<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
--------------
Date of Report (Date of earliest event reported) July 20, 1994
<TABLE>
<CAPTION>
A. L. Laboratories, Inc.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<S> <C> <C>
Delaware I-8593 22-2095212
- - ------------------------ ---------------- -------------------
(Commission (IRS Employer
(State or other File Number) Identification
jurisdiction No.)
of incorporation)
</TABLE>
- - -------------------------------------------------------------------------------
One Executive Drive, Fort Lee, New Jersey 07024
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (ZipCode)
Registrant's telephone number, including area code (201) 947-7774
--------------
Not Applicable
- - --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On July 21, 1994, A.L. Laboratories, Inc. (the "Company") issued two press
releases announcing that it had acquired Wade Jones Company, Inc., a Texas
corporation ("Wade Jones"), a distributor of poultry animal health products that
is also actively involved in the development, manufacture and sale of its own
line of products including animal health pharmaceuticals and feed additives.
The Company consummated the acquisition of Wade Jones by acquiring all of the
outstanding capital stock of Mikjan Corporation, an Arkansas corporation
("Mikjan"), which is the parent of Wade Jones. The Mikjan capital stock was
acquired from Mick Wagner, Jan Powell and certain charitable trusts established
by Mr. Wagner and Mr. Powell. Prior to the acquisition, Wade Jones acted as a
distributor of the Company's poultry animal health products. The Company
intends to continue to operate Wade Jones as a stand-alone business maintaining
its historic operations while expanding the scope of such operations.
The Company paid aggregate consideration of $8,219,440 as the initial
purchase price for the Mikjan capital stock, subject to a potential purchase
price adjustment for which certain amounts were retained by the Company. The
Company will pay additional consideration specified in the Stock Purchase
Agreement (defined below) in the event that regulatory approval is obtained
permitting the marketing of certain development stage products and in the event
that such products are successfully marketed by Wade Jones. The Company
obtained funds for the acquisition from a lender through a line of credit. The
identity of such lender has been filed separately with the Securities and
Exchange Commission (the "Commission").
ITEM 5. OTHER EVENTS.
As announced in its press release dated May 17, 1994, the Company entered
into an agreement (the "Restructuring Agreement") with Apothekernes Laboratorium
A.S, the beneficial owner of 100% of the Company's Class B Common Stock ("A. L.
Oslo"), on May 16, 1994 to combine the pharmaceutical, animal health, bulk
antibiotic and aquatic animal health businesses of A. L. Oslo (the "Related
Norwegian Businesses") with the Company. The Restructuring Agreement was
unanimously approved by the Board of Directors, following a recommendation by a
Special Committee of the Board consisting of the Directors elected by the
holders of the Company's Class A Common Stock (the "Class A Shares"). The
transactions contemplated by the Restructuring Agreement (the "Transactions")
will require approval of the shareholders of both corporations, including a
majority of the outstanding Class A Shares, voting as a separate class. A proxy
statement relating to approval of, among other things, the Restructuring
Agreement and the Transactions is being contemporaneously filed with this Form
8-K/A and is being mailed to stockholders on August 22, 1994 (the "Proxy
Statement"). The Proxy Statement includes detailed information regarding the
Transactions and the Related Norwegian Businesses. In addition to shareholder
approval, the Transactions are subject to a number of other conditions including
the approval of Norwegian governmental authorities and acceptance of the
Exchange Offer (as defined below) by holders of at least 90% of the shares of
capital stock of A. L. Oslo.
The consideration to be paid by the Company for the Related Norwegian
Businesses consists of 170 million Norwegian kroner ("NOK") and warrants to
purchase 3.6 million Class A Shares (the "Warrants"). The Warrants will have an
exercise price equal to 140% of the average trading price over a specified
period prior to closing. The cash portion of the purchase price has been
adjusted from NOK 170 million to NOK 160 million as a result of a NOK 10 million
dividend which was paid to A. L. Oslo shareholders in June 1994. Using the
exchange rate at June 30, 1994, NOK 160 million equals approximately $23.1
million.
Prior to the closing of the Transactions, A. L. Oslo will transfer the
assets and liabilities of the Related Norwegian Businesses into a new company
("New A. L. Oslo") in a transaction called a demerger. A demerger in Norway is
similar to a spin-off in the United States. Each holder of an A. L. Oslo share
will be entitled to receive one share of capital stock of New A. L. Oslo for
each A. L. Oslo share it holds. The Company will acquire the Related Norwegian
Businesses through an offer (the "Exchange Offer") to acquire all shares of New
A. L. Oslo which the A. L. Oslo shareholders are entitled to receive in the
demerger.
The Company is required to account for the acquisition of all of the
outstanding shares of New A. L. Oslo (the "RNB Acquisition") as a transfer and
exchange between companies under common control. Accordingly, the assets and
liabilities of New A. L. Oslo will be combined with the Company at historical
cost in a manner similar to a pooling-of-interests; and the Company's historical
financial statements will be restated to reflect the combined results of
operations, assets, liabilities and net worth of the Company and of the Related
Norwegian Businesses. The payment of the cash purchase price will be reflected
as a reduction of combined equity when the transactions are consummated.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
i) Report of Independent Accountants (Page F-2)
ii) Mikjan Corporation Consolidated Balance Sheets as of October 2,
1993 and October 2, 1992 (Page F-3).
iii) Mikjan Corporation Consolidated Statements of Income and Retained
Earnings (Accumulated Deficit) for the years ended October 2,
1993 and October 2, 1992 (Page F-5).
iv) Mikjan Corporation Consolidated Statements of Cash Flows for the
years ended October 2, 1993 and October 3, 1992 (Page F-6).
v) Notes to the Mikjan Corporation Consolidated Financial Statements
for the years ended October 2, 1993 and October 3, 1992 (Page F-
7).
vi) Mikjan Corporation Unaudited Consolidated Condensed Balance Sheet
as of June 30, 1994 (Page F-15).
vii) Mikjan Corporation Unaudited Consolidated Statement of Income for
the three month period and nine month period ended June 30, 1994
(Page F-16).
viii) Mikjan Corporation Unaudited Consolidated Condensed Statement
of Cash Flows for the nine month period ended June 30, 1994 \
(Page F-17).
ix) Notes to the Mikjan Unaudited Corporation Consolidated
Condensed Financial Statements (Page F-18).
(b) Pro Forma Financial Information.
i) Pro Forma Financial Information Reflecting the Acquisition of Mikjan:
A) A.L. Laboratories, Inc. Proforma Combined Balance Sheet for the
period ended June 30, 1994 (Page F-19).
B) A.L. Laboratories, Inc. Proforma Combined Statement of Income
for the year ended December 31, 1993 (Page F-20).
C) A.L. Laboratories, Inc. Proforma Combined Statement of Income
for the six months ended June 30, 1994 (Page F-21).
D) Notes to A.L. Laboratories, Inc. Unaudited Proforma Condensed
Combined Financial Statements (Page F-22).
ii) Pro Forma Financial Information Reflecting the Acquisition of Mikjan
and the Planned Acquisition of the Related Norwegian Businesses:
A) Unaudited Proforma Condensed Combined Balance Sheet for the
period ended June 30, 1994 (Page F-25).
B) Unaudited Pro Forma Condensed Combined Statement of Income for
the year ended December 31, 1993 (Page F-26).
C) Unaudited Pro Forma Condensed Combined Statement of Income for
the six months ended June 30, 1994 (Page F-27).
D) Notes to Unaudited Pro Forma Condensed Combined Financial
Statements (Page F-28).
(c) Exhibits.
2.1 Stock Purchase Agreement, dated as of July 20, 1994, by and
among Mikjan Corporation, Wade Jones Company, Inc., Mick Wagner,
Jan Powell, the Mick Wagner Charitable Remainder Unitrust, the
Jan Powell Charitable Remainder Unitrust, A.L. Laboratories,
Inc. and G.F. Reilly, Inc. (with respect to Section 9.12 thereof
only)(the "Stock Purchase Agreement").*
99.1 Press Release, dated July 21, 1994 (A.L. Laboratories, Inc.).*
99.2 Press Release, dated July 21, 1994 (A.L. Laboratories, Inc. -
Animal Health Division).*
- - ------
* Previously filed in the Company's Current Report on Form 8-K dated August 4,
1994.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
A. L. Laboratories, Inc.
By: /s/ Jeffrey E. Smith
------------------------------
Name: Jeffrey E. Smith
Title: Executive Vice President
and Chief Financial Officer
Dated: August 22, 1994
<PAGE>
MIKJAN CORPORATION
_______
REPORT ON AUDITS OF THE CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended October 2, 1993 and October 3, 1992
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Mikjan Corporation
We have audited the accompanying consolidated balance sheets of Mikjan
Corporation and subsidiary (the "Company") as of October 2, 1993 and October 3,
1992, the related consolidated statements of income and retained earnings
(accumulated deficit), and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Mikjan Corporation and subsidiary as of October 2, 1993 and October 3, 1992 and
the consolidated results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand
Tulsa, Oklahoma
December 1, 1993
F-2
<PAGE>
MIKJAN CORPORATION
CONSOLIDATED BALANCE SHEETS
As of October 2, 1993 and October 3, 1992
<TABLE>
<CAPTION>
October 2, October 3,
ASSETS 1993 1992
------ ---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 86,597 $ 138,124
Accounts and notes receivable, less
allowance for doubtful accounts of
$23,345 and $24,500, respectively
Trade 2,277,459 2,338,078
Related party 10,455 114,132
Inventories 3,144,127 2,942,472
Prepaid and other 17,217 90,847
Income tax receivable - 185,171
Future income tax benefits 100,000 100,000
---------- ----------
Total current assets 5,635,855 5,908,824
---------- ----------
Property, plant and equipment:
Land 55,689 55,689
Buildings and leasehold improvements 1,217,369 938,137
Machinery and equipment 919,980 585,641
Furniture and fixtures 316,521 300,460
Transportation equipment 590,149 464,781
---------- ----------
3,099,708 2,344,708
Less accumulated depreciation and
amortization 1,193,769 916,426
---------- ----------
1,905,939 1,428,282
---------- ----------
Other assets:
Intangible assets, net 530,897 933,813
Future income tax benefits 177,054 205,429
---------- ----------
707,951 1,139,242
---------- ----------
Total assets $8,249,745 $8,476,348
========== ==========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY October 2, October 3,
1993 1992
---------- ----------
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt
and other obligations $1,080,000 $ 956,365
Accounts payable 2,652,822 3,250,826
Accrued liabilities 107,119 510,983
Accrued income taxes 418,094 -
---------- ----------
Total current liabilities 4,258,035 4,718,174
---------- ----------
Long-term debt and other obligations 3,518,215 4,300,673
Commitments and contingencies (Notes 4,
6, 7 and 9)
Stockholders' equity:
Common stock, $1 par value, 2,000
shares authorized, 500 shares issued
and outstanding 500 500
Retained earnings (accumulated deficit) 472,995 (542,999)
---------- ----------
Total stockholders' equity (deficit) 473,495 (542,499)
---------- ----------
Total liabilities and stockholders'
equity $8,249,745 $8,476,348
========== ==========
</TABLE>
F-4
<PAGE>
MIKJAN CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND
RETAINED EARNINGS (ACCUMULATED DEFICIT)
For the Years Ended October 2, 1993 and October 3, 1992
<TABLE>
<CAPTION>
October 2, October 3,
1993 1992
----------- -----------
<S> <C> <C>
Sales $25,907,570 $30,102,783
Cost of sales 21,762,205 26,748,337
----------- -----------
Gross profit 4,145,365 3,354,446
Selling, general and administrative 1,531,665 1,332,351
Depreciation and amortization 761,200 716,673
----------- -----------
Operating income 1,852,500 1,305,422
Interest expense 297,235 451,814
Other (income) expense (49,301) 68,359
----------- -----------
Income before income taxes 1,604,566 785,249
Income taxes 588,572 299,534
----------- -----------
Net income 1,015,994 485,715
Accumulated deficit (542,999) (1,028,714)
----------- -----------
Retained earnings (accumulated deficit) $ 472,995 $ (542,999)
=========== ===========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
F-5
<PAGE>
MIKJAN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended October 2, 1993 and October 3, 1992
<TABLE>
<CAPTION>
October 2, October 3,
1993 1992
----------- ----------
<S> <C> <C>
Net income $1,015,994 $ 485,715
Deferred income tax provision 213,546 107,174
Depreciation and amortization 853,648 813,595
Other - 1,939
Changes in assets and liabilities:
Accounts and notes receivable 164,296 565,167
Inventories (201,655) (365,354)
Prepaid and other 73,630 (265,108)
Accounts payable (598,004) 151,755
Accrued liabilities 14,230 (395,700)
---------- ----------
Cash flows provided by operating
activities 1,535,685 1,099,183
---------- ----------
Cash flows provided by (used in)
investing activities:
Acquisition of property, plant
and equipment (885,074) (375,439)
Retirement of property, plant
and equipment 49,133 700
---------- ----------
Cash flows used in investing
activities (835,941) (374,739)
---------- ----------
Cash flows provided by (used in)
financing activities:
Proceeds from issuance of debt 844,469 477,029
Payments on debt (1,595,740) (1,355,143)
---------- ----------
Cash flows provided by (used in)
financing activities (751,271) (878,114)
---------- ----------
Net decrease (51,527) (153,670)
Cash and cash equivalents,
beginning of year 138,124 291,794
---------- ----------
Cash and cash equivalents,
end of year $ 86,597 $ 138,124
========== ==========
Cash paid during the year for:
Interest $ 297,235 $ 354,892
========== ==========
Income taxes $ 44,336 $ 435,730
========== ==========
</TABLE>
Supplemental non-cash transactions:
See Note 4 regarding assignment of the option to purchase the warehouse
facility to a shareholder.
The accompanying notes are an integral part
of the consolidated financial statements.
F-6
<PAGE>
MIKJAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the consolidated accounts of Mikjan Corporation and its wholly-owned
subsidiary, Wade Jones Company, Inc. (the "Company"). All significant
intercompany accounts and transactions have been eliminated.
NATURE OF BUSINESS - The Company is a manufacturer and distributor of
various feed additives, poultry medication and antibiotics for animals. The
Company extends credit to customers throughout the United States who serve
the poultry industry.
CONCENTRATIONS OF CREDIT RISK - Assets which potentially subject the Company
to a concentration of credit risk consist primarily of accounts receivable
and cash in financial institutions in excess of the federal deposit
insurance limits of $340,000 at October 2, 1993 and $377,000 at October 3,
1992. The Company generally does not require collateral from its customers.
FISCAL YEAR - The Company's fiscal year ends on the Saturday closest to
September 30.
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid
investments purchased with a maturity of three months or less to be cash
equivalents. Cash equivalents are stated at cost which approximates market
value. At October 2, 1993 and October 3, 1992, cash equivalents included
repurchase agreements of $440,000 and $477,000, respectively.
INVENTORY - Inventory is stated at the lower of cost, using the weighted
average cost method, or market.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated at
cost and are depreciated over their estimated useful lives. Leasehold
improvements are depreciated over the shorter of the lease term or the
estimated useful lives of the improvements. Annual depreciation is
primarily computed using the straight-line method. As assets are disposed
of, the cost and related accumulated depreciation are removed from the
accounts and any resulting gain or loss is included in income.
F-7
<PAGE>
MIKJAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
INCOME TAXES - Deferred income taxes, reflecting timing differences in
recognizing income and expenses for tax and financial reporting purposes,
relate principally to depreciation, deferred compensation and accrued
liabilities.
AMORTIZATION - A covenant not to compete was being amortized over five years
and became fully amortized in 1993. A licensing agreement and the excess of
purchase price over the net assets at the acquisition date of Wade Jones
Company of Texas, Inc., is being amortized over a period of forty years.
Amortization is computed using the straight-line method.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
October 2, October 3,
1993 1992
---------- ----------
<S> <C> <C>
Raw materials $1,062,134 $ 847,125
Work in process - 124,164
Finished goods 2,081,993 1,971,183
---------- ----------
$3,144,127 $2,942,472
========== ==========
</TABLE>
3. LONG-TERM DEBT AND OTHER OBLIGATIONS
Long-term debt and other obligations consist of the following:
<TABLE>
<CAPTION>
October 2, October 3,
1993 1992
---------- ----------
<S> <C> <C>
Note payable (A) $2,337,163 $2,712,500
Other obligations (B) 1,240,101 1,733,630
Mortgage payable, bank (C) 174,299 186,299
Note payable (D) 199,594 319,594
Capital lease obligations
(Note 4) 226,081 245,170
Installment notes (E) 420,977 59,845
---------- ----------
4,598,215 5,257,038
Less current maturities 1,080,000 956,365
---------- ----------
$3,518,215 $4,300,673
========== ==========
</TABLE>
F-8
<PAGE>
MIKJAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. LONG-TERM DEBT AND OTHER OBLIGATIONS, Continued
Aggregate annual maturities of long-term debt and other obligations at
October 2, 1993 are as follows: $1,080,000 in 1994, $983,029 in 1995,
$693,528 in 1996, $1,071,059 in 1997, $131,610 in 1998 and $638,989
thereafter.
(A) Due June, 1997; payable approximately $40,000 monthly plus interest at
prime plus 1 1/2% (7.5% currently); collateralized by accounts
receivable, inventories, equipment, intangibles and an insurance
policy on the life of a stockholder in the face amount of not less
than $1,000,000.
(B) Due by various dates from December, 1993 through February, 2003,
payable approximately $30,000 monthly through February, 1996 and then
approximately $10,000 monthly through February, 2003 including
interest at 8 1/2%, collateralized by vehicles and secondary liens on
accounts receivable and inventories to the extent these assets are not
collateral for item (A).
(C) Due November, 2002, payable approximately $2,300 monthly, including
interest at prime plus 1% (8.75% currently) and collateralized by real
estate.
(D) Due February, 1998, payable $8,000 monthly, noninterest-bearing,
imputed at 8.5%, personally guaranteed by officers and stockholders.
(E) Various installment notes with interest rates ranging from 6% to 13%
and total monthly installments ranging from approximately $19,000 in
1994 to $750 in 1998, collateralized by vehicles and equipment.
At October 2, 1993 and October 3, 1992, the unamortized debt discount
on certain obligations was $495,768 and $672,577, respectively. Included in
interest expense is the amortization of debt discount of $92,448 and $96,922
during fiscal 1993 and 1992, respectively.
F-9
<PAGE>
MIKJAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. LEASES
OPERATING - During 1993, the Company assigned its option to purchase a
warehouse facility to a shareholder which was exercised by such shareholder
prior to year end. The purchase price approximated $1.1 million and the
mortgage note is guaranteed by the Company. The Company also holds a second
mortgage on the property in the event of default. The Company signed a 7-
year lease with the related party providing for payments of $13,500 per
month.
The Company also leases tractors on a daily or monthly basis. The
leases require that the Company pay all repair costs associated with these
vehicles.
Total rent expense during 1993 was $242,348 and $191,415 during 1992.
Related party rental expense as discussed above totalled $54,000 during
1993.
Future lease payments under noncancellable operating leases (including
related parties) are as follows:
<TABLE>
<CAPTION>
<S> <C>
1994 $349,358
1995 325,826
1996 300,464
1997 279,372
1998 216,623
Thereafter 270,000
</TABLE>
CAPITAL - Capital leases included in long-term debt (Note 3), are leases
covering office and warehouse facilities, which expire in 2001.
Property, plant and equipment includes the following property under
capital leases:
Land $ 28,000
Buildings 378,693
--------
406,693
Less accumulated
amortization (62,098)
--------
$ 344,595
========
F-10
<PAGE>
MIKJAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. LEASES, Continued
Future minimum lease payments as of October 2, 1993, were:
<TABLE>
<CAPTION>
<S> <C>
1994 $ 34,956
1995 34,956
1996 34,956
1997 34,956
1998 34,956
Later years 113,607
--------
Future minimum lease
payments 288,387
Less amount representing
interest (62,306)
--------
Present value of future
minimum lease payments 226,081
Less current maturities (22,682)
--------
Noncurrent portion $203,399
========
</TABLE>
5. INCOME TAXES
Prior to October 3, 1992, the Company and its affiliates filed
separate federal and state income tax returns. The Company currently files
a consolidated return. The Company's income tax provision consists of the
following:
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Current provision $375,026 $192,360
Deferred tax provision 213,546 107,174
-------- --------
Total $588,572 $299,534
======== ========
</TABLE>
6. PROFIT-SHARING PLAN
The Company has a profit-sharing plan covering substantially all
employees. The Company's contributions to the plan are determined annually
by the Board of Directors. Contributions are limited to 15% of total
compensation paid participants during the plan year. Participants vest over
a period from three to seven years of service. The Company contributed
$67,503 to the Plan during fiscal 1993 and $149,325 during fiscal 1992.
F-11
<PAGE>
MIKJAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. DEFERRED COMPENSATION AGREEMENTS
The Company has deferred compensation agreements with its officers
and certain key employees providing additional compensation upon death,
disability or retirement. Contributions to the plan are made at the
discretion of management. If the Company ceases operations, the employees
interest would vest immediately. The Company made contributions of
approximately $102,000 during 1993 and $71,000 during 1992.
8. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
October 2, October 3,
1993 1992
-------------- ------------
<S> <C> <C>
Covenant not-to-compete $ 2,803,264 $ 2,803,264
Excess cost over fair value of net
assets acquired 214,472 214,472
Government registrations 278,205 240,000
Other 99,236 98,556
----------- -----------
3,395,177 3,356,292
Less accumulated amortization (2,864,280) (2,422,479)
----------- -----------
$ 530,897 $ 933,813
=========== ===========
</TABLE>
9. CONTINGENCIES
During the months of July through September 1992, the Company allowed
certain wastewater from its operations to be dumped on its parking lot. The
Company is in direct communication with all appropriate authorities and is
engaged in expedited testing and remediation. The Company presently
projects approximately $5,000 to $75,000 in future costs, for which it may
become liable, relating to this matter.
F-12
<PAGE>
MIKJAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. FUTURE ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 109 ("SFAS No. 109"): "Accounting for
Income Taxes" which is effective for fiscal years beginning after December
15, 1992. SFAS No. 109 requires that deferred tax liabilities and assets be
recognized for any difference between the tax basis of assets and
liabilities and their financial reporting amounts measured by using
presently enacted tax laws and rates. The Company has not yet determined
the impact of the adoption of SFAS No. 109.
F-13
<PAGE>
MIKJAN CORPORATION
Unaudited Consolidated Financial Statements
as of and for the period ended
June 30, 1994
F-14
<PAGE>
MIKJAN CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEET
(In thousands of dollars)
<TABLE>
<CAPTION>
June 30,
1994 October 2,
(Unaudited) 1993
----------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 60 $ 87
Accounts receivable, net 2,427 2,288
Inventories 3,195 3,144
Other 115 117
------ ------
Total current assets 5,797 5,636
Property, plant and equipment, net 2,323 1,906
Intangible assets 534 531
Other assets and deferred charges 177 177
------ ------
Total assets $8,831 $8,250
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 946 $1,080
Accounts payable and accrued liabilities 3,351 2,760
Accrued and deferred income taxes 171 418
------ ------
Total current liabilities 4,468 4,258
Long-term debt 3,044 3,518
Stockholders' equity:
Common Stock, $1 par value
500 shares issued 1 1
Retained earnings 1,318 473
------ ------
Total stockholders' equity 1,319 474
------ ------
Total liabilities and
stockholders' equity $8,831 $8,250
====== ======
</TABLE>
The accompanying notes are an integral part
of the consolidated condensed financial statements.
F-15
<PAGE>
MIKJAN CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
------------------- ------------------
1994 1993 1994 1993
------- ------ ------- -------
<S> <C> <C> <C> <C>
Total revenue $6,463 $5,879 $19,496 $19,555
Cost of sales 5,422 4,920 16,537 16,468
------ ------ ------- -------
Gross profit 1,041 959 2,959 3,087
Selling, general and
administrative expenses 519 635 1,455 1,726
------ ------ ------- -------
Operating income 522 324 1,504 1,361
Interest expense (103) (94) (226) (191)
Other, net 1 26 1 47
------ ------ ------- -------
Income before provision
for income taxes 420 256 1,279 1,217
Provision for income taxes 138 108 434 487
------ ------ ------- -------
Net income $ 282 $ 148 $ 845 $ 730
====== ====== ======= =======
</TABLE>
The accompanying notes are an integral part
of the consolidated condensed financial statements.
F-16
<PAGE>
MIKJAN CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(In thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
-----------------
1994 1993
------ -------
<S> <C> <C>
Operating Activities:
Net income $ 845 $ 730
Adjustments to reconcile net
income to net cash provided
by operating activities, principally
depreciation and amortization 324 588
Changes in assets and liabilities,
net of effects from business
acquisition:
(Increase) Decrease in accounts receivable (139) 558
(Increase) in inventory (51) (299)
(Decrease)/increase in accounts
payable and accrued expenses 344 (424)
Other (124) (23)
------- ------
Net cash provided by
operating activities 1,199 1,130
------- ------
Investing Activities:
Capital expenditures, net (618) (647)
------- ------
Net cash used in investing
activities (618) (647)
------- ------
Financing Activities:
Reduction of long-term debt (608) (573)
------- ------
Net cash used in
financing activities (608) (573)
------- ------
Decrease in Cash (27) (90)
Cash and cash equivalents at
beginning of year 87 138
------- ------
Cash and cash equivalents at
end of period $ 60 $ 48
======= ======
</TABLE>
The accompanying notes are an integral part
of the consolidated condensed financial statements.
F-17
<PAGE>
MIKJAN CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of dollars)
1. General
-------
The accompanying consolidated condensed financial statements include all
adjustments (consisting only of normal recurring accruals) which are, in the
opinion of management, considered necessary for a fair presentation of the
results for the periods presented. These financial statements should be read in
conjunction with the financial statements of Mikjan Corporation for the years
ended October 2, 1993 and October 3, 1992 included as an exhibit to the Form 8K.
The reported results for the nine month period ended June 30, 1994 are not
necessarily indicative of the results to be expected for the full year.
F-18
<PAGE>
<TABLE>
<CAPTION>
A.L. LABORATORIES, INC.
PRO-FORMA COMBINED BALANCE SHEET
FOR THE PERIOD ENDED JUNE 30, 1994
(In thousands of dollars)
A.L.
LABORATORIES MIKJAN PRO FORMA PRO FORMA
HISTORICAL CORPORATION ADJUSTMENTS COMBINED
------------ ----------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,676 $ 60 $ 6,736
Accounts receivable, net 77,312 2,427 (127) (A) 79,612
Inventories 82,053 3,195 85,248
Prepaid expenses and other current assets 6,956 115 (550) (B) 6,521
----------- --------- --------- -----------
Total current assets 172,997 5,797 (677) 178,117
Property, plant and equipment, net 133,707 2,323 1,000 (C) 137,030
Intangible assets, net 113,731 534 6,280 (C) 120,545
Other assets and deferred charges 12,242 177 (1,507) (B) 10,912
----------- --------- --------- -----------
Total assets $ 432,677 $ 8,831 $ 5,096 $ 446,604
=========== ========= ========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 9,560 $ 946 ($550) (B) $ 9,956
Short-term debt 61,365 0 7,719 (C) 69,084
Accounts payable and accrued expenses 54,255 3,351 373 (A),(C) 57,979
Accrued and deferred income taxes 4,090 171 4,261
----------- --------- --------- -----------
Total current liabilities 129,270 4,468 7,542 141,280
Long-term debt 77,842 3,044 (1,507) (B) 79,379
Deferred income taxes 23,797 0 380 (C) 24,177
Other non-current liabilities 9,798 0 9,798
Stockholders' equity 191,970 1,319 (1,319) (C) 191,970
----------- --------- --------- -----------
Total liabilities and stockholders' equity $ 432,677 $ 8,831 $ 5,096 $ 446,604
=========== ========= ========= ===========
</TABLE>
F-19
<PAGE>
<TABLE>
<CAPTION>
A.L. LABORATORIES, INC.
PRO-FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
(In thousands, except per share data)
A.L.
LABORATORIES MIKJAN PRO FORMA PRO FORMA
HISTORICAL CORPORATION ADJUSTMENTS COMBINED
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total revenue $ 338,230 $ 25,907 $ (1,568) (D) $ 362,569
Cost of sales 207,573 21,762 (3,963) (D),(H) 225,372
------------ ---------- ---------- -----------
Gross profit 130,657 4,145 2,395 137,197
Selling, general and administrative expenses 109,733 2,292 2,809 (D),(F),(H) 114,834
------------ ---------- ---------- -----------
Operating income 20,924 1,853 (414) 22,363
Interest expense (6,598) (297) (292) (E),(G) (7,187)
Other income (expense), net 498 49 (188) (E) 359
------------ ---------- ---------- -----------
Income before provision for income taxes 14,824 1,605 (894) 15,535
Provision for income taxes 6,203 589 (220) (F), (G) 6,572
------------ ---------- ---------- -----------
Net income $ 8,621 $ 1,016 $ (674) $ 8,963
============ ========= ========== ===========
Average common shares outstanding:
Primary 21,510 21,510
Fully diluted 21,581 21,581
Earnings per share:
Primary $ 0.40 $ 0.42
Fully diluted $ 0.40 $ 0.42
</TABLE>
F-20
<PAGE>
<TABLE>
<CAPTION>
A.L. LABORATORIES, INC.
PRO-FORMA COMBINED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1994
(In thousands, except per share data)
A.L.
LABORATORIES MIKJAN PRO FORMA PRO FORMA
HISTORICAL CORPORATION ADJUSTMENTS COMBINED
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total revenue $ 185,370 $ 13,033 $ (771) (D) $ 197,632
Cost of sales 114,591 11,115 (1,951) (D),(H) 123,755
------------ ----------- ----------- -----------
Gross profit 70,779 1,918 1,180 73,877
Selling, general and administrative expenses 59,018 936 1,387 (D),(F),(H) 61,341
------------ ----------- ----------- -----------
Operating income 11,761 982 (207) 12,536
Interest expense (3,666) (123) (175) (E),(G) (3,964)
Other income (expense), net (64) 0 (85) (E) (149)
------------ ----------- ----------- -----------
Income before provision for income taxes 8,031 859 (467) 8,423
Provision for income taxes 3,204 295 (118) (F),(G) 3,381
------------ ----------- ----------- -----------
Net income $ 4,827 $ 564 $ (349) $ 5,042
============ =========== =========== ===========
Average common shares outstanding:
Primary 21,554 21,554
Fully diluted 21,590 21,590
Earnings per share:
Primary $ 0.22 $ 0.23
Fully diluted $ 0.22 $ 0.23
</TABLE>
F-21
<PAGE>
A.L. LABORATORIES, INC.
Notes to Unaudited Pro Forma Condensed
Combined Financial Statements
(In thousands of dollars)
1. Basis of Presentation
---------------------
The unaudited pro forma condensed combined financial statements (pro forma
financials) are presented for illustrative purposes only, giving effect to the
acquisition, as described and therefore are not necessarily indicative of the
operating results and financial position that might have been achieved had the
combination occurred as of an earlier date, nor are they necessarily indicative
of operating results and financial position which may occur in the future.
On July 21, 1994, the Company acquired the stock of the Mikjan Corporation
(hereinafter referred to as "Wade Jones Company" or "Wade Jones".) The Wade
Jones Company is a major distributor of Poultry Animal Health products with
headquarters in Lowell, Arkansas and five other facilities. In addition, Wade
Jones manufactures and blends certain Animal Health products. The purchase
agreement required a purchase price of approximately $8,200 and provides for
contingent payments based on certain product approvals.
The acquisition will be accounted for in accordance with the purchase method.
The accompanying unaudited pro forma condensed combined financial statements
reflect the acquisition as if it occurred as of the beginning of the periods
presented for the income statements and as of June 30, 1994 for the balance
sheet presented. The Wade Jones Company presently has a fiscal year which ends
on the Saturday closest to September 30. Accordingly, the pro forma financials
consolidate the results of operations for the fiscal year ended October 2, 1993
with the Company's year ended December 31, 1993 and the results of operations
for the period October 3, 1993 to March 31, 1994 with the Company's six month
results of operations as of June 30, 1994.
For the pro forma balance sheet the unaudited Wade Jones balance sheet dated
June 30, 1994 has been consolidated with the balance sheet of the Company dated
June 30, 1994.
The actual results of Wade Jones will be consolidated with the Company from
the date of acquisition.
The pro forma balance sheet includes a preliminary allocation of the purchase
price which will be adjusted during the allocation period based on a detail
review of the assets and liabilities acquired.
F-22
<PAGE>
Transactions between the Company and Wade Jones Company
- - -------------------------------------------------------
The Company and Wade Jones Company have engaged in a number of transactions
during prior years including Wade Jones distributing the Company's primary
Animal Health products to the poultry industry and blending certain of the
Company's products.
In addition the Company has provided financing to the Wade Jones Company at
market interest rates.
In preparing the pro forma financials these transactions are designated
intercompany and eliminated.
Pro Forma Adjustments Balance Sheet June 30, 1994
- - -------------------------------------------------
The unaudited pro forma balance sheet gives effect to the acquisition as if it
had been consummated on June 30, 1994.
(A) To eliminate intercompany payables and receivables of $127.
(B) To eliminate intercompany loan of $2,057. (Current portion $550.)
(C) To record the purchase of Wade Jones and record a preliminary
estimated purchase price allocation:
<TABLE>
<CAPTION>
Purchase price: Recorded as
-----------
<S> <C> <C>
Paid in cash $7,719 Short term debt
Hold back amounts 500 Accounts payable
------
8,219
Wade Jones equity @ 6/30/94 1,319
------
Amount to be allocated $6,900
======
Allocated as follows:
Property, plant & equipment $1,000
Deferred tax (380)
Intangible assets/excess
of cost over net book value 6,280
------
$6,900
======
</TABLE>
F-23
<PAGE>
Pro forma adjustments - Income statements for the year ended December 31,
-------------------------------------------------------------------------
1993 and six months ended June 30, 1994.
- - ----------------------------------------
The unaudited pro forma income statements assume the purchase as of the
beginning of each period presented. The adjustments are as follows:
<TABLE>
<CAPTION>
December June 30
31, 1993 1994
-------- -------
<S> <C> <C> <C>
(D) Sales (1,568) (771)
Cost of sales (1,163) (551)
SG&A (405) (220)
To eliminate intercompany transactions.
(E) Interest income (188) (85)
Interest expense 188 85
To eliminate interest income
to A.L. and expense to Wade Jones
(F) Depreciation expense 100 50
Tax benefit @ 38% (38) (19)
Amortization of intangibles 314 157
To record depreciation on an
estimated fixed asset write up
based on a 10 year life.
To record amortization of intangibles
based on a 20 year life.
(Both are included in selling,
general and administrative expenses.)
(G) Interest expense
@ 6.0% 1993 (480)
@ 6.5% 1994 (260)
Tax benefit @ 38% (182) (99)
To record interest expense on
assumed average borrowings of $8,000
and related tax benefit.
For each 1/4% change in interest rates
interest expense would increase/decrease
by $20.
(H) Cost of goods sold (reduction) (2,800) (1,400)
Selling general & administrative
increase 2,800 1,400
To reclassify certain expenses between
cost of goods sold and SG&A to conform
Wade Jones classifications to the Company.
</TABLE>
F-24
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 1994
<TABLE>
<CAPTION>
The Related Pro
Company Norwegian Pro Forma Forma
Proforma Businesses Adjustments Combined
-------- ---------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,736 $ 2,820 -- $ 9,556
Accounts receivable, net 79,612 15,698 $(2,201)(a) 93,109
Inventories 85,248 11,528 (1,075)(b) 95,701
Prepaid expenses and other current assets 6,521 1,318 -- 7,839
-------- -------- -------- --------
Total current assets 178,117 31,364 (3,276) 206,205
Property, plant and equipment, net 137,030 57,402 (250)(b) 194,182
Intangible assets, net 120,545 20,659 -- 141,204
Other assets and deferred charges 10,912 6,321 (1,000)(c) 16,233
-------- -------- -------- --------
Total assets $446,604 $115,746 $(4,526) $557,824
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 9,956 $ 7,254 -- $ 17,210
Short-term debt 69,084 215 -- 69,299
Accounts payable, accrued expenses and
income taxes 62,240 10,955 $(1,978)(a)(b)(c) 71,217
-------- -------- -------- --------
Total current liabilities 141,280 18,424 (1,978) 157,726
Long-term debt 79,379 65,157 25,115(c) 169,651
Deferred income taxes 24,177 6,733 -- 30,910
Other non-current liabilities 9,798 3,466 -- 13,264
Stockholders' equity 191,970 21,966 (27,663)(d)(e) 186,273
-------- -------- -------- --------
Total liabilities and stockholders'
equity $446,604 $115,746 $(4,526) $557,824
======== ======== ======== ========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
F-25
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
The Related
Company Norwegian Pro Forma Pro Forma
Proforma Businesses Adjustments Combined
-------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Total revenue $362,569 $78,467 $(14,022)(a) $427,014
Cost of sales 225,372 37,890 (12,040)(a)(b)(d) 251,222
-------- ---------- ----------- ---------
Gross profit 137,197 40,577 (1,982) 175,792
Selling, general and administrative expenses 114,834 31,978 (2,673)(a) 144,139
-------- ---------- ----------- ---------
Operating income 22,363 8,599 691 31,653
Interest expense (7,187) (8,398) -- (15,585)
Other income (expense), net 359 1,382 -- 1,741
-------- ---------- ----------- ---------
Income before provision for income taxes 15,535 1,583 691 17,809
Provision for income taxes 6,572 575 191 (e) 7,338
-------- ---------- ----------- ---------
Net income 8,963 1,008 500 10,471
======== ========== =========== =========
Average common shares outstanding:
Primary 21,510 21,510
Fully diluted 21,581 21,581
Earnings per share:
Primary $0.42 $0.49
Fully diluted $0.42 $0.49
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
F-26
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1994
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
The Related
Company Norwegian Pro Forma Pro Forma
Proforma Businesses Adjustments Combined
-------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Total revenue $197,632 $41,694 $(8,726)(a) $230,600
Cost of sales 123,755 19,839 (6,826)(a)(b)(d) 136,768
-------- ---------- ----------- ---------
Gross profit 73,877 21,855 (1,900) 93,832
Selling, general and administrative expenses 61,341 16,363 (1,550)(a) 76,154
-------- ---------- ----------- ---------
Operating income 12,536 5,492 (350) 17,678
Interest expense (3,964) (3,182) -- (7,146)
Other income (expense), net (149) 242 -- 93
-------- ---------- ----------- ---------
Income before provision for income taxes 8,423 2,552 (350) 10,625
Provision for income taxes 3,381 773 (102)(e) 4,052
-------- ---------- ----------- ---------
Net income $ 5,042 $ 1,779 $ (248) $ 6,573
======== ========== =========== =========
Average common shares outstanding:
Primary 21,554 21,554
Fully diluted 21,590 21,590
Earnings per share:
Primary $0.23 $0.30
Fully diluted $0.23 $0.30
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
F-27
<PAGE>
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
(in thousands, except shares and per share data)
1. Basis of Presentation
The unaudited pro forma condensed combined financial statements ("pro forma
financials") are presented for illustrative purposes only, giving effect to the
planned RNB Acquisition and therefore are not necessarily indicative of the
financial position that might have been achieved had the combination occurred as
of an earlier date, nor are they necessarily indicative of the financial
position which may occur in the future. In accordance with the rules of the
Commission, the Company has been required to present pro forma combined income
statements of the Company combined with the Mikjan Corporation (the Company
combined with the Mikjan Corporation is referred to as the "Company Proforma")
and the Related Norwegian Businesses as if a pooling of interests was
consummated at the beginning of the earliest period presented. The pro forma
results of operations presented are therefore not indicative of the results of
---
the combined companies that might have been achieved had the combination
occurred as of an earlier date nor are they indicative of results which may
occur in the future since to effect the RNB Acquisition the cash consideration
paid would have resulted in interest expense in each of the periods presented.
The pro forma financials give effect to the RNB Acquisition as a transfer
and exchange between companies under common control. Accordingly, the assets
and liabilities of the Related Norwegian Businesses will be combined with the
Company Proforma at their historical costs in a manner similar to a pooling-of-
interests. Upon restatement of the combined consolidated balance sheet the
initial period presented will reflect the addition of the net equity of the
Related Norwegian Businesses as of that date as an increase in consolidated
equity and the subsequent payment of consideration by the Company for the
Related Norwegian Businesses as a reduction in consolidated equity.
The pro forma financials assume that the New A. L. Oslo shareholders will
tender 100% of the New A. L. Oslo shares in the Exchange Offer. If, however,
less than 100% but more than 90% of the New A. L. Oslo shares were tendered in
the Exchange Offer, the Company does not believe that the cost of acquiring the
remaining outstanding New A. L. Oslo shares would significantly affect the pro
forma financials.
Because the Transactions have not been completed and transition plans are
not finalized, and the benefits and costs of integrating certain operations
cannot be estimated with reasonable assurance, the pro forma combined income
statements for the periods exclude the financial impact of benefits expected to
be achieved upon combining the resources of the companies and any special
charges or other costs to achieve these benefits. As a result of the RNB
Acquisition, there may be a restructuring charge taken in the fourth quarter of
1994. Such a charge and its magnitude have yet to be determined. The Company
expects to operate as a pharmaceutical and animal health company and will be
managed on a global basis through decentralized strategic business units (or
divisions) ("SBU's"). It is anticipated that by the end of August 1994 key
executives will be named by the Chief Executive Officer of the Company to head
the SBU's. Each SBU head will begin a study of their business to determine what
actions may be taken to realize potential synergies of the RNB Acquisition and
to maximize both the SBU and the Company's global competitive position. Such
actions may include rationalization of the combined businesses. At the
conclusion of these studies, the head of each SBU working with the Chief
Executive Officer of the Company will make appropriate recommendations to the
Company's Board of Directors. It is anticipated that the Company's Board of
Directors will decide on recommended actions by December 31, 1994. Given the
timing of this plan, the financial impact of the actions that may be taken as a
result of such studies and the related action of the Company's Board of
Directors are not estimable at this time. The pro forma income statements for
the periods also exclude investment banking, legal, accounting and other
transaction expenses, including the expensing of debt issuance costs related to
existing debt expected to be refinanced, and tax effects relating to the
combination to be incurred and recorded by the Company subsequent to the signing
of the Restructuring Agreement in May 1994, estimated to be
F-28
<PAGE>
up to $3,600 after tax. Tax effects of the combination will include the non-
deductibility for tax purposes of a majority of the expenses previously incurred
or to be incurred to complete the RNB Acquisition.
The pro forma condensed combined balance sheet as of June 30, 1994 includes,
in accordance with the reporting rules of the Commission, the impact of all
transactions, whether of a recurring or non-recurring nature, that can be
reasonably reflected and should be reflected as of that date. Therefore,
current liabilities and long-term debt have been increased by $600 and $2,000,
respectively, and other assets and deferred charges have been reduced by $1,000.
Such adjustments represent an estimate of the investment banking, legal,
accounting and other transaction expenses, including the expensing of debt
issuance costs related to existing debt expected to be refinanced, and tax
effects relating to the combination expected to be incurred and recorded by the
Company subsequent to the signing of the Restructuring Agreement in May 1994 and
as a result of the planned refinancing of the existing debt.
2. Transactions between the Company and the Related Norwegian Businesses
The Company and the Related Norwegian Businesses have engaged in and will
continue to engage in a number of transactions including inventory purchased
from the Related Norwegian Businesses, license fees for technology paid to the
Related Norwegian Businesses and sales from the Company to the Related Norwegian
Businesses.
As a result, current amounts are generally payable from the Company to the
Related Norwegian Businesses for inventory and license fees. When the companies
are combined, the profit related to inventory purchased from either party will
be deferred or recognized depending on the amount on hand and the change in the
amounts from the preceding period.
Upon consummation of the combination these transactions will be intercompany
in nature and will be eliminated in preparing the consolidated accounts.
Accordingly, in the preparation of the pro forma financials these transactions
are designated as "intercompany" and are eliminated.
3. Translation of Related Norwegian Businesses Financial Information
The Related Norwegian Businesses financial information is maintained and
translated where applicable into Norwegian kroner. For purposes of the pro
forma financials, (a) the balance sheet at June 30, 1994 in Norwegian kroner has
been translated into United States dollars at the quarter end rate of NOK 6.9219
to $1.00; and (b) the income statements for the year ended December 31, 1993 and
for the six-month period ended June 30, 1994 have been translated by first
converting the income statements for each quarter in the period presented using
the average exchange rate for such quarter and then aggregating the converted
income statements for all of the quarters in such period. The average exchange
rates for each of the quarters in the year ended December 31, 1993 and the six
months ended June 30, 1994 were as follows:
<TABLE>
<CAPTION>
Average Exchange Rate
----------------------
1993 1994
-------- --------
<S> <C> <C>
1st Quarter.......... 6.8954 7.4070
2nd Quarter.......... 6.8740 7.1239
3rd Quarter.......... 7.2716
4th Quarter.......... 7.3419
</TABLE>
F-29
<PAGE>
4. Earnings Per Common Share -- Pro Forma
The pro forma earnings per common share computations are based on historical
average common shares outstanding and income from continuing operations as
presented on a pro forma basis.
To reflect the effect of the consideration to be paid, the Company has
presented a supplemental computation of earnings per common share with earnings
being decreased by imputed interest expense net of taxes based on the proposed
cash consideration of $23,115 at a 7% interest rate and has reflected the
3,600,000 Warrants to be issued as part of the Transactions as outstanding
(assuming an exercise price of $20) for all periods presented. It should be
noted that the impact of the Warrants was either antidilutive or not material
for all periods presented.
Supplemental fully diluted earnings per share for the periods presented is
as follows:
<TABLE>
<CAPTION>
Year ended Six Months
December 31, 1993 ended June 30, 1994
----------------- -------------------
<S> <C> <C>
Earnings per share -- fully diluted.. $.44 $.28
</TABLE>
5. Pro Forma Adjustments -- Balance Sheet at June 30, 1994
The unaudited pro forma balance sheet gives effect to the RNB Acquisition as
if it had been consummated on June 30, 1994. The adjustments are as follows:
(a) To eliminate intercompany receivable and payable of $2,201.
(b) To eliminate profit in inventory on intercompany sales of $1,075, profit
on intercompany sale of equipment of $250, and the tax effect related
thereto of $377.
(c) To reflect additional long-term debt expected to be incurred by the
Company as part of a refinancing in order to pay the Cash Purchase Price
pursuant to the Restructuring Agreement, NOK 160,000 ($23,115 at June
30, 1994 exchange rates), and estimated transaction expenses, including
the expensing of debt issuance costs related to existing debt expected
to be refinanced, of $3,600 after tax. The Company expects to obtain
long-term financing to complete the Transactions by the Closing Date.
For purposes of the pro forma financials, $2,000 of the $3,600
transaction expenses are assumed to be financed at Closing. The $3,600
of transaction expenses are reflected as a decrease in other assets and
deferred charges of $1,000, an increase in accounts payable, accrued
expenses and income taxes of $600, and an increase in long-term debt of
$2,000.
F-30
<PAGE>
(d) To reflect the reduction of stockholders' equity relating to the
consideration paid of $29,667 by the Company to the holders of New A. L.
Oslo shares to acquire the Related Norwegian Businesses. The reduction of
stockholders' equity is offset by the recording of the Warrants as an
increase to stockholders' equity. The net effect is a reduction of
stockholders' equity of $23,115 (as detailed below).
Calculation of Consideration Paid:
<TABLE>
<CAPTION>
Entries in Stockholders' Equity
---------------------------------
Additional
Consideration Retained Paid in
Paid Earnings Capital Total
------------- -------- ---------- --------
<S> <C> <C> <C> <C>
(reduction) increase
Cash (NOK 160,000, at
exchange rate of NOK
6.9219 to $1.00)......... $23,115 -- $(23,115) $(23,115)
Warrants (3,600,000 @
$1.82)..................... 6,552 $(6,552) 6,552 0
------------- -------- ---------- --------
$29,667 $(6,552) $(16,563) $(23,115)
======== ==========
Net book value of Related
Norwegian Businesses....... 21,966 21,966
------------- --------
Excess of total
consideration paid over Excess of cash paid over
net book value of the net book value of the
Related Norwegian Related Norwegian
Businesses................ $ 7,701 Businesses.............. $ 1,149
============= ========
</TABLE>
The actual amount by which the total consideration and cash to be paid
will exceed the net book value of the Related Norwegian Businesses at the date
the RNB Acquisition is consummated will be determined by the exchange rate in
effect on such date and the actual net book value of the Related Norwegian
Businesses on such date.
For purposes of the pro forma financials, the Warrants have been valued
at $1.82 each. The $1.82 value is the average of the range ($1.36 to $2.27)
determined by the Special Committee's financial advisor, Lehman Brothers, based
on the 26-week observed volatility of the Class A Shares assuming up to a 40%
discount. Based on different hypothetical assumptions, Lehman Brothers observed
additional Black-Scholes Model ranges for valuation of the Warrants of between
$.90 and $3.41. The Company chose the average of $1.82 because it was based on
actual Class A Share volatility and on generally recognized variations between
Black-Scholes theoretical values and actual trading values. A wide range of
different valuations is possible depending on the chosen assumptions.
A. L. Oslo's financial advisor, Bear, Stearns & Co. Inc., had estimated
the value of the Warrants to be in a range of $2.93 to $3.30 using the
Black-Scholes Model, assuming a $14.00 market price of the Class A Shares and a
4.5 year exercise period for the Warrants. The difference in the Warrant
valuation is primarily due to varying assumptions relating to the expected
future volatility of the market price of Class A Shares and discounts
attributable to marketability.
Each $.25 change in the value of the Warrants will result in a $900
corresponding change in the consideration to be paid by the Company for the
Related Norwegian Businesses. However, the final value attributed to the
Warrants for accounting purposes will not result in any change in total
---
stockholders' equity since the difference in the value will be reflected as a
change in the amount of the stockholder's equity reduction related to the RNB
Acquisition offset by the change in the increase in equity relating to recording
the
F-31
<PAGE>
issuance of the Warrants. The actual value of the Warrants will be
determined by the actual performance of the Class A Shares as traded in
the public market over the period that the Warrants are outstanding.
(e) To record the net effect after tax to retained earnings of:
<TABLE>
<S> <C>
Profit in inventory and intercompany
equipment sale elimination (948)
Transaction expenses including related taxes (3,600)
------
(4,548)
======
</TABLE>
F-32
<PAGE>
6. Pro Forma Adjustments - Income Statements for the Year Ended December 31,
1993 and Six Months Ended June 30, 1994.
The unaudited pro forma income statements give effect to the RNB
Acquisition as if it were a pooling of interests. The adjustments are as
follows:
<TABLE>
<CAPTION>
December 31, 1993 June 30, 1994
----------------- -------------
<S> <C> <C> <C>
(a) To eliminate intercompany
transactions:
Sales and other revenues $(14,022) $(8,726)
Cost of sales (11,349) (7,176)
Selling, general and
administrative (2,673) (1,550)
(b) To record rollover of profit
in inventory at period end
Cost of goods sold -
(reduction) increase $ (617) $ 426
(c) To reverse the intercompany
profit realized on the sale of
certain equipment by the
Related Norwegian Businesses
to the Company -- --
(d) To reverse depreciation on the
equipment purchased from the
Related Norwegian Businesses $ (74) $ (76)
(e) Estimated tax effect related
to the cost of goods sold
adjustment and the profit and
depreciation related to the
equipment sales. $ (191) $ 102
</TABLE>
As previously disclosed the unaudited pro forma income statements do not
include an adjustment for interest expense related to the cash consideration
to be paid by the Company to the shareholders of New A. L. Oslo. Assuming
cash consideration of $23,115 and an interest rate of 7%, interest expense
after tax would have decreased net income by approximately $1,000 in 1993 and
$500 for the six months ended June 30, 1994.
F-33
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Document Page
- - ------------ --------------------------------- ----
<S> <C> <C>
2.1 Stock Purchase Agreement, dated *
as of July 20, 1994, by and among
Mikjan Corporation, Wade Jones
Company, Inc., Mick Wagner, Jan
Powell, the Mick Wagner
Charitable Remainder Unitrust,
the Jan Powell Charitable
Remainder Unitrust, A.L.
Laboratories, Inc. and G.F.
Reilly, Inc. (with respect to
Section 9.12 thereof only).
99.1 Press Release, dated July 21, *
1994 (A.L. Laboratories, Inc.).
99.2 Press Release, dated July 21, *
1994 (A.L. Laboratories, Inc. -
Animal Health Division).
</TABLE>
- - ------------
* Previously filed in the Company's Current Report on Form 8-K dated August
4, 1994.
