UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
FORM 8-K\A
Amendment No.1 to
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported) February
17, 1995
Chemfab Corporation
(Exact Name of registrant as specified in charter)
Delaware 0-12948 03-0221503
(State or other (Commission (IRS employer
jurisdiction of file number) identification
incorporation no.)
701 Daniel Webster Highway, Merrimack, New Hampshire 03054
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (603) 424-9000
(Former name or former address, if changed since last report)
Item 7 Financial Statements, and Exhibits
- ------ ----------------------------------
7(a) The audited financial statements of Fothergill Tygaflor Division of
Courtaulds Aerospace Limited (Tygaflor) for its fiscal year ended
March 31, 1994 and the 10 1\2 months ended February 17, 1995 are
attached hereto as an exhibit.
7(b) The pro forma financial information required pursuant to Article 11 of
Regulation S-X is attached hereto as an exhibit.
7(c) Exhibits
1. 10(b)(8) Asset Purchase Agreement between Chemfab Corporation,
Chemfab U.K. Ltd., Courtaulds plc and Courtaulds Aerospace
Limited dated February 13, 1995.
1. 10(b)(9) Facilities Agreement between Chemfab Europe, Chemfab
Holdings U.K. Ltd., Chemfab U.K. Ltd. and Bank of Ireland
dated February 17, 1995.
1. 10(b)(10) Guarantee and Indemnity between Chemfab Corporation and the
Bank of Ireland dated February 17, 1995.
2. 10(b)(11) Balance sheets of Tygaflor as of March 31, 1994 and February
17, 1995, the related statements of income and cash flows
for the periods then ended, and the report of Ernst and
Young LLP thereon.
2. 10(b)(12) Unaudited pro forma combined balance sheet of the registrant
and Tygaflor as of January 1, 1995, unaudited pro forma
statements of income for the year ended June 30, 1994 and
the six months ended January 1, 1995 and explanatory notes
thereto.
_______________________________________________________________________
1. Attached as an exhibit to this report on Form 8-K as
originally filed on March 2, 1995.
2. Filed herewith.
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 thereunto duly authorized.
Date: May 8, 1995
---------------------
CHEMFAB CORPORATION
By: /s/ William H. Everett
---------------------------
Title: Vice President
-----------------------
FOTHERGILL TYGAFLOR DIVISION OF COURTAULDS AEROSPACE LIMITED
ACCOUNTS
17 FEBRUARY 1995
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF DIRECTORS AND THE SHAREHOLDERS OF CHEMFAB CORPORATION
WE HAVE AUDITED THE ACCOMPANYING BALANCE SHEETS OF THE FOTHERGILL TYGAFLOR
DIVISION OF COURTAULDS AEROSPACE LIMITED AS AT 17 FEBRUARY 1995 AND 31 MARCH
1994 AND THE RELATED PROFIT AND LOSS ACCOUNTS AND CASH FLOW STATEMENTS FOR THE
PERIODS THEN ENDED. THESE FINANCIAL STATEMENTS ARE THE RESPONSIBILITY OF THE
DIVISION'S MANAGEMENT. OUR RESPONSIBILITY IS TO EXPRESS AN OPINION ON THESE
FINANCIAL STATEMENTS BASED ON OUR AUDITS.
WE CONDUCTED OUR AUDITS IN ACCORDANCE WITH UNITED KINGDOM AUDITING STANDARDS
WHICH DO NOT DIFFER IN ANY SIGNIFICANT RESPECT FROM THOSE GENERALLY ACCEPTED IN
THE UNITED STATES. 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 AUDITS PROVIDES A REASONABLE BASIS
FOR OUR OPINION.
IN OUR OPINION, THE FINANCIAL STATEMENTS REFERRED TO ABOVE PRESENT FAIRLY, IN
ALL MATERIAL RESPECTS, THE FINANCIAL POSITION OF THE FOTHERGILL TYGAFLOR
DIVISION OF COURTAULDS AEROSPACE LIMITED AT 17 FEBRUARY 1995 AND 31 MARCH 1994
AND THE RESULTS OF ITS OPERATIONS AND ITS CASH FLOWS FOR THE PERIODS THEN ENDED,
IN CONFORMITY WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED
KINGDOM WHICH DIFFER IN CERTAIN RESPECTS FROM THOSE FOLLOWED IN THE UNITED
STATES (SEE NOTE 18 OF THE NOTES TO THE ACCOUNTS).
ERNST & YOUNG
CHARTERED ACCOUNTANTS
MANCHESTER
ENGLAND
28 APRIL 1995
PROFIT AND LOSS ACCOUNT
<TABLE>
<S><C>
PERIOD YEAR
ENDED ENDED
17 FEBRUARY 31 MARCH
1995 1994
POUNDS POUNDS
NOTES STLG000 STLG000
TURNOVER 2 5,813 5,952
COST OF SALES 3,693 3,887
----- -----
GROSS PROFIT 2,120 2,065
ADMINISTRATIVE EXPENSES 1,304 1,290
----- -----
OPERATING PROFIT 3 816 775
INTEREST PAYABLE AND SIMILAR CHARGES 4 - -
----- -----
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 816 775
TAXATION ON PROFIT ON ORDINARY ACTIVITIES 6 270 260
----- -----
PROFIT FOR THE FINANCIAL PERIOD/YEAR 546 515
===== =====
</TABLE>
A SUMMARY OF THE SIGNIFICANT ESTIMATED ADJUSTMENTS TO PROFIT FOR THE FINANCIAL
PERIOD/YEAR THAT WOULD BE REQUIRED HAD UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES BEEN APPLIED INSTEAD OF THOSE GENERALLY ACCEPTED IN
THE UNITED KINGDOM IS SET OUT IN NOTE 18 TO THE ACCOUNTS.
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
THERE ARE NO RECOGNISED GAINS OR LOSSES OTHER THAN THE PROFIT OF POUNDS
STLG 546,000 FOR THE PERIOD ENDED 17 FEBRUARY 1995 AND THE PROFIT OF
POUNDS STLG 515,000 FOR THE YEAR ENDED 31 MARCH 1994.
BALANCE SHEET
<TABLE>
<S><C>
17 FEBRUARY 31 MARCH
1995 1994
POUNDS POUNDS
NOTES STLG000 STLG000
FIXED ASSETS
TANGIBLE ASSETS 7 980 1,164
----- -----
CURRENT ASSETS
STOCK 8 1,104 1,327
DEBTORS 9 1,419 1,400
CASH AT BANK AND IN HAND 1,484 643
----- -----
4,007 3,370
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR 10 867 952
----- -----
NET CURRENT ASSETS 3,140 2,418
----- -----
TOTAL ASSETS LESS CURRENT LIABILITIES 4,120 3,582
PROVISIONS FOR LIABILITIES AND CHARGES
DEFERRED TAXATION 11 123 131
----- -----
3,997 3,451
===== =====
NET WORTH
AS AT 1 APRIL 3,451 2,936
RETAINED PROFIT FOR THE FINANCIAL PERIOD/YEAR 546 515
----- -----
3,997 3,451
===== =====
</TABLE>
A SUMMARY OF THE ESTIMATED SIGNIFICANT ADJUSTMENTS TO NET WORTH THAT WOULD BE
REQUIRED HAD UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES BEEN
APPLIED INSTEAD OF THOSE GENERALLY ACCEPTED IN THE UNITED KINGDOM IS SET OUT IN
NOTE 18 TO THE ACCOUNTS.
CASH FLOW STATEMENT
<TABLE>
<S><C>
NOTES PERIOD YEAR
TO THE ENDED ENDED
CASH 17 FEBRUARY 31 MARCH
FLOW 1995 1994
STATEMENT POUNDS POUNDS
STLG000 STLG000
NET CASH INFLOW FROM OPERATING ACTIVITIES 1 1,135 955
----- -----
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
INTEREST PAID - -
----- -----
NET CASH INFLOW FROM RETURNS ON
INVESTMENTS AND SERVICING OF FINANCE - -
TAXATION
TAXATION PAID 3 (244) -
INVESTING ACTIVITIES
PAYMENTS TO ACQUIRE TANGIBLE FIXED ASSETS (50) (312)
----- -----
INCREASE IN CASH AND CASH EQUIVALENTS 2 841 643
===== =====
</TABLE>
THE SIGNIFICANT DIFFERENCES BETWEEN THE CASH FLOW STATEMENT PRESENTED ABOVE AND
THAT REQUIRED UNDER UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IS
SET OUT IN NOTE 18 TO THE ACCOUNTS.
NOTES TO CASH FLOW STATEMENT
1. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
<TABLE>
<S><C>
PERIOD YEAR
ENDED ENDED
17 FEBRUARY 31 MARCH
1995 1994
POUNDS POUNDS
STLG000 STLG000
OPERATING PROFIT 816 775
DEPRECIATION CHARGE 234 238
DECREASE/(INCREASE) IN STOCK 223 (102)
(INCREASE)/DECREASE IN DEBTORS (19) 141
(DECREASE) IN CREDITORS (119) (97)
----- -----
1,135 955
===== =====
</TABLE>
2. ANALYSIS OF CHANGES IN CASH AND CASH EQUIVALENTS DURING THE PERIOD/YEAR
<TABLE>
<S><C>
PERIOD YEAR
ENDED ENDED
17 FEBRUARY 31 MARCH
1995 1994
POUNDS POUNDS
STLG000 STLG000
BALANCE AT 1 APRIL 643 -
NET CASH INFLOW 841 643
----- -----
BALANCE AT 17 FEBRUARY/31 MARCH 1,484 643
===== =====
</TABLE>
THE FOTHERGILL TYGAFLOR DIVISION DID NOT MAINTAIN ITS OWN BANK ACCOUNT BUT
UTILISED THE TOTAL FACILITIES OF THE PERFORMANCE FABRICS DIVISION. FOR THE
PURPOSES OF THESE ACCOUNTS IT HAS BEEN ASSUMED THAT THE DIVISION HAD NO CASH
AND BANK BALANCE AS AT 1 APRIL 1993. THE NET CASH INFLOWS IN THE YEAR TO 31
MARCH 1994 AND THE PERIOD TO 17 FEBRUARY 1995 ARE REFLECTED IN THE CASH AND
BANK BALANCES AS AT THOSE DATES.
3. TAXATION
THE TAXATION CHARGES IN THE PERIOD ENDED 17 FEBRUARY 1995 AND THE YEAR ENDED
31 MARCH 1994 ARE NOTIONAL CHARGES (SEE NOTE 1 TO THE ACCOUNTS).
TAXATION DUE IN RESPECT OF EARLIER PERIODS HAS NOT BEEN CALCULATED. AS A
RESULT NO PAYMENT OF CORPORATION TAX IS SHOWN IN THE CASH FLOW STATEMENT FOR
THE YEAR ENDED 31 MARCH 1994.
NOTES TO THE ACCOUNTS
as at 17 February 1995
1. ACCOUNTING POLICIES
Basis of preparation
Prior to 17 February 1995 the business was part of the Performance Fabrics
Division of Courtaulds Aerospace Limited. These accounts have been prepared on
the basis of the results and balances of the Performance Fabrics Division that
were included in the statutory accounts for Courtaulds Aerospace Limited for
the year ended 31 March 1994 and the management accounts of the Performance
Fabrics Division for the period ended 17 February 1995. The results and
balances relating to the Fothergill Tygaflor division have been extracted
from those accounts.
Allocation of common costs
Certain of the operating costs of the Performance Fabrics Division were not
specifically identified as relating to either the Fothergill Tygaflor division
or the other parts of the Division. These common costs have been allocated to
the business on the basis considered most appropriate. These bases include
turnover, headcount and site occupancy.
Accounting convention
The accounts have been prepared under the historical cost convention and in
accordance with applicable United Kingdom accounting standards.
Depreciation
Depreciation is calculated so as to write off the cost of tangible fixed assets
by equal instalments over their estimated useful lives at the following rates:
Motor vehicles 20% per annum
Plant and machinery 10% per annum
Micro computers 33 1/3% per annum
Mini computers 20% per annum
Fixtures and fittings 10% per annum
Depreciation is charged in the financial year following the year in which
assets are brought in to use, except for motor vehicles, which are depreciated
as from the year in which they are brought in to use. A full year's
depreciation is charged in the year of disposal. All computer software is
expensed on receipt and not capitalised and depreciated.
Stocks
Stocks are stated at the lower of cost incurred in bringing each product to its
present location and condition, and net realisable value as follows:
Raw materials, consumables and goods for resale - purchase cost on a first-in,
first-out basis
Work in progress and finished goods - cost of direct materials and
labour plus attributable
overheads based on a normal
level of activity.
Net realisable value is based on estimated selling price less any further costs
expected to be incurred to completion and disposal.
Taxation
The division has never incurred charges in respect of taxation as this was
previously accounted for by Courtaulds Aerospace Limited. For the purpose of
these accounts a notional tax charge has been calculated. These charges are
based on the results for the periods adjusted to reflect the different
treatment of certain items for taxation purposes and the rates of UK
corporation taxation.
It has been assumed that the notional taxation charges calculated were paid
nine months after the end of the financial year.
Deferred taxation
Notional deferred taxation is provided using the liability method on all timing
differences which are expected to reverse in the future without being replaced,
calculated at the rate at which it is anticipated the timing differences will
reverse.
Foreign currencies
Assets and liabilities in foreign currencies are translated into pounds stlg
at the rate of exchange ruling at the period end or more usually at the forward
cover rate. Profits and losses on exchange arising in the normal course of
trading are dealt with in the profit and loss account.
Leases
Rentals payable under operating leases are charged to the profit and loss
account in the period in which they fall due.
Pensions costs
The expected cost of pensions is charged to the profit and loss account so as
to spread the cost of pensions over the service life of employees in the
pension scheme. Variations from the regular cost are spread over the expected
remaining service lives of current employees in the scheme.
Research and development
Expenditure on research and development is charged to the profit and loss
account in the year in which it is incurred.
2. TURNOVER
Turnover represents the net invoiced value of goods and services sold,
excluding value added tax.
3. OPERATING PROFIT
<TABLE>
<S><C>
This is stated after charging/(crediting): Period Year
ended ended
17 February 31 March
1995 1994
POUNDS POUNDS
STLG000 STLG000
Depreciation of fixed assets 234 238
Research and development expenditure 179 249
Hire of plant and machinery 71 96
Exchange gain on foreign currency transactions (2) 51
===== =====
</TABLE>
4 INTEREST PAYABLE AND SIMILAR CHARGES
<TABLE>
<S><C>
Period Year
ended ended
17 February 31 March
1995 1994
POUNDS POUNDS
STLG000 STLG000
Interest payable on bank loans and overdrafts wholly
repayable within five years - -
===== =====
</TABLE>
5. STAFF COSTS
<TABLE>
<S><C>
Period Year
ended ended
17 February 31 March
1995 1994
POUNDS POUNDS
STLG000 STLG000
Wages and salaries 1,587 1,518
Social security costs 130 150
Other pension costs - -
----- -----
1,717 1,668
===== =====
</TABLE>
The average weekly number of employees during the period was as follows:
<TABLE>
<S><C>
Period Year
ended ended
17 February 31 March
1995 1994
No. No.
Production 59 55
Administration 41 44
----- -----
100 99
===== =====
</TABLE>
6. TAXATION ON PROFIT ON ORDINARY ACTIVITIES
<TABLE>
<S><C>
Period Year
ended ended
17 February 31 March
1995 1994
POUNDS POUNDS
STLG000 STLG000
Based on the profit for the year:
Corporation tax at 33% (1994: 33%) 278 244
Deferred taxation (8) 16
----- -----
270 260
===== =====
</TABLE>
7. TANGIBLE FIXED ASSETS
<TABLE>
<S><C>
Furniture Plant and
and fixtures machinery Total
POUNDS POUNDS POUNDS
STLG000 STLG000 STLG000
Cost:
At 1 April 1994 511 1,336 1,847
Additions 29 21 50
----- ----- -----
At 17 February 1995 540 1,357 1,897
----- ----- -----
Depreciation:
At 1 April 1994 204 479 683
Charge for the year 142 92 234
----- ----- -----
At 17 February 1995 346 571 917
----- ----- -----
Net book value:
At 17 February 1995 194 786 980
===== ===== =====
At 31 March 1994 307 857 1,164
===== ===== =====
</TABLE>
8. STOCKS
<TABLE>
<S><C>
17 February 31 March
1995 1994
POUNDS POUNDS
STLG000 STLG000
Raw materials 185 198
Work in progress 333 506
Finished goods 586 623
----- -----
1,104 1,327
===== =====
</TABLE>
9. DEBTORS
<TABLE>
<S><C>
17 February 31 March
1995 1994
POUNDS POUNDS
STLG000 STLG000
Trade debtors 1,392 1,371
Prepayments and accrued income 27 29
----- -----
1,419 1,400
===== =====
</TABLE>
10. CREDITORS: amounts falling due within one year
<TABLE>
<S><C>
17 February 31 March
1995 1994
POUNDS POUNDS
STLG000 STLG000
Trade creditors 445 600
Corporation tax 278 244
Other taxes and social security costs 57 52
Accruals and deferred income 87 56
----- -----
867 952
===== =====
</TABLE>
11. DEFERRED TAXATION
Deferred taxation provided in the accounts and the amounts not provided are as
follows:
<TABLE>
<S><C>
Provided Not provided
17 February 31 March 17 February 31 March
1995 1994 1995 1994
POUNDS POUNDS POUNDS POUNDS
STLG000 STLG000 STLG000 STLG000
Accelerated capital allowances 123 131 - -
Other timing differences - - - -
----- ----- ----- -----
123 131 - -
===== ===== ===== =====
</TABLE>
12. CAPITAL COMMITMENTS
<TABLE>
<S><C>
17 February 31 March
1995 1994
POUNDS POUNDS
STLG000 STLG000
Contracted - 5
===== =====
Authorised but not contracted 1 22
===== =====
</TABLE>
13. OTHER FINANCIAL COMMITMENTS
At 17 February 1995 the division had annual commitments under non-cancellable
operating leases as set out below:
<TABLE>
<S><C>
17 February 31 March
1995 1994
Land and Land and
buildings Other buildings Other
POUNDS POUNDS POUNDS POUNDS
STLG000 STLG000 STLG000 STLG000
Operating leases which expire:
within one year - 4 - 14
within two to five years - 66 - 42
in over five years - - - -
----- ----- ----- -----
- 70 - 56
===== ===== ===== =====
</TABLE>
14. ULTIMATE HOLDING COMPANY
Prior to 17 February 1995 the division was part of Courtaulds Aerospace Limited
which is a wholly owned subsidiary of Courtaulds plc, a company incorporated in
the United Kingdom.
15. RELATED PARTY TRANSACTIONS
The division purchases high performance fabric and other raw material from
fellow divisions of Courtaulds plc. These purchases are recorded at cost and
do not include any commercial margin. The total of such purchases in the
period ended 17 February 1995 were Pounds Stlg 710,000 and in the year ended
31 March 1994 were Pounds Stlg 605,000. The amounts due to fellow divisions
at 17 February 1995 was Pounds Stlg 175,000 and at 31 March 1994 was Pounds
Stlg 132,000.
16. PENSIONS
Eligible employees are members of the Courtaulds plc defined benefit pension
scheme with assets held in separate trustee administered funds.
The scheme was valued by independent actuaries as at 31 March 1993.
The valuation used the projected unit method and was carried out on two
different bases, using a conservative set of actuarial assumptions for funding
purposes and a best estimate set for accounting purposes (as required by SSAP
24). After allowing for benefit improvements announced in December 1993, and
future increases in pensionable remuneration, the actuarial value of the assets
was sufficient to cover the benefits that had accrued to members by 114% on the
funding basis and by 124% on the SSAP 24 basis. The market value of the Scheme
assets at the date of the valuation was Pounds Stlg 883 million. The principal
actuarial assumptions used in the valuation were:
Funding SSAP 24
basis basis
Long term annual rate of return on investments 9.5% 10.0%
Annual increase in dividends 5.0% 5.5%
Average annual increase in total pensionable remuneration 7.5% 7.5%
Average annual increase in present and future pension payments 5.0% 5.0%
<TABLE>
<S><C>
Period Year
ended ended
17 February 31 March
1995 1994
POUNDS POUNDS
STLG000 STLG000
Regular cost 102 105
Variation from regular cost (102) (105)
----- -----
Net charge to operating profit - -
===== =====
</TABLE>
17. COMPANIES ACT 1985
These accounts do not constitute statutory accounts within the meaning of
section 240 of the Companies Act 1985, as amended, of Great Britain insofar as
such accounts have to comply with the disclosure and other provisions of that
Act.
18. DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
The company's financial statements are prepared in accordance with accounting
principles generally accepted in the United Kingdom ("UK GAAP") which differ in
certain respects from United States generally accepted accounting principles
("US GAAP"). The following significant differences apply to the company.
Pensions
Pension costs, based on actuarial assumptions and methods, are charged in the
financial statements so as to allocate the cost of providing benefits over the
service lives of employees in a consistent manner approved by the actuary. US
GAAP as set out in Financial Accounting Standards 87 prescribes the method of
actuarial valuation and also requires assets to be assessed at fair value and
the assessment of liabilities to be based on current interest rates.
The calculations in accordance with Financial Accounting Standards 87 are as
follows:
<TABLE>
<S><C>
17 February 31 March
1995 1994
POUNDS POUNDS
STLG000 STLG000
Actuarial present value of accumulated benefit obligation (1,573) (1,286)
----- -----
Actuarial present value of projected benefit obligation
(PBO) for services rendered to date (2,178) (1,759)
Plan assets at fair value 1,923 1,925
----- -----
Funded status (excess of plan assets over the PBO) (255) 166
Unrecognised net (gain)/loss from past experience different
from that assumed and effects of changes in assumptions 208 (145)
Prior service cost not yet recognised in net periodic
pension cost 30 32
Unrecognised net transition (asset)/obligation (109) (118)
----- -----
Prepaid/(accrued) pension costs (126) (65)
===== =====
</TABLE>
<TABLE>
<S><C>
Period Year
ended ended
17 February 31 March
1995 1994
POUNDS POUNDS
STLG000 STLG000
Service cost benefits earned during the period 89 96
Interest cost on projected benefit obligation 131 139
Actual return on plan assets (6) (239)
Net amortisation and deferral (153) 69
----- -----
Net periodic pension cost (NPPC) 61 65
===== =====
</TABLE>
The assumptions used in the above calculations differ from those used for UK
GAAP purposes mainly due to the market value bias under US GAAP. The principal
financial assumptions used to calculate the above figures are set out below:
Valuation date 17 February 1 April
1995 1994
Expected long term rate of return on scheme assets 9.5% 9.0%
Discount rate 9.0% 8.5%
Rate of increase in compensation levels 7.0% 6.5%
Rate of increase of pensions in payment 5.0% 4.5%
Cash flow statement
The cash flow statement included in these accounts presents substantially the
same information as that requested under US GAAP by US Statement of Financial
Accounting Standards 95, "Statement of Cash Flows". These standards differ,
however, with regard to classification of items within the statement and as
regards the definition of cash and cash equivalents.
Under UK GAAP, cash flows are presented separately for operating activities,
returns on investments and servicing of finance, taxation, investing activities
and financing activities. US GAAP, however, requires only three categories of
cash flow activity to be reported: operating, investing and financing. Cash
flows from taxation and servicing of finance and returns on investments shown
under UK GAAP would be included as operating activities under US GAAP.
Reconciliation
The following is a summary of adjustments to profit which would be required if
US GAAP had been applied instead of UK GAAP.
<TABLE>
<S><C>
Period Year
ended ended
17 February 31 March
1995 1994
POUNDS POUNDS
STLG000 STLG000
Profit on ordinary activities before tax Pension 816 775
costs (61) (65)
----- -----
Income before tax according to generally accepted
accounting principles in the United States 755 710
===== =====
</TABLE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Forms S-8 No 2-89831 and No 33-61946 and Form S-3 No 33-18264) pertaining
to the 1986 Stock Option Plan, the 1991 Stock Option Plan and the 1991
Chemfab Employee Stock Option Plan and the 1986 Stock Option Plan and the
1983 Incentive Stock Option Plan, respectively, of Chemfab Corporation of our
report dated 28 April 1995 with respect to the financial statements of the
Fothergill Tygaflor division of Courtaulds Aerospace Limited included in the
Current Report (Form 8-K/A) dated 5 May 1995 of Chemfab Corporation filed
with the Securities and Exchange Commission.
Ernst & Young
Chartered Accountants
Manchester
England
4 May 1995
<TABLE>
<S><C>
CHEMFAB CORPORATION and TYGAFLOR
PRO FORMA COMBINED BALANCE SHEET
AS OF JANUARY 1, 1995
Adjustments
ASSETS CHEMFAB TYGAFLOR see note 2 COMBINED
------------- ------------- ------------- ------------
Current assets:
Cash and cash equivalents $ 7,400,000 $ 2,243,000 $ (6,468,000)(a) $ 3,175,000
Marketable securities 500,000 500,000
Accounts receivable (net) 11,296,000 2,341,000 252,000 (a) 13,889,000
Costs and estimated earnings in excess of
billings on uncompleted contracts 524,000 524,000
Inventories 10,918,000 1,875,000 12,793,000
Prepaid expenses, and other 1,547,000 16,000 1,563,000
Deferred tax asset 640,000 202,000 (a) 842,000
------------- ------------- ------------- -------------
Total current assets 32,825,000 6,475,000 (6,014,000) 33,286,000
Property, plant and equipment at cost 33,370,000 2,953,000 (453,000)(a) 35,870,000
Less accumulated depreciation 15,783,000 1,385,000 (1,385,000)(a) 15,783,000
------------- ------------- ------------- -------------
Net property, plant and equipment 17,587,000 1,568,000 932,000 (a) 20,087,000
Goodwill 2,884,000 9,444,000 (a) 12,328,000
Investments in joint ventures and
other assets 1,722,000 1,174,000 (a) 2,896,000
------------- ------------- ------------- -------------
Total assets $ 55,018,000 $ 8,043,000 $ 5,536,000 $ 68,597,000
============= ============= ============= =============
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities:
Accounts payable and accrued
expenses $ 6,557,000 $ 953,000 $ 1,671,000 (a) $ 9,181,000
Accrued income taxes 566,000 566,000
Billings in excess of costs and
estimated earnings on
uncompleted contracts 117,000 117,000
------------- ------------- ------------- -------------
Total current liabilities 7,240,000 953,000 1,671,000 9,864,000
Long - term debt 10,955,000 (a) 10,955,000
Deferred tax liabilities 1,151,000 1,151,000
0
Shareholders' equity: 0
Common stock, par value $.10: 523,000 523,000
Additional paid-in capital 16,549,000 16,549,000
Retained earnings 30,208,000 7,090,000 (7,090,000) (a) 30,208,000
Foreign currency translation adjustment (653,000) (653,000)
------------- ------------- ------------- -------------
Total shareholders' equity 46,627,000 7,090,000 (7,090,000) 46,627,000
------------- ------------- ------------- -------------
Total liabilities and shareholders' equity $ 55,018,000 $ 8,043,000 $ 5,536,000 $ 68,597,000
============= ============= ============= =============
See accompanying Notes to the Pro Forma Combined Financial Statements
</TABLE>
<TABLE>
<S><C>
CHEMFAB CORPORATION AND TYGAFLOR
PRO FORMA COMBINED INCOME STATEMENTS
FOR THE SIX MONTHS ENDED JANUARY 1, 1995
(Unaudited)
Adjustments
CHEMFAB TYGAFLOR (see note 2) COMBINED
------------- ------------- ------------- -------------
Net sales $ 29,223,000 $ 4,839,000 $ $ 34,062,000
Cost of sales 20,105,000 3,008,000 (148,000)(b) 22,965,000
------------- ------------- ------------- -------------
Gross profit 9,118,000 1,831,000 148,000 11,097,000
Selling, general and
administrative expenses 5,529,000 1,123,000 31,000 (c) 6,683,000
Research and development expenses 971,000 0 38,000 (d) 1,009,000
Other (income) expense, net (63,000) 0 (63,000)
Interest expense 13,000 0 372,000 (e) 385,000
Interest income (182,000) 0 131,000 (e) (51,000)
Results of equity operations 137,000 0 137,000
------------- ------------- ------------- -------------
Income before income taxes 2,713,000 708,000 (424,000) 2,997,000
Provision for income taxes 746,000 234,000 (64,000)(f) 916,000
------------- ------------- ------------- -------------
Net income $ 1,967,000 $ 474,000 $ (360,000) $ 2,081,000
============= ============= ============= =============
Weighted average common and
common equivalent shares 5,300,000 5,300,000
============= =============
Earnings per common share $0.37 $0.39
============= =============
See accompanying Notes to the Pro Forma Combined Financial Statements.
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CHEMFAB CORPORATION AND TYGAFLOR
PRO FORMA COMBINED INCOME STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1994
(Unaudited)
Adjustments
CHEMFAB TYGAFLOR (see note 2) COMBINED
------------- ------------- ------------- -------------
Net sales $ 52,151,000 $ 8,958,000 $ $ 61,109,000
Cost of sales 35,434,000 5,850,000 (146,000)(b) 41,138,000
------------- ------------- ------------- -------------
Gross profit 16,717,000 3,108,000 146,000 19,971,000
Selling, general and
administrative expenses 10,019,000 1,941,000 212,000 (c) 12,172,000
Research and development expenses 1,965,000 0 75,000 (d) 2,040,000
Other (income) expense, net (251,000) 0 (251,000)
Interest expense 33,000 0 888,000 (e) 921,000
Interest income (363,000) 0 181,000 (e) (182,000)
Results of equity operations 96,000 0 96,000
------------- ------------- ------------- -------------
Income before income taxes 5,218,000 1,167,000 (1,210,000) 5,175,000
Provision for income taxes 1,323,000 391,000 (239,000)(f) 1,475,000
------------- ------------- ------------- -------------
Net income $ 3,895,000 $ 776,000 $ (971,000) $ 3,700,000
============= ============= ============= =============
Weighted average common and
common equivalent shares 5,284,000 5,284,000
============= =============
Earnings per common share $0.74 $0.70
============= =============
See accompanying Notes to the Pro Forma Combined Financial Statements.
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CHEMFAB CORPORATION AND TYGAFLOR
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(unaudited)
In February 1995, the Company purchased certain assets and liabilities of the
Tygaflor fluoropolymer products business of the Advanced Materials Division of
Courtaulds Aerospace Ltd. (the Tygaflor business) for approximately $15.1
million (Pounds Stlg 9.7 million) in cash at closing, subject to adjustment
as a result of changes in working capital. This acquisition was funded with
approximately $4.2 million of available cash on hand and $10.9 million of
bank debt.
(1) The acquisition of Tygaflor has been accounted for using the purchase
method of accounting. The pro forma combined statements of income presents
the combined operations of the Company and Tygaflor for the year ended June
30, 1994 and the six months ended January 1, 1995 as if the acquisition had
been completed on July 1, 1993. For these purposes, Tygaflor's results for
the year ended March 31, 1994 and the six months ended September 30, 1994
have been utilized. The pro forma condensed balance sheet as of January 1,
1995 has been prepared as if the acquisition had been completed on that
date.
(2) The following adjustments were applied to the historical balance sheet or
historical statements of income in order to arrive at the pro forma
combined condensed balance sheet and pro forma combined condensed
statements of income.
(a) Reflects the initial purchases accounting, including cash disbursed,
bank financing obtained, and the allocation of the purchase price to
the net assets acquired.
The total purchase price is calculated as follows:
Total consideration paid by Chemfab $ 15,181,000
Estimated transaction costs 865,000
Severence, net 411,000
Working Capital Adjustment (252,000)
----------
$ 16,205,000
==========
The allocation of the purchase price is a follows:
Accounts receivable $ 2,341,000
Inventories 1,875,000
Other Current Assets 16,000
Plant and equipment 2,500,000
Goodwill 9,444,000
Other intangibles 1,174,000
Liabilities assumed (1,145,000)
----------
$ 16,205,000
==========
(b) Reflects anticipated cost savings of $296,000 and $208,000 through
redundancies for the year ended June 30, 1994 and for the six months
ended January 1, 1995, respectively, a reduction of depreciation
expense due to purchase accounting of $57,000 and $32,000 for the
periods ending June 1994 and January 1995, respectively. These
anticipated cost savings have been offset by adding an estimated gross
margin of $182,000 and $92,000 for raw materials historically
purchased at cost from an affiliated business for the year ended June
30, 1994 and for the six months ended January 1, 1995, respectively.
(c) Reflects the cost savings realized through the redundancies described
in (b) above offset by the amortization of goodwill of $608,000 and
$309,000 for the year and six month period respectively.
(d) Reflects amortization of the portion of the purchase price allocated
to patents.
(e) Assumes the interest expense on the bank debt at the prevailing bank
rate for the period and the reduction of interest income resulting
from the use of cash for the acquisition.
(f) The provision for taxes is assumed to decrease due to the tax effect
of the proforma adjustments using an incremental tax rate of 33%
except for interest income which assumes an incremental rate of 40%.
