<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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) May 23, 1995
SpecTran Corporation
(Exact name of registrant as specified in its charter)
Delaware 0-12489 04-2729372
(State or other (Commission (IRS Employer
jurisdiction) File No.) Identification No.)
50 Hall Road, Sturbridge, MA 01566
(Address of principal executive offices)
Registrant's telephone number, including area code (508) 347-2261
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The following has been filed as a part of this report:
(a) Financial Statements of business acquired.
Consolidated Financial Statements of Applied Photonic Devices, Inc.
and Subsidiaries for the year ended December 31, 1994.
(b) Pro forma financial information.
Pro forma consolidated Statements of Operations for the year ended
December 31, 1994 and six months ended June 30, 1995.
(c) Exhibit 1, Consent of Auditors.
2
<PAGE> 3
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.
SPECTRAN CORPORATION
-------------------------------------
(Registrant)
Date: August 7, 1995 /s/R. E. Jaeger
-------------------------------------
Raymond E. Jaeger
President and Chief Executive Officer
3
<PAGE> 4
APPLIED PHOTONIC DEVICES, INC.
AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 1994
(With Independent Auditors' Report Thereon)
4
<PAGE> 5
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Applied Photonic Devices, Inc. and Subsidiaries:
We have audited the consolidated balance sheet of Applied Photonic Devices,
Inc. and subsidiaries as of December 31, 1994, and the related consolidated
statements of income and retained earnings, and cash flows for the year then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Applied Photonic
Devices, Inc. and subsidiaries as of December 31, 1994, and the results of
their operations and their cash flows for the year then ended December 31,
1994, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
June 1, 1995
5
<PAGE> 6
APPLIED PHOTONIC DEVICES, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
December 31, 1994
<TABLE>
<CAPTION>
Assets (Note 5)
------
<S> <C>
Current assets:
Cash $ 16,955
Accounts receivable, trade, net of allowance for doubtful
accounts of $35,695 1,141,898
Inventories (Note 2) 836,144
Deferred income taxes (Note 6) 114,126
Prepaid expenses 3,751
----------
Total current assets 2,112,874
----------
Property and equipment:
Machinery and equipment 510,316
Leasehold improvements 19,894
Furniture and fixtures 15,272
----------
545,482
Less accumulated depreciation and amortization 300,345
----------
245,137
----------
Loan origination costs, net of accumulated amortization 16,187
----------
Total assets $2,374,198
==========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
Liabilities and Stockholders' Equity
<TABLE>
<S> <C>
Current liabilities:
Current maturities of long-term debt (Note 5) $ 51,511
Accounts payable 876,060
Income taxes payable 169,800
Accrued liabilities (Note 3) 188,004
----------
Total current liabilities 1,285,375
Deferred income taxes (Note 6) 78,680
Long-term debt, less current maturities (Note 5) 478,584
----------
Total liabilities 1,842,639
----------
Stockholders' equity:
Common stock, $10 par value; authorized 5,000 shares,
100 shares issued and outstanding 1,000
Additional paid-in capital 1,000
Retained earnings 529,559
----------
Total stockholders' equity 531,559
----------
Total liabilities and stockholders' equity $2,374,198
==========
</TABLE>
7
<PAGE> 8
APPLIED PHOTONIC DEVICES, INC. AND SUBSIDIARIES
Consolidated Statement of Income and Retained Earnings
Year ended December 31, 1994
<TABLE>
<S> <C>
Net sales $5,359,401
Cost of sales 3,729,781
----------
Gross profit 1,629,620
Selling and administrative expenses 1,279,681
----------
Income from operations 349,939
----------
Other expenses:
Interest expense 47,837
Other 10,625
----------
Other expenses 58,462
----------
Income before income tax expense 291,477
Income tax expense (Note 6) 130,650
----------
Net income 160,827
Retained earnings, beginning of year 368,732
----------
Retained earnings, end of year $ 529,559
==========
</TABLE>
See accompanying notes to consolidated financial statements.
8
<PAGE> 9
APPLIED PHOTONIC DEVICES, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Year ended December 31, 1994
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income $160,827
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 53,264
Change in deferred income taxes (69,350)
Increase in accounts receivable (533,829)
Increase in inventories (320,906)
Decrease in prepaid expenses 2,733
Increase in income taxes payable 169,800
Increase in accounts payable and accrued liabilities 621,742
--------
Net cash provided by operating activities 84,281
--------
Cash flows from investing activities:
Acquisition of property and equipment (41,187)
--------
Net cash used in investing activities (41,187)
--------
Cash flows from financing activities:
Proceeds from long-term debt 550,000
Loan origination costs (17,077)
Principal payments on long-term debt (565,044)
--------
Net cash used in financing activities (32,121)
--------
Increase in cash 10,973
Cash at beginning of year 5,982
--------
Cash at end of year $ 16,955
========
Supplemented disclosures of cash flow information:
Cash paid during the year for:
Interest expense $ 37,600
========
Income taxes 29,500
========
</TABLE>
See accompanying notes to consolidated financial statements.
9
<PAGE> 10
APPLIED PHOTONIC DEVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Year ended December 31, 1994
(1) Summary of Significant Accounting Policies
(a) Business
Applied Photonic Devices, Inc. and subsidiaries' (the Company) business
principally entails the design, manufacture and sale of
fiber optic cable for specialty applications.
(b) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Applied Photonic Devices, Inc. and its inactive wholly owned
subsidiaries Cable Design Engineering, Inc. and Optical Cable Systems,
Inc. All significant intercompany balances and transactions have been
eliminated in consolidation.
(c) Revenue Recognition
Sales revenues are recognized upon shipment of goods. Sales revenues and
cost of sales as reported in the consolidated statement of income are
adjusted to reflect estimated returns and rework costs.
(d) Inventories
Inventories are stated at the lower of cost or market value. Cost is
determined by the first-in, first-out (FIFO) method.
(e) Property and Equipment
Property and equipment are carried at cost. Significant renewals and
betterments are capitalized. The cost of maintenance and repairs is
charged to income as incurred. Depreciation and amortization is
provided by the straight-line method over the estimated useful lives of
the respective assets.
(f) Income Taxes
The Company accounts for income taxes pursuant to Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." Under the asset and liability method of
Statement 109, deferred tax assets and liabilities are recognized for
the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(2) Inventories
Inventories at December 31, 1994, consisted of:
<TABLE>
<S> <C>
Raw materials $317,735
Work in process 217,397
Finished goods 301,012
--------
$836,144
========
</TABLE>
(Continued)
10
<PAGE> 11
APPLIED PHOTONIC DEVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Accrued Liabilities
Accrued liabilities at December 31, 1994, consisted of:
<TABLE>
<S> <C>
Salaries and wages $ 53,004
Retirement plan contribution 135,000
--------
$188,004
========
</TABLE>
(4) Note Payable - Bank
In 1994, the Company had a $100,000 revolving loan agreement with First
National Bank of New England. Interest on the loan was payable at 1% over
the prime rate and the note was secured by all of the Company's accounts
receivable and inventory. At December 31, 1994, the prime rate was 8.5%
and there was no outstanding balance under this agreement. On May 23,
1995, the outstanding balance of $100,000 was paid in full and terminated
(see note 8).
(5) Long-Term Debt
Long-term debt at December 31, 1994, consisted of the following:
<TABLE>
<S> <C>
Small Business Administration note payable in
the amount of $550,000 granted through First
National Bank of New England. The note requires
monthly principal and interest payments beginning
August 1, 1994 on an eight-year term loan basis.
Interest is charged at a rate of 1.5% over the
prime rate. The loan is secured by substantially
all the assets of the Company and is guaranteed
by the stockholders of the Company. $530,095
Less current maturities 51,511
--------
$478,584
========
</TABLE>
On May 23, 1995, this note was paid in full (see note 8).
(6) Income Taxes
Income tax expense for the year ended December 31, 1994 differs from the
expected tax expense determined by applying the federal
income tax rate of 34 percent to income before taxes as follows:
<TABLE>
<S> <C>
Computed expected tax expense $ 99,099
State income taxes, net of federal benefit 22,122
Items not deductible for tax purposes 9,429
--------
$130,650
========
</TABLE>
(Continued)
11
<PAGE> 12
APPLIED PHOTONIC DEVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Income tax expense for the year ended December 31, 1994 consists of the
following:
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- -----
<S> <C> <C> <C>
Federal $145,000 (56,700) 88,300
State 55,000 (12,650) 42,350
-------- ------- -------
$200,000 (69,350) 130,650
======== ======= =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities at December 31,
1994, are presented below:
<TABLE>
<S> <C>
Deferred tax assets:
Accounts receivable $ 17,328
Inventories 66,532
Accrued liability - compensation related expense 30,266
--------
Total gross deferred tax assets 114,126
Less valuation allowance --
--------
Net deferred tax assets 114,126
Deferred tax liabilities:
Property and equipment - depreciation 78,680
--------
Net deferred tax asset $ 35,446
========
</TABLE>
Management has determined, based on the Company's history of prior operating
earnings, that the Company will more likely than not fully realize the benefit
of these net deferred tax assets.
(7) Commitments
The Company leases office and production facilities as well as certain
equipment under leases that expire over the next four years. The scheduled
rental payments required under these operating leases at December 31, 1994 are
as follows:
<TABLE>
<S> <C>
1995 $ 74,070
1996 14,900
1997 9,890
1998 4,540
--------
$103,400
========
</TABLE>
(Continued)
12
<PAGE> 13
APPLIED PHOTONIC DEVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(8) Subsequent Event
On May 23, 1995, all of the Company's outstanding stock was purchased by
SpecTran Corporation for a total purchase price of $3,900,000 cash plus
144,444 shares of common stock. Concurrent with this sale, SpecTran
Corporation paid off both of the Company's loans with First National Bank
of New England as discussed in notes 4 and 5.
13
<PAGE> 14
SPECTRAN CORPORATION AND APPLIED PHOTONIC DEVICES, INC.
PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited Proforma)
On May 23, 1995 SpecTran Corporation ("the Company") acquired Applied Photonic
Devices ("APD"), a Connecticut manufacturer of highly engineered fiber optic
cable. The Company purchased the outstanding capital stock of APD for cash and
stock with a total cost of $4.4 million. The Company also retired $614,000 of
APD bank debt.
The accompanying pro forma condensed consolidated statement of operations for
the fiscal year ending December 31, 1994 assumes that the acquisition took
place as of the beginning of 1994, and consolidates APD's statement of
operations for the year ended 1994. The accompanying pro forma consolidated
statement of operations for the six month period ended June 30, 1995 also
assumes the acquisition took place as of the beginning of 1994, and
consolidates the financial statements of APD for the five month period ended
May 23, 1995, the date of acquisition.
The acquisition of APD will be accounted for using the purchase method of
accounting. The unaudited proforma consolidated financial information does not
purport to represent what the Company's financial position or results of
operations would actually have been had the transaction in fact occurred on the
dates indicated above, or to project the Company's financial position or
results of operations for any future date or period. In the opinion of the
Company's management, all adjustments necessary for a fair presentation have
been made.
The purchase price allocation reflected in the accompanying pro forma condensed
consolidated financial statements has been prepared on an estimated basis. The
effects from any differences in the final allocation of the purchase price are
not expected to have a material effect on the Company's financial statements.
The accompanying pro forma condensed consolidated financial statements should
be read in conjunction with the historical financial statements and related
notes thereto for SpecTran Corporation.
14
<PAGE> 15
SPECTRAN CORPORATION AND APPLIED PHOTONIC DEVICES, INC. ("APD")
PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
(Dollars in thousands except per share data)
(Unaudited Proforma)
<TABLE>
<CAPTION>
SpecTran
Historical Pro-forma Pro-forma
Without APD APD Adjustments Results
----------- --- ----------- -------
<S> <C> <C> <C> <C>
Sales $ 26,926 $5,359 $ (1,654) (a) $ 30,631
Cost of sales 19,303 3,730 (1,654) (a) 21,379
---------- ------ -------- ----------
Gross profit 7,623 1,629 0 9,252
Operating expenses 8,293 1,280 216 (b) 9,789
Other income (expense) 183 (58) (260) (c) (135)
---------- ------ -------- ----------
Income (loss) before taxes (487) 291 (476) (672)
Income tax expense 0 130 (130) (d) 0
---------- ------ -------- ----------
Income (loss) from
continuing operations $ (487) $ 161 $ (346) $ (672)
========== ====== ======== ==========
Earnings per share:
Weighted average shares
outstanding 5,202,604 144,444 5,347,048
========== ====== ======== ==========
Income (loss) from
continuing operations per share $(0.09) $(0.03) $(0.13)
======= ====== ======= =======
</TABLE>
15
<PAGE> 16
SPECTRAN CORPORATION AND APPLIED PHOTONIC DEVICES, INC. ("APD")
PRO FORMA STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995
(Dollars in thousands except per share data)
(Unaudited Proforma)
<TABLE>
<CAPTION>
SpecTran
Historical Pro-forma Pro-forma
Without APD APD Adjustments Results
----------- --- ----------- -------
<S> <C> <C> <C> <C>
Sales $ 17,064 $2,901 $(900) (a) $ 19,065
Cost of sales 11,329 2,138 (850) (a) 12,617
---------- ------ ----- ----------
Gross profit 5,735 763 (50) 6,448
Operating expenses 5,578 622 90 (b) 6,290
Other income (expense) (1) 0 (102) (c) (104)
---------- ------ ----- ----------
Income before taxes 155 141 (242) 54
Income tax expense 64 63 (106) (d) 22
---------- ------ ----- ----------
Income from continuing
operations $ 91 $ 78 $(136) $ 33
========== ====== ===== ==========
Earnings per share:
Weighted average shares
outstanding 5,296,622 -- -- 5,296,622
Income from continuing
operations per share $0.02 $0.01
===== ====== ===== =====
</TABLE>
16
<PAGE> 17
SPECTRAN CORPORATION AND APPLIED PHOTONIC DEVICES, INC. ("APD")
NOTES TO PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited Proforma)
NOTE 1. PRO FORMA ADJUSTMENTS
Certain pro forma adjustments have been made to the accompanying pro forma
condensed consolidated statements of operations as described below:
(a) Eliminates sales and cost of sales from SpecTran to APD during
1994 and the six month period ended June 30, 1995.
(b) Reflects goodwill amortization resulting from the purchase.
(c) Reflects increased interest expense on the increased debt.
(d) Reflects the tax effect of proforma adjustments.
NOTE 2. PURCHASE PRICE ALLOCATION
The Company issued 144,444 shares of common stock and paid $3.9 million to
acquire the stock of APD. In connection with the acquisition, the Company
received net assets of $559,000, recorded goodwill of $3,237,000 and paid APD
debt of $614,000.
17
<PAGE> 18
EXHIBIT INDEX
Exhibit 1 - Consent of Auditors
<PAGE> 1
EXHIBIT 1
CONSENT OF AUDITORS
The Board of Directors
Applied Photonic Devices, Inc.
and Subsidiaries:
We consent to the inclusion of our report dated June 1, 1995, with respect to
the consolidated balance sheet of Applied Photonic Devices, Inc. and
subsidiaries as of December 31, 1994 and the related consolidated statements of
income and retained earnings, and cash flows for the year ended December 31,
1994, which report appears in the Form 8-K of SpecTran Corporation dated August
7, 1995.
KPMG Peat Marwick LLP
Boston, Massachusetts
August 7, 1995
18
