<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) November 27, 1996
---------------------
GRAHAM-FIELD HEALTH PRODUCTS, INC.
----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-8801 NY 11-2578230
----------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
400 Rabro Drive East, Hauppauge, New York 11788
----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 582-5900
------------------
Not Applicable
----------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On November 27, 1996, Graham-Field Health Products, Inc., a Delaware
corporation (the "Company"), acquired Everest & Jennings International Ltd., a
Delaware corporation ("E&J"), pursuant to the terms and provisions of the
Amended and Restated Agreement and Plan of Merger dated as of September 3, 1996
and amended as of October 1, 1996, by and among the Company, E&J, E&J
Acquisition Corp., a wholly-owned subsidiary of the Company ("Sub"), and BIL
(Far East Holdings) Limited, a Hong Kong corporation and the majority
stockholder of E&J ("BIL"). Under the terms of the Merger Agreement, Sub was
merged with and into E&J with E&J continuing as the surviving corporation
wholly-owned by the Company (the "Merger").
In the Merger, each share of E&J's common stock, par value $.10 per
share (the "E&J Common Stock"), other than shares of E&J Common Stock cancelled
pursuant to the Merger Agreement, was converted into the right to receive .35
shares of common stock, par value $.025 per share, of the Company (the "Company
Common Stock"). There were 7,207,689 shares of E&J Common Stock outstanding on
November 26, 1996.
In addition, at the effective time of the Merger:
(i) BIL purchased for cash 1,922,242 shares of Company Common Stock
having a value (determined as set forth in the Merger Agreement)
equal to the outstanding principal and interest on E&J's
indebtedness to Hong Kong and Shanghai Banking Corporation
Limited in the amount of $24,989,151, which indebtedness (the
"HSBC Indebtedness") was guaranteed by BIL. The proceeds of such
stock purchase were contributed by the Company to E&J immediately
following the Merger and used to discharge the HSBC Indebtedness.
(ii) The Company issued $61 million stated value of a new Series B
Cumulative Convertible Preferred Stock (the "Series B Preferred
Stock") to BIL in exchange for certain indebtedness of E&J owing
to BIL and shares of E&J preferred stock owned by BIL. The
Series B Preferred Stock is entitled to a dividend of 1.5% per
annum payable quarterly, votes on an as-converted basis as a
single class with the Company Common Stock and the Series C
Preferred Stock (as defined in clause (iii) below), is not
subject to redemption and is convertible (x) at the option of the
holder thereof, at a conversion price of $20 per share (or, in
the case of certain
- 2 -
<PAGE>
dividend payment defaults, at a conversion price of $15.50 per
share), (y) at the option of the Company, at a conversion price
equal to current trading prices (subject to a minimum conversion
price of $15.50 and a maximum conversion price of $20 per share)
and (z) automatically on the fifth anniversary of the date of
issuance at a conversion price of $15.50 per share. Such
conversion prices are subject to customary antidilution
adjustments. A form of the Certificate of Designations of the
Series B Preferred Stock, setting forth the terms thereof, is
attached to the Merger Agreement as Exhibit A.
(ii) BIL purchased for cash $10 million stated value of a new Series C
Cumulative Convertible Preferred Stock (the "Series C Preferred
Stock"), the proceeds of which are available to the Company for
general corporate purposes. The Series C Preferred Stock is
entitled to a dividend of 1.5% per annum payable quarterly, votes
on an as-converted basis as a single class with the Company
Common Stock and the Series B Preferred Stock, is subject to
redemption as a whole at the option of the Company on the fifth
anniversary of the date of issuance at stated value and, if not
so redeemed, will be convertible automatically on the fifth
anniversary of the date of issuance at a conversion price of $20
per share, subject to customary antidilution adjustments. A form
of the Certificate of Designations of the Series C Preferred
Stock, setting forth the terms thereof, is attached to the Merger
Agreement as Exhibit B.
(iv) Certain indebtedness in the amount of $4 million owing by the
Company to BIL will be exchanged for an equal amount of unsecured
subordinated indebtedness of the Company maturing on April 1,
2001 and bearing interest at the effective rate of 7.7% per
annum. A summary term sheet relating to such subordinated
indebtedness is attached to the Merger Agreement as Exhibit C.
As part of the E&J transaction, on November 27, 1996, the Board of
Directors of the Company voted to increase the size of the Board of Directors
from eight (8) directors to ten (10) directors. Rodney F. Price, the Chairman
of the Board of E&J, was elected as a Class III director with a term expiring in
1999, and became a member of the Company's Executive Committee. Bevil J. Hogg,
the President and Chief Executive Officer of E&J was elected as a Class II
director with a term expiring in 1998.
- 3 -
<PAGE>
ITEM 5. OTHER MATTERS.
On November 27, 1996, the stockholders of the Company approved the
adoption of several amendments to the Certificate of Incorporation of the
Company, which were previously approved by the Board of Directors of the
Company, including:
(i) increasing the number of authorized shares of Company Common
Stock to 60 million;
(ii) requiring that any action required or permitted to be taken by
the stockholders of the Company be effected at an annual or
special meeting of stockholders of the Company and may not be
effected by any consent in writing in lieu of a meeting of such
stockholders;
(iii) providing that special meetings of stockholders may be called
only by the Chief Executive Officer of the Company or by the
Secretary of the Company at the written request of a majority of
the Board of Directors;
(iv) providing that directors can only be removed from office for
cause by the affirmative vote of the holders of more than 50% of
the voting power of the then outstanding Voting Shares; and
(v) requiring the affirmative vote of the holders of at least 80% of
the voting power of the then outstanding Voting Shares to amend
the provisions described in clauses (ii), (iii) and (iv) above
and certain related provisions contained in the Certificate of
Incorporation and Bylaws of the Company.
The text of the amendments is attached to the Merger Agreement as Exhibit D.
In addition, on November 27, 1996, the stockholders of the Company
approved an increase in the number of shares available for the granting of
options under the Company's Incentive Program, as amended, by 900,000.
- 4 -
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO-FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS Everest & Jennings International Ltd.:
(a)(1)- Report of Independent Accountants*.
(a)(2)- Consolidated Statements of Operations for the
three years ended December 31, 1995, 1994 and
1993*.
(a)(3)- Consolidated Balance Sheets as of December 31,
1995 and 1994*.
(a)(4)- Consolidated Statements of Stockholders' Deficit
for the three year period ended December 31,
1995*.
(a)(5)- Consolidated Statements of Cash Flows for the
years ended December 31, 1995, 1994 and 1993*.
(a)(6)- Notes to Consolidated Financial Statements for
December 31, 1995*.
(b) PRO-FORMA FINANCIAL INFORMATION AND INTERIM FINANCIAL
STATEMENTS.
(b)(1)- Unaudited Pro-Forma Financial Information.
- --------------------
* Such items were previously furnished to the Securities and Exchange
Commission as part of of the Registrant's Registration Statement on
Form S-4 (Registration Statement No. 333-14423), which was filed on
October 18, 1996.
- 5 -
<PAGE>
(c) EXHIBIT NO. DESCRIPTION
2(a) Amended and Restated Agreement and Plan of 1
Merger dated as of September 3, 1996, and
amended as of October 1, 1996, by and among
Graham-Field Health Products, Inc. (the "Company"),
E&J Acquisition Corp., Everest & Jennings
International Ltd. and BIL (Far East Holdings)
Limited ("BIL")
4(b) Stockholder Agreement, dated as of September 3, 2
1996, and amended and restated as of October 1,
1996, among the Company, BIL and Irwin Selinger
7(b) Unaudited Pro-forma financial information and interim
financial statements.
99(a) Press Release, dated November 27, 1996
- --------------------------
1. Previously filed on October 18, 1996 with the Securities and Exchange
Commission (the "SEC") as Annex A to the Company's Registration Statement
on Form S-4 (Registration Statement No. 333-14423) (the "Registration
Statement").
2. Previously filed with the SEC as Annex B to the Registration Statement.
- 6 -
<PAGE>
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.
GRAHAM-FIELD HEALTH PRODUCTS, INC.
Date: December 12, 1996 By: /s/Richard S. Kolodny
-------------------------------
Name: Richard S. Kolodny
Title: Vice President, General
Counsel and Secretary
- 7 -
<PAGE>
EXHIBIT INDEX
ITEM NO. DESCRIPTION
2(a) Amended and Restated Agreement and Plan of 1
Merger dated as of September 3, 1996, and
amended as of October 1, 1996, by and among
Graham-Field Health Products, Inc. (the "Company"),
E&J Acquisition Corp., Everest & Jennings
International Ltd. and BIL (Far East Holdings)
Limited ("BIL")
4(b) Stockholder Agreement, dated as of September 3, 2
1996, and amended and restated as of October 1,
1996, among the Company, BIL and Irwin Selinger
7(b) Unaudited Pro-forma financial information and interim
financial statements.
99(a) Press Release, dated November 27, 1996
- ----------------------------
1. Previously filed on October 18, 1996 with the Securities and Exchange
Commission (the "SEC") as Annex A to the Company's Registration Statement
on Form S-4 (Registration Statement No. 333-14423) (the "Registration
Statement").
2. Previously filed with the SEC as Annex B to the Registration Statement.
<PAGE>
Exhibit (b)(1)
--------------
Unaudited Pro-forma Financial
-----------------------------
Information
-----------
<PAGE>
UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed financial statements
combine the historical balance sheets and statements of operations of Graham-
Field and E&J after giving effect to the Merger and the V.C. Medical
Acquisition. The unaudited pro forma combined condensed balance sheet as of
September 30, 1996 gives effect to the Merger, as if such transactions had
occurred on September 30, 1996. The unaudited pro forma combined condensed
statements of operations for the nine months ended September 30, 1996 and the
twelve months ended December 31, 1995 give effect to the Merger and the V.C.
Medical Acquisition as if such transactions had occurred on January 1, 1995.
The pro forma adjustments account for the Merger as a purchase and are based
upon the assumptions set forth in the notes hereto. The pro forma adjustments
are preliminary estimates based on available information and certain assumptions
that Graham-Field's management believes are reasonable. The unaudited pro forma
combined condensed financial information does not reflect potential cost savings
associated with E&J's on-going rationalization of its production facilities
located in the United States, Canada and Mexico, and the increased outsourcing
of products and product components (E&J has estimated that, based on certain
assumptions, such savings could total approximately $4.0 million per year before
taxes; however, there is no assurance that E&J's rationalization and outsourcing
programs will be successfully implemented or that any of the expected savings
will be realized). In addition, the unaudited pro forma combined condensed
financial information does not give effect to any potential synergistic benefits
and enhancements relating to the elimination of duplicate distribution and
manufacturing centers and the reduction in general and administrative expenses
of the combined entity anticipated by Graham-Field's management as a result of
the Merger.
The following unaudited pro forma combined condensed financial
information has been prepared from, and should be read in conjunction with,
the historical financial statements and related notes of Graham-Field and E&J
included in each of their respective 1995 Annual Reports on Form 10-K. The
following information is not necessarily indicative of the financial position
or operating results that would have occurred had the Merger been consummated
on the date, or at the beginning of the periods, for which the Merger is
being given effect, nor is it necessarily indicative of future operating
results or financial position. Instead, it reflects actual historical results
of the combined companies without benefit of savings or other efficiencies
that are expected to be achieved.
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(In Thousands)
(Unaudited)
AS OF SEPTEMBER 30, 1996
------------------------------------------------
HISTORICAL PRO FORMA
------------------------------- ----------------------------------
GRAHAM-FIELD E&J ADJUSTMENTS COMBINED
------------ -------- ----------- ---------
NOTE 2
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 596 $ 12 $ 10,000 [d] $ 10,608
Accounts receivable - net 30,377 14,448 (3,435) [e] 41,390
Notes receivable - 2,559 2,559
Inventories 33,735 17,858 (4,509) [e] 47,084
Other current assets 4,332 629 4,961
Recoverable and prepaid income taxes 246 - - 246
-------- ---------- --------- --------
Total Current Assets: 69,286 35,506 2,056 106,848
Property, Plant & Equipment - net 7,672 6,971 14,643
Excess of cost over net assets acquired - net 29,204 171 49,200 [h,j] 78,575
Notes receivable - 297 - 297
Other assets 5,381 345 - 5,726
Deferred tax asset 1,151 - - 1,151
-------- ---------- --------- --------
Total Asset $112,694 $ 43,290 $ 51,256 $207,240
-------- ---------- --------- --------
-------- ---------- --------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable to BIL $ 4,000 $ - $ (4,000)[i] $ -
Current maturities of long-term debt and
Guaranteed Senior Notes 2,581 4,782 - 7,363
Accounts Payable 9,219 7,109 - 16,328
Acceptances Payable 12,500 - - 12,500
Accrued expenses 4,386 10,713 3,053[a,b,c,j] 18,152
Accrued interest - BIL - 3,909 (3,909) [a] -
Accrued restructuring - 339 - 339
-------- ---------- --------- --------
TOTAL CURRENT LIABILITIES 32,686 26,852 (4,856) 54,682
LONG-TERM DEBT 577 27,516 (25,000) [b] 3,093
LONG-TERM DEBT - BIL - 21,103 (17,103)[a,i] 4,000
GUARANTEED SENIOR NOTES 17,000 - - 17,000
OTHER LONG-TERM LIABILITIES - 79 396 [j] 475
-------- ---------- --------- --------
TOTAL LIABILITIES 50,263 75,550 (46,563) 79,250
STOCKHOLDERS' EQUITY(DEFICIT):
Preferred Stock - 34,492 (34,492) [a] -
Series B Preferred Stock - - 28,200 [a] 28,200
Series C Preferred Stock - - 3,400 [d] 3,400
Common Stock 355 719 (608) [f] 466
Additional paid-in capital 67,613 105,608 (71,760) [f] 101,461
(Deficit) (5,338) (173,079) 173,079 [g,h] (5,338)
-------- ---------- --------- --------
Sub-total 62,630 (32,260) 97,819 128,189
Notes receivable from sale of shares (199) - - (199)
TOTAL STOCKHOLDERS'EQUITY(DEFICIT) 62,431 (32,260) 97,819 127,990
-------- ---------- --------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $112,694 $ 43,290 $ 51,256 $207,240
-------- ---------- --------- --------
-------- ---------- --------- --------
</TABLE>
The accompanying notes are an integral part of these pro forma combined
condensed financial statements.
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA
COMBINED CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(UNAUDITED)
NOTE 1: PURCHASE PRICE SUMMARY AND RELATED ALLOCATION OF MERGER
A summary of the purchase price and related allocation is as follows:
AMOUNTS IN THOUSANDS
Purchase Price:
Issuance of .35 shares of Graham-Field Common
Stock for each share of E&J Common Stock (a). . $ 19,273
Issuance of 1,922,242 shares of Graham-Field
Common Stock to BIL (b) . . . . . . . . . . . . 14,686
Issuance of Graham-Field Series B Preferred
Stock to BIL (c) . . . . . . . . . . . . . . . 28,200
Issuance of Graham-Field Series C Preferred
Stock to BIL (d) . . . . . . . . . . . . . . . 3,400
Fees and expenses related to the Merger,
including severance . . . . . . . . . . . . . . 4,100
--------
Total Purchase Price . . . . . . . . . . . . . . $ 69,659
--------
--------
Allocation (based on estimated fair values):
Cash (e) . . . . . . . . . . . . . . . . . . . . $ 10,012
Accounts and notes receivable, net . . . . . . . 13,869
Inventory . . . . . . . . . . . . . . . . . . . 13,349
Property, Plant & Equipment . . . . . . . . . . 6,971
Other assets . . . . . . . . . . . . . . . . . . 974
Debt and capital leases . . . . . . . . . . . . (7,773)
Accounts payable, accrued expenses and other . . (17,114)
Excess of Purchase Price over net assets
acquired. . . . . . . . . . . . . . . . . . . . 49,371
--------
$ 69,659
--------
--------
(a) As of September 30, 1996 there were 7,207,689 shares of E&J Common
Stock outstanding, which were exchanged into shares of Graham-Field
Common Stock at a ratio of .35 shares of Graham-Field Common Stock for
each share of E&J Common Stock, or a total of approximately 2,522,691
shares of Graham-Field Common Stock. For this purpose, the Graham-
Field Common Stock is valued at $7.64 per share, which represents the
average closing sales price of the Graham-Field Common Stock for the
period three business days immediately prior to and three business
days immediately after the announcement on September 3, 1996 of the
execution of the Merger Agreement.
(b) In exchange for the delivery of cash by BIL in an amount equal to the
HSBC Indebtedness, Graham-Field issued shares of Graham-Field Common
Stock equal to the amount determined by dividing the amount of the
HSBC Debt Payment by the greater of (x) $13 and (y) the fair market
value of each share of Graham-Field Common Stock based on
<PAGE>
a ten-day average closing sales price, provided that the HSBC Debt
Payment cannot exceed $25 million. The HSBC Debt Payment was
$24,989,151 as of the closing date; therefore, 1,922,242 shares of
Graham-Field Common Stock were issued to BIL. For this purpose, the
Graham-Field Common Stock is valued at $7.64 per share, which
represents the average closing sales price of the Graham-Field Common
Stock for the period three business days immediately prior to and
three business days immediately after the announcements on September
3, 1996 of the signing of the Merger Agreement. The proceeds will be
used to repay the HSBC Indebtedness.
(c) As of September 30, 1996, the BIL Debt was $25,012,000 and the
liquidation value of the E&J Preferred Stock was $35,382,000 including
unpaid accrued dividends of $890,000. In exchange for the BIL Debt
and E&J Preferred Stock, Graham-Field issued shares of Graham-Field
Series B Preferred Stock having an aggregate Appraised Value (as
defined in the Merger Agreement) equal to the sum of the amount of the
BIL Debt and the liquidation value of the E&J Preferred Stock,
provided that Graham-Field shall not be required to issue a number of
shares of Graham-Field Series B Preferred Stock having an aggregate
stated value exceeding $61 million. The fair value of the Graham-
Field Series B Preferred Stock based upon a valuation performed is
$28,200,000.
(d) The issuance of the Graham-Field Series C Preferred Stock
is recorded at fair value based upon a valuation performed. The
proceeds will be used for general corporate purposes.
(e) Includes $10,000,000 of cash to be received upon issuance of the
Graham-Field Series C Preferred Stock.
NOTE 2: PRO FORMA ADJUSTMENTS:
(a) Adjustments to eliminate the BIL debt ($25,012,000) and the E&J
Preferred Stock, including accrued unpaid dividends of $890,000
($35,382,000), in exchange for up to $61 million stated value of
Graham-Field Series B Preferred Stock with a fair market value of
$28,200,000.
(b) Adjustment to record the HSBC Debt Payment.
(c) Adjustment for acquisition costs of approximately $4,100,000,
including, but not limited to, investment banking fees, legal
fees, accounting and tax fees, due diligence expenses and severance
arrangements.
(d) Adjustment to record the issuance of Graham-Field Series C Preferred
Stock in the amount of $10 million, with a fair market value of
$3,400,000.
(e) Adjustment to reflect the estimated net realizable value of the
accounts receivable and inventory of E&J based on Graham-Field's
accounting policies and operational plans.
<PAGE>
(f) Adjustment to record the issuance of Graham-Field Common Stock as part
of the Merger and to eliminate the preacquisition E&J equity.
(g) Adjustment to record the elimination of preacquisition E&J deficit as
part of the Merger.
(h) Adjustment to record the excess of the estimated purchase price over
net assets acquired resulting from the Merger of $48,925,000 and the
elimination of E&J goodwill of $171,000.
(i) Adjustment to record the proceeds of the BIL Subordinated Loan due
April, 2001 from BIL and the use of these proceeds to reduce
acceptances payable.
(j) Adjustment to reflect the purchase by E&J of the 20% minority interest
in E&J's Mexican subsidiary for $50,000 in cash, which is reflected as
an accrued expense, and a note in the principal amount of $450,000 due
in three years. The excess of the cost over the net assets of the
minority interest in E&J's Mexican subsidiary has been reflected as
additional goodwill of E&J ($446,000).
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
NINE MONTHS ENDED SEPTEMBER 30, 1996
---------------------------------------------------------------------------------------
HISTORICAL PRO FORMA(NOTE 2)
------------------------- ----------------------------------------------------
ACQUISITION
GRAHAM-FIELD E&J ADJUSTMENTS ADJUSTMENTS COMBINED
------------- ------- ------------ ----------- ----------
NOTE 1 NOTE 3 NOTE 4
<S> <C> <C> <C> <C> <C>
Revenues:
Product Revenue $88,877 $49,561 $ 3,190 $ (2,799)[e] $138,829
Interest and other income 483 - - - 483
------- ------- --------- -------- --------
89,360 49,561 3,190 (2,799) 139,312
------- ------- --------- -------- --------
Costs and expenses:
Cost of revenue 60,241 40,861 2,385 (2,599)[e] 100,888
Selling, general & administrative 23,082 13,714 298 992 [a] 38,086
Interest expense 1,886 3,440 91 (2,752)[b] 2,665
------- ------- --------- -------- --------
85,209 58,015 2,774 (4,359) 141,639
------- ------- --------- -------- --------
Income (loss) before income taxes 4,151 (8,454) 416 1,560 (2,327)
Income taxes 1,861 6 187 (2,046)[c] 8
------- ------- --------- -------- --------
Net income (loss) $ 2,290 $(8,460) $ 229 $ 3,606 $ (2,335)
------- ------- --------- -------- --------
------- ------- --------- -------- --------
Net income (loss) per common
share [d] $ .16 $ (1.17) $ (.17)
------- ------- --------
------- ------- --------
Weighted average number of common
and common equivalent shares [d] 14,483 7,215 33 4,445 18,665
------- ------- --------- -------- --------
------- ------- --------- -------- --------
</TABLE>
The accompanying notes are an integral part of these pro forma combined
condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
TWELVE MONTHS ENDED DECEMBER 31, 1995
---------------------------------------------------------------------------------------
HISTORICAL PRO FORMA(NOTE 2)
------------------------- ----------------------------------------------------
ACQUISITION
GRAHAM- FIELD E&J ADJUSTMENTS ADJUSTMENTS COMBINED
------------- ------- ------------ ----------- ----------
NOTE 1 NOTE 3 NOTE 4
<S> <C> <C> <C> <C> <C>
Revenues:
Product Revenue $100,113 $74,627 $ 3,508 $ (6,207)[e] $172,041
Interest and other income 290 - 22 - 312
-------- ------- -------- -------- --------
100,403 74,627 3,530 (6,207) 172,353
-------- ------- -------- -------- --------
Costs and expenses:
Cost of revenue 68,883 58,597 2,682 (5,880)[e] 124,282
Selling, general &
administrative 27,566 17,656 418 1,323 [a] 46,963
Interest expense 2,656 3,730 136 (2,655)[b] 3,867
-------- ------- -------- -------- --------
99,105 79,983 3,236 (7,212) 175,112
-------- ------- -------- -------- --------
Income (loss) before
income taxes 1,298 (5,356) 294 1,005 (2,759)
Income taxes 560 96 132 (781)[c] 7
Net income (loss) $ 738 $(5,452) $ 162 $ 1,786 $ (2,766)
-------- ------- -------- -------- --------
-------- ------- -------- -------- --------
Net income (loss)per common
share [d] $ .06 $ (.75) - - $ (.22)
-------- ------- --------
-------- ------- --------
Weighted average number of
common and common equivalent
shares [d] 13,332 7,228 33 4,445 17,773
-------- ------- -------- -------- --------
-------- ------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part of these pro forma combined
condensed financial statements.
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA
COMBINED CONDENSED STATEMENTS OF OPERATIONS
NOTES TO THE UNAUDITED PRO FORMA
COMBINED CONDENSED STATEMENTS OF OPERATIONAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
AND THE TWELVE MONTHS ENDED DECEMBER 31, 1995
NOTE 1: E&J RESTRUCTURING
E&J's 1995 and 1996 revenues and operating results have been negatively
impacted by ongoing price competition. Long lead times and shipping delays due
to start-up inefficiencies in manufacturing operations adversely impacted
customer confidence. Management of E&J continues to address the rationalization
of its production facilities in the United, Canada and Mexico and the increased
outsourcing of products and product components, the effects of which are
expected to lower production costs. Productivity at E&J's primary domestic
manufacturing facility was negatively impacted during the fourth quarter of 1995
as a result of a WARN Act Notice issued pursuant to the layoff of 30% of the
work force at that facility. These layoffs, which were completed during the
first quarter of 1996, were a result of the transfer of workload to lower-cost
facilities and the continued manufacturing rationalization. On May 22, 1996,
E&J issued a second WARN Act Notice and announced a substantial workforce
reduction at its primary domestic wheelchair manufacturing facility. Such
reductions will be substantially completed during the third quarter of 1996.
When complete, United States operations will be limited to distribution, certain
custom manufacturing and light assembly. A severance reserve of approximately
$523,000 has been included in E&J's results of operations for the nine month
period ended September 30, 1996. E&J's management anticipates recording
additional restructuring expenses during the fourth quarter of 1996 when the
workforce reduction is substantially complete. Additional production relocation
and facility rationalizations are planned during 1996 which are designed to
improve E&J's cost structure. E&J has estimated that, based on certain
assumptions, such savings could total approximately $4.0 million per year before
taxes; however, there is no assurance that E&J's rationalization and outsourcing
programs will be successfully implemented or that any of the expected savings
will be realized. Such potential savings are not reflected in the pro forma
statements of operations for the year ended December 31, 1995 and nine months
ended September 30, 1996.
Note 2: Synergies and Enhancements
As a result of the Merger, Graham-Field expects that the combined entity
will be able to achieve significant cost savings and economies of scale.
Graham-Field has plans to eliminate certain duplicate distribution and
manufacturing centers and make reductions in general and administrative expenses
where duplicate functions are being performed. In addition, Graham-Field
anticipates that certain enhancements will be achieved as a result of the
Merger, including an improvement in the gross profit margin associated with the
sale of wheelchairs, an increase in sales of the Temco Home Healthcare products
due to the "bundling effect" with E&J products and improved Temco gross profit
margins to be derived from the rationalization and integration of the
manufacturing functions of the combined companies. There is no assurance that
such cost savings and enhancements will be achieved and accordingly they are not
included in the pro forma statements
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of operations for the year ended December 31, 1995 and nine months ended
September 30, 1996.
NOTE 3: ACQUISITION ADJUSTMENT
The acquisition adjustment reflects the pro forma results of the V.C.
Medical Acquisition, as if such acquisition occurred on January 1, 1995. This
acquisition was accounted for as a purchase.
NOTE 4: PRO FORMA ADJUSTMENTS
(a) Adjustment to record additional amortization of goodwill, created from
the Merger, of $48,925,000 over a 30 year life ($1,631,000 per annum), net of a
reduction in goodwill amortization previously recorded by E&J, which is being
eliminated, of $231,000 and $308,000 for the nine months ended September 30,
1996 and the twelve months ended December 31, 1996, respectively.
(b) Adjustment to reduce interest expense relating to the HSBC Indebtedness
and BIL Debt, which indebtedness is being eliminated as part of the Merger.
(c) Adjustment to reflect the income tax provision that would be required
based upon the pro forma results of the combined entity.
(d) The pro forma net loss per common share has been calculated by assuming
the payment of a dividend of 1.5% on both the Graham-Field Series B and Series C
Preferred Stock in the aggregate amount of $799,000 and $1,065,000 for the nine
month period ended September 30, 1996 and the twelve month period ended
December 31, 1995, respectively. It was assumed that this dividend was paid in
cash; however, at Graham-Field's option the dividend can be paid in Graham-Field
Common Stock. Conversion of the preferred stock was not assumed since the
result would have been antidilutive.
The weighted average number of shares was computed using the weighted
number of shares of Graham-Field Common Stock outstanding, including 32,727
shares issued by Graham-Field in connection with the V.C. Medical Acquisition,
as if the shares were outstanding for the entire period. Common stock
equivalents included in the Graham-Field historical weighted average number of
shares would be antidilutive in the pro forma combined condensed statements of
operations and therefore are excluded.
(e) Adjustment to reflect the elimination of intercompany sales between
Graham-Field and E&J.
<PAGE>
FOR IMMEDIATE RELEASE Contacts: Richard S. Kolodny
Vice President,
GRAHAM-FIELD HEALTH PRODUCTS, INC. General Counsel
400 RABRO DRIVE EAST Gary M. Jacobs
Vice President, Finance
HAUPPAUGE, NEW YORK 11788 Chief Financial Officer
(516) 582-5900
GRAHAM-FIELD HEALTH PRODUCTS, INC.
ACQUIRES EVEREST & JENNINGS INTERNATIONAL LTD.
HAUPPAUGE, NEW YORK, November 27, 1996--Graham-Field Health Products, Inc.
(NYSE-GFI), a manufacturer and supplier of healthcare products, announced that
it has acquired Everest & Jennings International Ltd. under the terms of the
Agreement and Plan of Merger previously disclosed on September 3, 1996. As a
result of the merger, Everest & Jennings has become a wholly-owned subsidiary of
Graham-Field. Under the terms of the merger, the stockholders of Everest &
Jennings will receive one share of Graham-Field common stock for each 2.857
shares of the common stock of Everest & Jennings. Immediately prior to the
merger, there were 7,196,565 shares of Everest & Jennings common stock
outstanding.
In connection with the merger, BIL (Far East Holdings) Limited has purchased for
cash 1,922,242 additional shares of Graham-Field common stock, valued at $13 per
share, the proceeds of which will be used by Graham-Field to repay all debt of
Everest & Jennings in the amount of $24,989,151 to Hong Kong and Shanghai
Banking Corporation Limited. In addition, Graham-
<PAGE>
Field has issued to BIL $61 million of a new Series B Cumulative Convertible
Preferred Stock in exchange for indebtedness of Everest & Jennings owing to BIL
and shares of Everest & Jennings preferred stock owned by BIL. As part of the
transaction, BIL purchased for cash $10 million of a new Series C Cumulative
Convertible Preferred Stock, the proceeds of which will be available to Graham-
Field for general corporate purposes. In addition, certain indebtedness in the
amount of $4 million owing by Graham-Field to BIL will be exchanged for a $4
million unsecured subordinated promissory note of Graham-Field which will mature
on April 1, 2001 and will bear interest at an effective rate of 7.7% per annum.
The Series B Preferred Stock and the Series C Preferred Stock issued by Graham-
Field to BIL will be entitled to a dividend at the rate of 1.5% per year,
payable at the option of Graham-Field either in cash or in shares of its common
stock. The shares of Series B and Series C Preferred Stock will vote on an as-
converted basis, as a single class together with the common stock, on all
matters submitted to a vote of the stockholders of Graham-Field. The Series B
Preferred Stock will not be redeemable and will be convertible into shares of
Graham-Field common stock (x) at the option of the holder, at a conversion price
of $20 per share, (y) at the option of Graham-Field, at a conversion price equal
to the then current trading price (but not less than $15.50 or more than $20 per
share), and (z) automatically on the fifth anniversary of the date of issuance
at a conversion price of $15.50 per share, in each case subject to customary
antidilution adjustments. The Series C Preferred Stock will be subject to
redemption as a whole at Graham-Field's option on the fifth anniversary of the
date of issuance at stated value and, to the extent not so redeemed, will
automatically convert on the fifth anniversary of the date of issuance at a
conversion price of $20 per share, subject to customary antidilution
adjustments.
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As part of the Everest & Jennings transaction, the Graham-Field Board of
Directors voted to increase the size of the Board of Directors from eight (8)
directors to ten (10) directors. Rodney F. Price, the Chairman of the Board of
Everest & Jennings, was elected as a Class III director with a term expiring in
1999, and became a member of Graham-Field's Executive Committee. Bevil J. Hogg,
the President and Chief Executive Officer of Everest & Jennings was elected as a
Class II director with a term expiring in 1998.
The strategic combination of Graham-Field and Everest & Jennings will position
the company as a significant force in the healthcare industry, and provide
Graham-Field with a world-class manufacturing operation for the wheelchair
product line. The merger will unite Everest & Jennings' manufacturing
operations with Temco's manufacturing operations, and Graham-Field's
distribution network and advanced technology systems, to provide penetration in
both the homecare and rehabilitation markets with a greater level of service and
efficiency, and a broader portfolio of products. The revenues of the combined
entity will be approximately $200 million, of which approximately 50% will
represent self-manufactured products, positioning Graham-Field as one of the
leading manufacturers of durable medical equipment in the United States, Canada
and Mexico. The Everest & Jennings name, a symbol of quality for more than 50
years, will permit Graham-Field to introduce its Temco home healthcare product
line into the rehabilitation marketplace, a virtually untapped marketplace for
Graham-Field.
According to Irwin Selinger, Chairman of the Board and Chief Executive Officer
of Graham-Field and Rodney F. Price, the Chairman of the Board of Everest &
Jennings, "the strategic
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<PAGE>
combination of Graham-Field and Everest & Jennings will enable Graham-Field to
strengthen its manufacturing operations on a company-wide basis and enhance
Graham-Field's Consolidation Advantage Program. The coordination of the
manufacturing and distribution of the wheelchair and homecare bed product lines,
which represent the leading product lines in the home healthcare market, will
solidify and strengthen Graham-Field's franchise for years to come. The Everest
& Jennings product line will enable Graham-Field to increase significantly its
market presence in the home healthcare market."
Graham-Field manufactures, markets and distributes more than 23,000 healthcare
products for hospital, physician and home use to approximately 16,000 home
healthcare, physician, hospital supply and pharmaceutical distributors,
retailers and wholesalers.
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