the quarter and nine months ended September 30,
1994, the Company realized losses of $1,400,000 and $3,404,000,
compared to $778,000 and $427,000 earned for the quarter and nine
months ended September 30, 1993, respectively, relating to income
of 20% to 50% owned subsidiaries, primarily as a result of ISI
being accounted for on the equity basis since the third quarter
of 1993.
Adoption of new accounting principle - Accounting for certain
investments in debt and equity securities
In 1994 the Company adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt
and Equity Securities" (see Note 4 of Notes to Consolidated
Condensed Financial Statements). There was no material effect on
the Company's financial condition or results of operations as a
result of the adoption of this principle.
13
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
The Company believes that it has sufficient cash, cash
equivalents and borrowing availability under existing and
potential lines of credit to satisfy its cash requirements until
the first scheduled maturity of its Swiss Franc denominated
indebtedness on March 1, 1995. However, in order for the Company
to meet its cash needs thereafter, which include the repayment of
approximately $9,614,000 of Swiss Franc denominated indebtedness
scheduled to mature in 1995 and approximately $4,110,000 of Swiss
Franc denominated indebtedness which is scheduled to mature in
1996, the Company must obtain additional funds from among various
sources. The Company has historically reduced its long-term debt
through the issuance of equity securities in exchange for long-
term debt. In addition to its ability to issue equity
securities, the Company believes that it has sufficient
marketable long-term investments, as well as the ability to
obtain additional funds from its operating subsidiaries and the
potential to enter into new credit arrangements. The Company
reasonably believes that it will be able to continue to
accomplish some or all of the above transactions in order to fund
the scheduled repayment of the Company's long-term Swiss debt in
1995.
At September 30, 1994, the Company had cash and, cash
equivalents totaling $13,689,000. GP, SGLG, American Drug
Company and Duratek had cash and, cash equivalents of $560,000 at
September 30, 1994. The minority interests of these four
companies are owned by the general public, and therefore the
assets of these subsidiaries have been dedicated to the
operations of these companies and may not be readily available
for the general corporate purpose of the parent.
14
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
QUALIFICATION RELATING TO FINANCIAL INFORMATION
September 30, 1994
The financial information included herein is unaudited. In
addition, the financial information does not include all
disclosures required under generally accepted accounting
principles because certain note information included in the
Company's Annual Report has been omitted; however, such
information reflects all adjustments (consisting solely of normal
recurring adjustments) which are, in the opinion of management,
necessary to a fair statement of the results for the interim
periods. The results for the 1994 interim period are not
necessarily indicative of results to be expected for the entire
year.
15
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 5.
The following information is provided in response to Item
7 in the Form 8-K filed on September 14, 1994.
a. Financial statements of business acquired:
The consolidated balance sheets of General Physics
Corporation (GP) and subsidiaries as of December 31,
1993 and 1992, and the related statements of
operations, changes in stockholders equity and cash
flows for each of the years in the three-year period
ended December 31, 1993, and the related notes to the
consolidated financial statements, included in GP's
Form 10-K dated March 29, 1994, are hereby incorporated
by reference.
b. Pro forma financial information:
The following unaudited pro forma combined statements
of operations have been prepared based upon the
historical statements of operations of the Company and
GP and give effect to the Transaction as if it had
occurred on January 1, 1993 and January 1, 1994. The
transaction has been accounted for using the purchase
method. The Company owns approximately 54% of the
outstanding shares of GP after the Transaction. The
pro forma financial statements are not necessarily
indicative of the actual financial position or results
of operations that would have been achieved if the
transactions had occurred as of or for the period
indicated, or of future results that may be achieved.
16
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
PRO FORMA STATEMENT OF OPERATIONS
(unaudited)
(in thousands)
Nine months ended September 30, 1994
Actual GP Adjustments Proforma
Revenues
Sales $149,763 $36,250 $186,013
Investment and other
income, net (2,149) $200 (e) (1,949)
147,614 36,250 184,064
Costs and expenses
Cost of goods sold 124,009 33,279 (952) (a) 156,336
Selling, general &
administrative 26,021 4,050 (1,587) (b) 28,484
Research & development 349 349
Interest 4,407 422 (c) 4,829
154,786 37,329 189,998
Gain on disposition of
a subsidiary and
an affiliate 229 229
Minority interests (18) (493) (d) (511)
Loss before income taxes
and extraordinary item (6,961) (1,079) (6,216)
Income tax benefit
(expense) (301) 360 (946) (f) (887)
Loss before
extraordinary item (7,262) (719) (7,103)
Early extinguishment
of debt, net of
income tax in 1993 35 35
Net loss $(7,227) $(719) $(7,068)
Loss per share before
extraordinary item $(.35) $(.34)
Extraordinary item
Net loss per share $(.35) $(.34)
17
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended September 30, 1994
Adjustments (in thousands)
(a) To adjust cost of goods for the transaction as follows:
Reduce salaries and benefits for
employees not retained $952
(b) To adjust selling, general and administrative expenses for
the transaction as follows:
Reduce salaries and benefits for
employees not retained $1,010
Reduce rent and related costs
for duplicate facilities 150
Reduce other administrative costs
such as insurance and professional fees 327
Record amortization of excess cost over
fair value of assets acquired (25)
Reduce amortization of goodwill for
the effect of the transaction 125
$1,587
(c) To adjust interest expense as follows:
Eliminate SGLG interest $169
Record interest expense on bank borrowings
assuming $10 million at 7 % (591)
$(422)
(d) To adjust minority interest as follows:
Adjust minority interest related to
businesses and assets acquired
from SGLG from 8% to 46% $(149)
Record minority interest of 46%
pertaining to GPC (344)
$(493)
(e) To adjust investment and other income, net as follows:
Eliminate share of loss related
to investment in GP $200
(f) To adjust income tax expense $(946)
18
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
(in thousands)
Year ended December 31, 1993
Actual GP Adjustments Proforma
Revenues
Sales $189,683 $62,402 $252,085
Investment and other
income, net 3,358 $(441) (e) 2,917
193,041 62,402 255,002
Costs and expenses
Cost of goods sold 162,164 55,422 (744) (a) 216,842
Selling, general &
administrative 35,600 4,180 (2,016) (b) 37,764
Research & development 2,847 2,847
Interest 8,325 499 (c) 8,824
208,936 59,602 266,277
Gain on disposition of
a subsidiary and
an affiliate 3,795 3,795
Gain on issuance of
stock of a subsidiary 1,353 1,353
Minority interests 2,376 (1,725) (d) 651
Loss before income taxes
and extraordinary item (8,371) 2,800 (5,476)
Income tax benefit
(expense) 575 (1,037) (1,140) (f) (1,602)
Income (loss) before
extraordinary item (7,796) 1,763 (7,078)
Early extinguishment
of debt, net of
income tax in 1993 1,819 1,819
Net income (loss) $(5,977) $1,763 $(5,259)
Loss per share before
extraordinary item $(.46) $(.42)
Extraordinary item .11 .11
Net loss per share $(.35) $(.31)
19
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1993
Adjustments (in thousands)
(a) To adjust cost of goods for the transaction as follows:
Reduce salaries and benefits for
employees not retained $744
(b) To adjust selling, general and administrative expenses for
the transaction as follows:
Reduce salaries and benefits for
employees not retained $1,340
Reduce rent and related costs
for duplicate facilities 200
Reduce other administrative costs
such as insurance and professional fees 339
Record amortization of excess cost over
fair value of assets acquired (33)
Reduce amortization of goodwill for
the effect of the transaction 170
$2,016
(c) To adjust interest expense as follows:
Eliminate SGLG interest $276
Record interest expense on bank borrowings
assuming $10 million at 7 % (775)
$(499)
(d) To adjust minority interest as follows:
Adjust minority interest related to
businesses and assets acquired
from SGLG from 8% to 46% $(260)
Record minority interest of 46%
pertaining to GPC (1,465)
$(1,725)
(e) To adjust investment and other income, net as follows:
Eliminate share of income related to
investment in GP $(441)
(f) To adjust income tax expense $(1,140)
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION (Continued)
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
None
b. Reports on Form 8-K
A report on Form 8-K dated August 31, 1994 reporting
event under Item 2 was filed on September 14, 1994.
21
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
September 30, 1994
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed in
its behalf by the undersigned thereunto duly authorized.
NATIONAL PATENT DEVELOPMENT
CORPORATION
DATE: November 14, 1994 BY: Jerome I. Feldman
President and Chief
Executive Officer
DATE: November 14, 1994 BY: Scott N. Greenberg
Vice President,
Chief Financial Officer
22
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> QTR-3
<FISCAL-YEAR-END> DEC-31-1993
<PERIOD-END> SEP-30-1994
<CASH> 13,689
<SECURITIES> 0
<RECEIVABLES> 56,871
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<TOTAL-ASSETS> 184,553
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<BONDS> 31,888
<COMMON> 240
0
0
<OTHER-SE> 72,654
<TOTAL-LIABILITY-AND-EQUITY> 184,553
<SALES> 149,763
<TOTAL-REVENUES> 147,614
<CGS> 124,009
<TOTAL-COSTS> 150,030
<OTHER-EXPENSES> 349
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<INCOME-PRETAX> (6,961)
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<INCOME-CONTINUING> (7,262)
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</TABLE>
