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): OCTOBER 10, 1995
GILBERT ASSOCIATES, INC.
- -------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-12588 23-2280922
- -------- ------- ----------
(STATE OF INCORPORATION) (COMMISSION FILE NO.) (IRS EMPLOYER I.D. NO.)
P.O. BOX 1498, READING, PENNSYLVANIA 19603
- ------------------------------------ -----
(MAILING ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(610) 775-5900
------------------------------
(REGISTRANT'S TELEPHONE NO., INCLUDING AREA CODE)
<PAGE>
On October 27, 1995, the Company consummated the acquisition of XEL Corporation
(XEL).In accordance with Item 7 of Form 8-K, the Company is now filing the
audited financial statements and pro forma information for the Company and XEL
which were not available at the time of the original Form 8-K filing for such
transaction.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) The following financial statements of XEL are included as a separate section
of this report:
Report of Independent Public Accountants
Balance Sheets - December 31, 1994 and December 31, 1993
Consolidated Statements of Income - Years ended December 31, 1994, 1993
and 1992
Consolidated Statement of Shareholders' Investment - Years ended
December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows - Years ended December 31, 1994,
1993 and 1992
Notes to Consolidated Financial Statements - Years ended December 31,
1994, 1993 and 1992
Unaudited Condensed Consolidated Balance Sheet - September 29, 1995
Unaudited Condensed Consolidated Statements of Income - Nine months
ended September 29, 1995 and September 29, 1994
Unaudited Condensed Consolidated Statement of Stockholders' Equity -
September 29, 1995
Unaudited Condensed Consolidated Statements of Cash Flow - Nine months
ended September 29, 1995 and September 29, 1994
Note to Unaudited Consolidated Condensed Financial Statements - Nine
months ended September 29, 1995
(b) The following prof forma information for the Company is included as a
separate section of this report:
Introduction to Pro Forma Unaudited Condensed Financial Statements
Pro Forma Unaudited Condensed Consolidated Balance Sheet -
September 29, 1995
Pro Forma Unaudited Condensed Consolidated Statements of Operations -
Nine Months Ended September 29, 1995 and the Year Ended December 30,
1994
Notes to Pro Forma Unaudited Condensed Consolidated Financial
Statements as of September 29, 1995 and December 30, 1994
(c) Exhibit 23 - Consent of Independent Public Accountants
<PAGE>
XEL CORPORATION AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1994, 1993 AND 1992
TOGETHER WITH REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Shareholders of XEL Corporation:
We have audited the accompanying consolidated balance sheets of XEL CORPORATION
(a Colorado corporation) and subsidiary as of December 31, 1994 and 1993, and
the related consolidated statements of income, shareholders' investment and cash
flows for each of the three years in the period ended December 31, 1994. 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 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 provide 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 XEL Corporation and subsidiary
as of December 31, 1994 and 1993, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles.
As discussed in Note 7 to the financial statements, effective January 1, 1992,
the Company changed its method of accounting for income taxes.
Denver, Colorado,
February 17, 1995.
XEL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1994 AND 1993
(Amounts in thousands except share amounts)
ASSETS 1994 1993
CURRENT ASSETS:
Cash and cash equivalents $ 2,764 $ 1,496
Short-term investments 54 468
Receivables-
Trade, net 4,545 3,594
Due from inventory subcontractors 28 954
Inventories, net of reserve for obsolescence
of approximately $224 and $206 in
1994 and 1993, respectively 7,429 4,068
Deferred income tax asset 468 277
Other 200 99
--------- ---------
Total current assets 15,488 10,956
--------- ---------
PROPERTY AND EQUIPMENT, at cost 8,235 4,815
Less- Accumulated depreciation (3,814) (3,292)
--------- ---------
4,421 1,523
--------- ---------
OTHER ASSETS, net 87 89
--------- ---------
Total assets $19,996 $12,568
========= =========
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
XEL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1994 AND 1993
(Amounts in thousands except share amounts)
LIABILITIES AND SHAREHOLDERS' INVESTMENT 1994 1993
CURRENT LIABILITIES:
Accounts payable $ 2,915 $ 2,423
Accrued payroll and related taxes 808 531
Accrued warranty 499 312
Other accrued liabilities 550 505
Customer deposits - 928
Current portion of debt and capital lease obligations 293 94
Current portion of subordinated notes payable
to shareholders 333 667
--------- ---------
Total current liabilities 5,398 5,460
DEFERRED TAX LIABILITY 301 35
LONG-TERM DEBT AND CAPITAL LEASES, net of current portion 1,755 5
SUBORDINATED NOTES PAYABLE TO SHAREHOLDERS - 333
OTHER LIABILITIES 230 130
--------- ---------
Total liabilities 7,684 5,963
--------- ---------
COMMITMENTS AND CONTINGENCIES (Notes 4, 5, 6, and 10)
SHAREHOLDERS' INVESTMENT:
Common stock, $.10 par value; 7,500,000 shares
authorized; 1,944,123 and 1,733,513 shares
issued, respectively 194 173
Additional paid-in capital 1,614 1,035
Treasury stock, 43,800 and 8,100 shares of common,
respectively, at cost (212) (16)
Retained earnings 10,716 5,413
--------- ---------
Total shareholders' investment 12,312 6,605
--------- ---------
Total liabilities and shareholders' investment $19,996 $12,568
========= =========
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
XEL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(Amounts in thousands except share amounts)
1994 1993 1992
NET SALES $52,283 $23,589 $16,794
COST OF SALES 36,640 15,822 10,894
--------- --------- ---------
Gross profit 15,643 7,767 5,900
--------- --------- ---------
OPERATING EXPENSES:
Research and development 3,337 2,247 1,749
Selling and marketing 3,017 2,107 1,617
General and administrative 743 548 460
--------- --------- ---------
7,097 4,902 3,826
--------- --------- ---------
Income from operations 8,546 2,865 2,074
--------- --------- ---------
OTHER INCOME (EXPENSE):
Interest income 76 56 64
Interest expense (130) (152) (138)
Other, net 104 45 1,209
--------- --------- ---------
50 (51) 1,135
--------- --------- ---------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 8,596 2,814 3,209
INCOME TAX PROVISION (3,293) (1,067) (690)
--------- --------- ---------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 5,303 1,747 2,519
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE (Note 7) - - 412
--------- --------- ---------
NET INCOME $ 5,303 $ 1,747 $ 2,931
========= ========= =========
EARNINGS PER COMMON AND COMMON EQUIVALENT
SHARE (Note 2):
Income before cumulative effect of
change in accounting principle $2.70 $1.07 $1.26
Cumulative effect of change
in accounting principle - - .21
------ ------ ------
Primary $2.70 $1.07 $1.47
Fully Diluted $2.39 $ .87 $1.24
The accompanying notes to consolidated financial statements
are an integral part of these statements.
<TABLE>
XEL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(Amounts in thousands except share amounts)
Additional Common Total
Common Stock Paid-in Stock in Retained Shareholders'
Shares Amount Capital Treasury Earnings Investment
<S> <C> <C> <C> <C> <C> <C>
BALANCES, December 31,
1991 1,417,600 $142 $ 166 $ (18) $ 735 $ 1,025
Net income - - - - 2,931 2,931
------------ ----- ------ ----- --------- ---------
BALANCES, December 31,
1992 1,417,600 142 166 (18) 3,666 3,956
Conversion of preferred
stock to common stock 210,610 21 579 - - 600
Conversion of subordinated
debt to common stock 105,303 10 290 - - 300
Exercise of stock options - - - 2 - 2
Net income - - - - 1,747 1,747
------------ ----- ------- ---- --------- ---------
BALANCES, December 31,
1993 1,733,513 173 1,035 (16) 5,413 6,605
Conversion of subordinated
debt to common stock 210,610 21 579 - - 600
Repurchase of stock
(Note 10) - - - (225) - (225)
Exercise of stock options - - - 29 - 29
Net income - - - - 5,303 5,303
------------ ----- ------- ----- --------- ---------
BALANCES, December 31,
1994 1,944,123 $194 $1,614 $(212) $10,716 $12,312
============ ===== ======= ====== ======== =========
The accompanying notes to consolidated financial statements
are an integral part of these statements.
</TABLE>
XEL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(Amounts in thousands)
1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,303 $ 1,747 $ 2,931
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities-
Depreciation and amortization 603 392 328
Loss (gain) on disposal of assets 119 (6) -
Changes in assets and liabilities-
Receivables (25) (2,634) (2,174)
Income tax refund - - 44
Inventories (3,361) (1,924) (561)
Deferred income taxes, net 75 230 (334)
Other current assets (101) 5 (36)
Other assets (23) (41) (17)
Accounts payable and accrued liabilities 1,001 1,114 975
Customer deposits (928) 228 700
Other liabilities 100 (13) 9
Other - 85 -
-------- -------- --------
Total adjustments (2,540) (2,564) (1,066)
-------- -------- --------
Net cash provided by (used in) operating
activities 2,763 (817) 1,865
-------- -------- --------
CASH FLOWS (USED IN) PROVIDED BY INVESTING
ACTIVITIES:
Proceeds from life insurance - 1,188 -
Purchases of property and equipment (3,295) (539) (638)
Proceeds from sale of fixed assets 1 12 14
Net sales (purchases) of short-term
investments 414 (47) 375
-------- -------- --------
Net cash (used in) provided by
investing activities (2,880) 614 (249)
-------- -------- --------
CASH FLOWS PROVIDED BY (USED IN) FINANCING
ACTIVITIES:
Proceeds from issuance of debt $ 2,245 $ - $ -
Net repayments on debt and capital leases (597) (202) (19)
Repayments on subordinated notes payable (67) (367) -
Redemption of preferred stock (Note 5) - (67) (667)
Repurchase of stock (Note 10) (225) - -
Proceeds from exercise of stock options 29 2 -
-------- -------- --------
Net cash provided by (used in)
financing activities 1,385 (634) (686)
-------- -------- --------
Net increase (decrease) in cash
and cash equivalents 1,268 (837) 930
CASH AND CASH EQUIVALENTS, beginning of year 1,496 2,333 1,403
-------- -------- --------
CASH AND CASH EQUIVALENTS, end of year $ 2,764 $ 1,496 $ 2,333
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Redemption of preferred stock for subordinated notes
payable (Note 5) $ - $ - $ 667
Conversion of preferred stock
for common stock $ - $ 600 $ -
Conversion of subordinated notes payable for
common stock $ 600 $ 300 $ -
Capital leases incurred for equipment $ 301 $ - $ 269
The accompanying notes to consolidated financial statements
are an integral part of these statements.
XEL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
(1) ORGANIZATION AND BUSINESS
XEL Corporation (the "Company") through its wholly owned subsidiary, XEL
Communications, Inc., designs, manufactures and markets certain transmission,
signaling and data transmission products and systems for the telecommunications
industry.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary, XEL Communications, Inc. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
Reclassifications
Certain prior year amounts have been reclassified to conform to the 1994
presentation.
Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, the Company considers
all highly liquid cash investments with original maturities of three months or
less to be cash equivalents.
Short-term Investments
Short-term investments consist of government bonds stated at cost which
approximates market.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market and consist of the following (in thousands):
December 31
1994 1993
Raw materials $3,965 $3,233
Work-in-process and finished goods,
net of reserve for obsolescence 3,464 835
------- -------
$7,429 $4,068
Property and Equipment
Depreciation of property and equipment is provided using the straight-line
method over estimated useful lives as follows:
Lives (In Years)
Computers and manufacturing equipment 2 to 5
Furniture and fixtures 5 to 7
Building 39
Building equipment 2 to 5
Other 2 to 4
Property balances consist of the following (in thousands):
December 31
1994 1993
Land $ 821 $ -
Building 1,185 -
Computers and manufacturing equipment 5,065 3,896
Furniture and fixtures 535 455
Equipment 167 129
Other 462 335
------- -------
$8,235 $4,815
Intangible Assets
Amortization of intangible assets, which are included in other assets in the
financial statements, is provided using the straight-line method over an
estimated period of benefit of three years.
Research and Development Costs
Research and development costs are charged to expense as incurred and include
costs of supplies, direct labor and other direct and indirect costs.
Earnings Per Share
Earnings per common share were computed by dividing net income by the weighted
average number of common and common equivalent shares outstanding during each
year.
Weighted average shares outstanding used in the calculation of primary and fully
diluted earnings per share were 1,960,860 and 2,249,735 at December 31, 1994,
1,631,216 and 2,103,400 at December 31, 1993 and 1,991,694 and 2,402,167 at
December 31, 1992, respectively.
(3) DEBT AND CAPITAL LEASE OBLIGATIONS
Total debt and capital lease obligations consisted of the following:
December 31
1994 1993
(In thousands)
Mortgage payable on building $1,338 $ -
Mortgage payable on land 200 -
Note payable to City of Aurora 250 -
Capitalized lease obligations 260 99
------- -----
2,048 99
Less- Current portion (293) (94)
------- -----
Long-term debt and capital leases $1,755 $ 5
The Company has financed certain equipment purchases through capital lease
arrangements which mature at various dates through January 1999. Principal plus
interest (ranging from 8.8% to 13%) is paid monthly on the obligations. The
amounts due under these arrangements are collateralized by the related equipment
under the leasing arrangements.
During 1992, the Company established two bank lines of credit. A $1,500,000
line of credit, bearing interest at the prime rate plus 1.25% in 1992 and the
prime rate plus 1.00% in 1993 (7.00% at December 31, 1993) is secured by
accounts receivable and inventory. There were no amounts outstanding under this
line of credit at December 31, 1993 or 1992. The Company also had a line of
credit totaling $500,000 bearing interest at the prime rate plus 2.25% in 1992
which was secured by equipment. At December 31, 1992, the Company had $87,000
outstanding under this line of credit which was paid in 1993 when it expired.
The Company did not renew this line of credit of 1993. During 1994, the line of
credit was extended to $3,000,000 and bears interest at prime plus .75%.
Amounts borrowed under the line of credit are secured by accounts receivable and
inventories. There were no amounts outstanding under this line of credit at
December 31, 1994 or 1993.
In October 1994, the Company purchased a building and land for $1,750,000. The
mortgage payable plus interest at 8.5% is due in monthly installments through
November 2001. At December 31, 1994, approximately $1,338,000 was outstanding
on the mortgage payable.
In conjunction with the building purchase, the Company purchased land located
adjacent to the new building for $245,000. The mortgage payable plus interest
at 9% is due in annual installments through August 1997. At December 31, 1994,
approximately $200,000 was outstanding on the mortgage payable.
In December 1994, the Company borrowed $250,000 from the City of Aurora
("City"). The note, plus accrued interest at 6%, matures in December 1999. The
Company's obligation on the note is reduced for the amount of sales and use
taxes, as defined, paid to the city during the loan period. Additionally, the
Company has agreed to maintain certain levels of business, as defined, during
the loan period. At December 31, 1994, $250,000 was outstanding under this
note.
(4) OPERATING LEASE COMMITMENTS
The Company leases its office and manufacturing facilities under a noncancelable
lease agreement expiring in September 1997. The Company also leases various
other equipment under operating lease agreements which run through 1999.
Future minimum annual lease payments required under these leases, as of
December 31, 1994, are as follows (in thousands):
Year ending December 31-
1995 $ 365
1996 364
1997 298
1998 166
1999 153
-------
$1,346
Operating lease expense was approximately $280,000, $255,000 and $321,000 for
the years ended December 31, 1994, 1993 and 1992, respectively.
During 1994, the Company purchased a building (Note 3) and intends to move
in 1995. The existing facility has a lease commitment until 1997, however, the
Company intends to sublease the existing facility at an amount approximating the
current minimum lease payments until the lease expires.
(5) PREFERRED STOCK
Preferred shareholders are entitled to a liquidation preference of $4 per share
plus all declared and unpaid preferred stock dividends. The liquidation value
of the preferred stock at December 31, 1994, 1993 and 1992, was approximately
$0, $0 and $936,000, respectively. The preferred stock is noncumulative;
however, dividends must be paid on each preferred share before being paid on
common shares.
Under the amended preferred stock redemption agreement negotiated in 1990, the
Company was required to redeem one-sixth of the preferred stock on each June 30
and December 31 beginning in December 1990 and ending in June 1993. The
redemption price ($2.85 per share) may be paid 50% in cash, and 50% in debt,
however the required cash payment is limited to the greater of 45% of the cash
balance of the Company, or the cash balance of the Company less $500,000. In
the event the cash portion of the redemption is limited, as discussed above, the
portion unpaid will be included in the debt portion.
Debt incurred in the redemption of the preferred stock is unsecured, and bears
interest at 10% payable annually with the principal amount due three years from
the date of the redemption. All debt incurred in connection with the redemption
is convertible into common stock at the option of the holder at $2.85 per share.
A summary of the Series A Preferred Stock and convertible debt activity for 1993
and 1994 follows (in thousands):
Series A
Preferred Stock Convertible
Shares Amount Debt
Balances, December 31, 1991 702 $2,001 $1,000
Redemption of preferred stock on
June 30 and December 31, 1992- (468) - -
For cash - (667) -
For subordinated notes - (667) 667
------ ------ -------
Balances, December 31, 1992 234 667(a) 1,667
Redemption of preferred stock on
June 30, 1993-
For cash (23) (67) -
For common stock (211) (600) -
Repayments of subordinated notes payable-
For cash - - (367)
For common stock - - (300)
------ ------ -------
Balances, December 31, 1993 - - 1,000(a)
Repayments of subordinated notes payable-
For cash - - (67)
For common stock - - (600)
------ ------ -------
Balances, December 31, 1994 - $ - $ 333(a)
(a) These balances include the current debt maturities at December 31,
1994 and 1993 of $333,000 and $667,000, respectively.
(6) STOCK OPTIONS
The Company adopted an Equity Incentive Plan in 1994 for key officers, employees
and directors covering 250,000 shares of common stock. This Plan replaced both
the Nonqualified Stock Option Plan and the Incentive Stock Option Plan, both of
which expired in 1994 after a ten-year mandatory life.
As of December 31, 1994, 1993 and 1992, nonqualified stock options to purchase
85,500, 67,500 and 52,500 shares of common stock, respectively, were
outstanding. Of this number at December 31, 1994, options to purchase 67,500
shares of common stock at $2 per share were outstanding under the Nonqualified
Stock Option Plan and options to purchase 18,000 shares of common stock at $4
per share were outstanding under the Equity Incentive Plan. All options granted
vest over time periods up to two years and expire ten years after the grant
date.
Under the terms of both plans, the purchase price of incentive stock options
granted must be at least equal to the fair market value of the common stock at
the date of grant unless the purchaser owns more than 10% of the total combined
voting power of all classes of stock, in which case the purchase price must be
at least 110% of the fair market value at the date of grant. Options granted
vest over periods up to four years, and expire in 10 years.
Options granted under the incentive stock option plan are as follows:
Officers Employees Total
Balanced, December 31, 1991 174,934 33,642 208,576
Granted during the year 26,469 25,089 51,558
Canceled during the year - (3,659) (3,659)
Exercised during the year - - -
---------- ---------- ----------
Balances, December 31, 1992 201,403 55,072 256,475
Granted during the year 50,266 13,684 63,950
Canceled during the year - - -
Exercised during the year (900) - (900)
---------- ---------- ----------
Balances, December 31, 1993 250,769 68,756 319,525
Granted during the year 13,989 35,469 49,458
Canceled during the year - - -
Exercised during the year (14,200) (100) (14,300)
---------- ---------- ----------
Balances, December 31, 1994 250,558 104,125 354,683
Exercise price per share $2.00
Options exercisable at
December 31, 1994 297,100
Subsequent to December 31, 1994, 31,235 options under the incentive stock plan
were granted at an exercise price per share of $6.25.
(7) INCOME TAXES
The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS 109") effective January 1, 1992 resulting
in a $412,000 benefit which has been reported as a cumulative effect of a change
in accounting principle in the accompanying 1992 statement of income. SFAS 109
establishes accounting and reporting standards for recording the tax effects of
differences between the tax basis of assets and liabilities and their reported
amounts in the financial statements.
Deferred taxes are determined based on the estimated future tax effects of
differences between the financial statements and tax basis of assets and
liabilities given the provisions of the enacted tax laws. The net deferred tax
asset is comprised of the following (in thousands):
December 31, December 31, December 31,
1992 Change 1993 Change 1994
Current:
Accrued warranty $111 $ 4 $115 $ 76 $ 191
Obsolescence expense 31 7 38 48 86
Accrued vacation 59 56 115 37 152
Other 33 (24) 9 30 39
R&D tax credit 281 (281) - - -
----- ----- -----
Total current deferred
tax asset 515 277 468
----- ----- -----
Noncurrent:
Depreciation (43) (40) (83) (36) (119)
Deferred compensation - 48 48 8 56
Other - - - (238) (238)
----- ----- -----
Total noncurrent deferred
tax liability (43) (35) (301)
----- ----- -----
Total $472 $242 $ 167
The Company did not record any valuation allowances against deferred tax assets
at December 31, 1994, 1993 or 1992, as management expects these assets to be
realized against future taxable income.
Income tax expense for the years ended December 31, 1994, 1993 and 1992,
consists of the following (in thousands):
December 31
1994 1993 1992
Current tax expense $3,218 $ 837 $ 621
Deferred tax expense 75 230 69
------- ------- ------
Total income tax provision $3,293 $1,067 $690
The Company's effective income tax rate was different than the federal statutory
tax rate for the following reasons (in thousands):
December 31
1994 1993 1992
Statutory federal income tax $2,923 $ 957 $ 1,091
State income taxes, net of federal deduction 205 101 20
Tax effect of income from life insurance proceeds - - (404)
Tax credits (66) (15) (50)
Other 231 24 33
------- ------- -------
Effective tax $3,293 $1,067 $ 690
(8) MAJOR CUSTOMER
During 1994, approximately 72% and 23%, respectively, of net sales were to GTE
and Regional Bell operating companies. During 1993 and 1992, approximately 63%
and 78%, respectively, of net sales were to GTE and affiliated companies. Trade
receivables of approximately $3,624,000 and $2,862,000 at December 31, 1994 and
1993, respectively, were due from GTE. Additionally, trade receivables of
approximately $618,000 and $826,000 at December 31, 1994 and 1993, respectively,
were due from Regional Bell operating companies.
(9) EMPLOYEE BENEFIT PLANS
On January 1, 1985, the Company adopted a 401(k) retirement and savings plan
(the "Plan"). The Plan is a defined contribution plan covering substantially
all employees of the Company who complete at least six months of service. The
Plan's administrators are officers of the Company. The Company may contribute
to the Plan from its current or accumulated net profits. Contributions made by
the Company were $74,000, $41,000 and $27,000 in 1994, 1993 and 1992,
respectively.
Additionally, the Company has a deferred compensation plan covering the officers
of the Company. Participating officers, who may contribute up to 10% of their
salary and any portion of any bonus granted by the Company, elected to defer
$126,000, $75,000 and $48,000 at December 31, 1994, 1993 and 1992, respectively.
The Company may make a discretionary contribution equal to 25% of the bonus
amount deferred each year, and accordingly contributed approximately $24,000,
$12,000 and $12,000, respectively, for each year. The Company has funded this
plan using key person life insurance as a vehicle.
(10) STOCK REPURCHASE
In January of 1993, the Company received life insurance proceeds (recorded in
1992) covering a deceased officer of the Company. Under the terms of the
deceased officer's employment agreement, his estate had the option to require
the Company to use up to 50% ($594,000) of these life insurance proceeds to
redeem a portion of the 315,000 shares of the Company's common stock held by the
deceased officer's estate (based on the greater of $3.00 per share or other fair
value as negotiated in good faith).
During 1994, the Company reached an agreement with the estate whereby the
Company purchased a total of 50,000 shares from the estate. The purchase was
done in two installments at $4.00 per share in June and $5.00 per share in July.
The Company is no longer required to redeem any additional stock from the
estate.
<PAGE>
As of
Sept. 29, 1995
ASSETS:
Current assets:
Cash and cash equivalents $ 5,248,000
Accounts receivable 3,094,000
Inventories 4,150,000
Deferred income taxes 467,000
Other current assets 445,000
----------
Total current assets 13,404,000
----------
Property, plant and equipment 9,605,000
Less accumulated depreciation and amortization 3,684,000
---------
5,921,000
Other assets 291,000
---------
TOTAL ASSETS $ 19,616,000
==========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,015,000
Salaries and wages 797,000
Other accrued liabilities 1,666,000
---------
Total current liabilities 4,478,000
---------
Long-term debt 1,501,000
Stockholders' equity:
Common stock 205,000
Capital in excess of par value 1,904,000
Retained earnings 11,715,000
Treasury stock (187,000)
----------
Total stockholders' equity 13,637,000
----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 19,616,000
==========
<PAGE>
XEL Corporation
Unaudited Condensed Consolidated Statements of Income
Nine Months Ended Nine Months Ended
September 29, 1995 September 29, 1994
Revenue:
Telecommunications sales 31,997,000 39,672,000
Other income 219,000 112,000
----------- ----------
32,216,000 39,784,000
---------- ----------
Cost and expenses:
Telecommunications costs 24,080,000 27,435,000
Selling, general and
administrative expenses 3,134,000 2,868,000
Research and development 3,097,000 2,295,000
Depreciation and amortization 151,000 25,000
Interest expense 144,000 79,000
---------- ----------
30,606,000 32,702,000
---------- ----------
Income before provision for taxes on income 1,610,000 7,082,000
Provision for taxes on income 611,000 2,746,000
--------- ---------
Net income $ 999,000 4,336,000
========== =========
<PAGE>
XEL Corporation
Consolidated Condensed Statement of Cash Flows
Nine Months Ended Nine Months Ended
September 29, 1995 September 29, 1994
Net income $ 999,000 $ 4,336,000
Net cash flows from operating activities:
Adjustments to reconcile net
income to net cash provided by
operating activities 1,395,000 932,000
Changes in current assets and
liabilities 2,932,000 (3,861,000)
Other, net (434,000) (119,000)
--------- ---------
Net cash provided by operating activities 4,892,000 1,288,000
--------- ---------
Cash flows from investing activities:
Payments for property, plant and
equipment (2,222,000) (1,112,000)
--------- ---------
Net cash used for investing activities (2,222,000) (1,112,000)
--------- ---------
Cash flows from financing activities:
Payments on debt and capital leases (232,000) (157,000)
Proceeds from issuance of debt 251,000
Repayments on subordinated notes
payable (33,000) (33,000)
Purchase of treasury stock (225,000)
Issuance of treasury stock 25,000 12,000
-------- --------
Net cash used in financing activities (240,000) (152,000)
-------- -------
Net increase in cash and cash equivalents 2,430,000 24,000
Cash and cash equivalents at beginning
of the period 2,818,000 1,964,000
--------- ---------
Cash and cash equivalents at end of the period $ 5,248,000 $ 1,988,000
========= =========
<PAGE>
<TABLE>
XEL Corporation
Unaudited Condensed Consolidated Satement of Stockholders' Equity
Common Stock Additional Paid Common Stock Retained Total Stockholders'
Shares Amount In Capital in Treasury Earnings Equity
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1994 1,944,123 $ 194,000 $ 1,614,000 $ (212,000) $ 10,716,000 $ 12,312,000
Conversion of subordinated
debt to common stock 105,300 11,000 290,000 301,000
Exercise of stock options 25,000 25,000
Net Income 999,000 999,000
--------- -------- ---------- --------- ---------- ----------
Balances at Sept. 29, 1995 $2,049,423 $ 205,000 $ 1,904,000 $ (187,000) $ 11,715,000 $ 13,637,000
========= ======= ========= ========= ========== ==========
</TABLE>
<PAGE>
XEL Corporation
Note to Unaudited Condensed Consolidated Financial Statements
1.) The financial statements furnished herein reflect all adjustments which are,
in the opinion of management, necessary for a fair presentation of financial
position and results of operations for the interim period. Such adjustments
are of a normal recurring nature.
Gilbert Associates, Inc. and Subsidiaries
Introduction to Pro Forma Unaudited Condensed Financial Statements
On October 30, 1995, the Company completed the purchase of all the outstanding
capital stock of XEL Corporation (XEL) for $30,000,000. Under the terms of the
agreement, additional amounts may be paid to former XEL shareholders for the
achievement of certain earnings and revenue objectives in the fourth quarter of
1995 and the 1996, 1997 and 1998 fiscal years. Any additional payments will
increase intangible assets.
The following Pro Forma Unaudited Condensed Consolidated Statements of
Operations for the year ended December 30, 1994 and the nine months ended
September 29, 1995 and the Pro Forma Unaudited Condensed Balance Sheet as of
September 29, 1995 are presented to give effect of the purchase of XEL. Pro
Forma adjustments made to the Unaudited Condensed Consolidated Statements of
Operations assume the sale was consummated on January 1, 1994 and December 31,
1994, respectively, and the Pro Forma Unaudited Condensed Consolidated Balance
Sheet assumes the purchase was consummated on September 29, 1995.
The following Pro Forma Unaudited Condensed Consolidated Statements of
Operations for the year ended December 30, 1994 and the nine months ended
September 29, 1995 exclude a non-recurring write-off of $2,500,000, after income
taxes, for research and development in process associated with the acquisition
of XEL.
The pro forma condensed financial statements are not necessarily indicative of
future operations or the actual results that would have occurred had the
acquisition been consummated at the beginning of the year. The pro forma
information should be read in conjunction with the Company's historical
financial statements and notes, thereto, included in the Company's 1994 Annual
Report on Form 10-K.
<PAGE>
<TABLE>
Gilbert Associates, Inc. & Subsidiaries
Pro Forma Unaudited Condensed Consolidated Balance Sheet
As of September 29, 1995
Consolidated XEL Pro Forma Consolidated
Historical Corporation Adj Pro Forma
ASSETS:
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 5,293,000 $ 5,248,000 $ (1,256,000)(A) $ 10,435,000
1,150,000 (B)
Short-term investments 28,974,000 0 (28,974,000)(A) 0
Accounts receivable, net of allowance
for doubtful accounts 20,874,000 3,094,000 23,968,000
Unbilled revenue 12,671,000 0 12,671,000
Inventories 6,563,000 4,150,000 10,713,000
Deferred income taxes 3,605,000 467,000 4,072,000
Other current assets 5,543,000 445,000 5,988,000
---------- ---------- ---------- ----------
Total current assets 83,523,000 13,404,000 (29,080,000) 67,847,000
---------- ---------- ---------- ----------
Property, plant and equipment 65,892,000 9,605,000 200,000 (C) 75,697,000
Less accumulated depreciation and amortization 29,417,000 3,684,000 33,101,000
---------- --------- ---------- ----------
36,475,000 5,921,000 200,000 42,596,000
Deferred income taxes 735,000 0 735,000
Other assets 1,321,000 291,000 1,612,000
Intangible assets 23,577,000 0 10,593,000 (D) 34,170,000
----------- ---------- ---------- ----------
TOTAL ASSETS $ 145,631,000 $ 19,616,000 $ (18,287,000) $ 146,960,000
=========== ========== ========== ===========
</TABLE>
<PAGE>
<TABLE>
Gilbert Associates, Inc. & Subsidiaries
Pro Forma Unaudited Consolidated Balance Sheet
As of September 29, 1995
Consolidated XEL Pro Forma Consolidated
Historical Corporation Adj Pro Forma
LIABILITIES & STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C>
Current liabilities:
Accounts payable $ 3,470,000 $ 2,015,000 $ $ 5,485,000
Salaries and wages 4,704,000 797,000 5,501,000
Income taxes 4,212,000 0 (2,150,000)(B) 2,062,000
Estimated liability for contract losses 2,703,000 0 2,703,000
Contractual billings in excess of 0
recognized revenue 740,000 0 740,000
Other accrued liabilities 10,786,000 1,666,000 12,452,000
---------- --------- ---------- ----------
Total current liabilities 26,615,000 4,478,000 (2,150,000) 28,943,000
---------- --------- ---------- ----------
Long-term debt 801,000 1,501,000 2,302,000
Self-insured retention 2,806,000 0 2,806,000
Other long-term obligations 6,618,000 0 6,618,000
Stockholders' equity:
Common stock 8,985,000 205,000 50,000 (B) 8,985,000
(255,000)(E)
Capital in excess of par value 38,497,000 1,904,000 1,100,000 (B) 38,497,000
(3,004,000)(E)
Retained earnings 101,761,000 11,715,000 (11,715,000)(E) 99,261,000
(2,500,000)(F)
Treasury stock (40,452,000) (187,000) 187,000 (E) (40,452,000)
----------- ---------- ---------- -----------
Total stockholders' equity 108,791,000 13,637,000 (16,137,000) 106,291,000
----------- ---------- ---------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 145,631,000 $ 19,616,000 $ (18,287,000) $ 146,960,000
</TABLE>
<PAGE>
<TABLE>
Gilbert Associates, Inc. & Subsidiaries
Pro Forma Unaudited Condensed Consolidated Statement of Operations
For the Nine Months Ended September 29, 1995
Consolidated XEL Pro Forma Consolidated
Historical Corporation Adj Pro Forma
<S> <C> <C> <C> <C>
Revenue:
Technical services $ 106,184,000 $ 0 $ $ 106,184,000
Telecommunications sales 35,083,000 31,997,000 67,080,000
Other income 7,345,000 300,000 (425,000) (G) 7,220,000
----------- ---------- ------- -----------
148,612,000 32,297,000 (425,000) 180,484,000
----------- ---------- ------- -----------
Cost and expenses:
Technical services costs 87,058,000 0 87,058,000
Telecommunications costs 22,055,000 24,080,000 46,135,000
Selling, general and
administrative expenses 28,839,000 3,134,000 31,973,000
Research and development 1,278,000 3,097,000 4,375,000
Depreciation and amortization 3,676,000 232,000 269,000 (H) 4,177,000
Interest expense 134,000 144,000 1,008,000 (I) 1,286,000
----------- ---------- --------- ---------
143,040,000 30,687,000 1,277,000 175,004,000
----------- ---------- --------- -----------
Income(Loss) before gain on sale
of subsidiary and provision (benefit)
for taxes on income(loss) 5,572,000 1,610,000 (1,702,000) 5,480,000
Gain on sale of subsidiary 26,542,000 0 0 26,542,000
---------- ---------- --------- ---------
Income(Loss) before provision(benefit)
for taxes on income(loss) 32,114,000 1,610,000 (1,702,000) 32,022,000
Provision(Benefit) for taxes on income(loss) 10,168,000 611,000 (600,000) 10,179,000
---------- ------- -------- ----------
Net income(loss) $ 21,946,000 $ 999,000 $ (1,102,000) $ 21,843,000
========== ======= ========= ==========
Per share of common stock:
Net income(loss) $ 3.28 $ 0.15 $ (0.17) $ 3.26
Average number of shares of common
stock outstanding 6,692,720 6,692,720 6,692,720 6,692,720
</TABLE>
<PAGE>
<TABLE>
Gilbert Associates, Inc. & Subsidiaries
Pro Forma Unaudited Condensed Consolidated Statement of Operations
For the Year Ended December 30, 1994
Consolidated XEL Pro Forma Consolidated
Historical Corporation Adj Pro Forma
<S> <C> <C> <C> <C>
Revenue:
Technical services $ 229,887,000 $ 0 $ $ 229,887,000
Telecommunication sales 46,045,000 52,283,000 98,328,000
Other income 6,563,000 180,000 6,743,000
----------- ---------- ---------- -----------
282,495,000 52,463,000 0 334,958,000
----------- ---------- ---------- -----------
Cost and expenses:
Technical services costs 179,216,000 0 179,216,000
Telecommunication costs 29,488,000 36,640,000 66,128,000
Selling, general and
administrative expenses 76,116,000 3,760,000 79,876,000
Research and development 1,727,000 3,337,000 5,064,000
Depreciation and amortization 6,922,000 0 355,000 (L) 7,277,000
Interest expense 186,000 130,000 1,550,000 (M) 1,866,000
----------- ---------- --------- -----------
293,655,000 43,867,000 1,905,000 339,427,000
----------- ---------- --------- -----------
Income (Loss) before provision for taxes
on income (loss) (11,160,000) 8,596,000 (1,905,000) (4,469,000)
Provision for taxes on income (loss) 460,000 3,293,000 (667,000) 3,086,000
---------- --------- --------- ---------
Net income (loss) $ (11,620,000) $ 5,303,000 $ (1,238,000) $ (7,555,000)
========== ========= ========= =========
Per share of common stock:
Net income (loss) $ (1.66) $ 0.76 $ (0.18) $ (1.08)
Average number of shares of common
stock outstanding 7,002,834 7,002,834 7,002,834 7,002,834
</TABLE>
<PAGE>
Notes to Pro Forma Unaudited Condensed Consolidated Financial Statements as of
September 29, 1995
Notes to Pro Forma Unaudited Condensed Consolidated Balance Sheet:
(A) To reflect payment for XEL($30,000,000) and estimated acquisition
costs ($230,000).
(B) To reflect cash proceeds from exercising stock options and the corresponding
income tax deduction.
(C) To write-up property, plant and equipment to fair market value.
(D) To record goodwill($10,593,000) and value assigend to acquired research and
development($2,500,000).
(E) To remove the XEL' s equity balances.
(F) To reflect the write-off of acquired research and development in process.
Notes to Pro Forma Unaudited Condensed Consolidated Statement of Operations:
(G) To remove interest income from June 30, 1995 through September 29, 1995.
This interest income would not have been earned due to the payment for
XEL.
(H) To record additional depreciation expense associated with the increased
value on property, plant and equipment and record intangible asset
amortization expense.
(I) To record interest expense on debt used to finance the acquisition. Assumed
debt was outstanding through June 30, 1995. Cash proceeds received from
disposition of Gilbert/Commonwealth, Inc. was used to repay debt on
June 30, 1995.
Other Notes:
(J) The statement of operations for the period ended September 29, 1995 excludes
a non-recurring $2,500,000, after income tax, write-off of research and
development in process acquired from XEL.
(K) The historical statement of operations has been reclassified to conform with
the pro forma presentation.
Notes to Pro Forma Unaudited Condensed Consolidated Financial Statements as of
December 30, 1994
(L) To record additional depreciation expense associated with the increased
value on property, plant and equipment and record intangible asset
amortization expense.
(M) To record interest expense on debt used to finance purchase.
Other Notes:
(N) The historical statement of operations has been reclassified to conform with
the pro forma presentation.
Signatures
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant ahs duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Gilbert Associates, Inc.
(Registrant)
/s/Paul H. Snyder
Paul H. Snyder
Vice President and
Chief Financial Officer
Date: December 15, 1995
<EX-23> CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the use in this
Form 8-K of our report dated February 17, 1995 included herein and to all
references to our Firm included in this registration statement.
Arthur Andersen LLP
Denver, Colorado,
December 14, 1995
