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, 1996
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) 856-5500
(Registrant's telephone number, including area code)
<PAGE>
On September 30, 1996, the Company acquired the net assets of the
Electronic Systems Division of Safco Corporation, and formed a new
operating division, Safco Technologies, Inc. (STI). In accordance
with Item 7 of Form 8-K, the Company is now filing the audited
Statement of Net Assets Acquired and Statement of Revenues and
Operating Expenses, and unaudited interim statements as well as
unaudited pro forma information, 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 are included as a separate
section of this report:
Report of Independent Public Accountants
Statement of Net Assets Acquired as of December 31, 1995
Statement of Revenues and Operating Expenses for the year ended
December 31, 1995
Notes to Statement of Net Assets Acquired as of December 31,
1995 and Statement of Revenues and Operating Expenses for the year
ended December 31, 1995
Unaudited Statement of Net Assets Acquired as of September 30, 1996
Unaudited Statement of Revenues and Operating Expenses - for the
nine months ended September 30, 1996
Note to unaudited Statement of Net Assets Acquired as of
September 30, 1996 and unaudited Statement of Revenues and Operating
Expenses for the nine months ended September 30, 1996
(b) The following pro forma information for the Company is included
as a separate section of this report:
Introduction to Pro Forma Unaudited Condensed Consolidated
Financial Statements
Pro Forma Unaudited Condensed Consolidated Balance Sheet as of
September 27, 1996
Pro Forma Unaudited Condensed Consolidated Statements of
Operations for the nine months ended September 27, 1996 and the year
ended December 29, 1995
Notes to Pro Forma Unaudited Condensed Consolidated Financial
Statements as of September 27, 1996 and December 29, 1995
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Management of Gilbert Associates, Inc.:
We have audited the accompanying statement of net assets acquired of the
Electronics Systems Division of Safco Corporation (the "Division") as
of December 31, 1995, and the related statement of revenues and
operating expenses for the year then ended. These financial
statements are the responsibility of the Division's management. Our
responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
As described in Note 1, the accompanying financial statements were prepared
to present the net assets acquired and the revenues and operating expenses of
the Division, which does not have a separate legal status or existence,
and are not intended to be a complete presentation of the assets and
liabilities or the results of operations of the Division.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the net assets acquired of the
Division as of December 31, 1995, and the revenues and operating
expenses for the year then ended, in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Philadelphia, PA
November 22, 1996
<PAGE>
Electronic Systems Division of Safco Corporation
Statement of Net Assets Acquired
as of December 31, 1995
Assets Acquired
Current Assets:
Cash $ 57,000
Accounts receivable 6,847,000
Inventories 1,585,000
Prepaid expenses 133,000
---------
8,622,000
---------
Property and Equipment:
Machinery and equipment 2,576,000
Data processing and software 527,000
Furniture and fixtures 518,000
Leasehold improvements 412,000
Automobiles 109,000
---------
4,142,000
Less accumulated depreciation and amortization (2,272,000)
---------
1,870,000
---------
Other assets 69,000
---------
Total Assets Acquired 10,561,000
==========
Liabilities Assumed
Current Liabilities:
Accounts payable 1,390,000
Deferred service revenue 188,000
Accrued liabilities 572,000
Current portion of capital lease obligations 429,000
---------
2,579,000
---------
Long-Term Obligations:
Capital lease obligations 856,000
Other 87,000
-------
943,000
-------
Total Liabilities Assumed 3,522,000
=========
Net Assets Acquired $ 7,039,000
=========
The accompanying notes are an integral part of this statement.
<PAGE>
Electronic Systems Division of Safco Corporation
Statement of Revenues and Operating Expenses
for the year ended December 31, 1995
December 31, 1995
Revenues $ 16,225,000
Operating expenses:
Cost of revenue 5,847,000
Selling, general and administrative 7,897,000
----------
13,744,000
Revenues in excess of operating expenses $ 2,481,000
=========
The accompanying note is an integral part of this unaudited statement.
<PAGE>
Electronic Systems Division of Safco Corporation
Notes to the Statements of Net Assets Acquired and Revenues and
Operating Expenses
December 31, 1995
Note 1 - Nature of Operations and Basis of Presentation:
The Electronic Systems Division of Safco Corporation ("ESD")
designs, provides systems engineering, manufactures, sells and
services a complete line of radio propagation measurement and analysis
equipment utilized by the wireless communications industry.
The statement of net assets acquired represents those assets and
liabilities of ESD that were purchased by Gilbert Associates on
September 30, 1996 (see Note 7). The statement of revenues and
operating expenses represents actual costs incurred and revenues earned
by ESD. Expenses reported by ESD include costs allocated from Safco
Corporation for certain shared services. These shared services
include such costs as accounting, human resources and management
information services. Allocations were made based upon sales, square
footage, head count, and other appropriate measures. There can be no
assurances that the allocations will be representative of actual future
costs. The accompanying financial statements were prepared to present
the net assets acquired and the revenues and operating expenses of
ESD, which does not have a separate legal status or existence, and are
not intended to be a complete presentation of the assets and
liabilities or the results of operations of ESD.
The statement of net assets acquired and the statement of revenues and
operating expenses (the "Statements") are prepared in conformity with
generally accepted accounting principles, and require management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the Statements. Also, estimates are made
for reported amounts of revenues and operating expenses during the
reporting period. Actual results could differ from those estimates.
Historically, ESD has been highly seasonal with up to 40% and 65% of
its revenue and operating income, respectively, generated in the
fourth calendar quarter.
ESD's sales are made to a variety of wireless communication companies
located throughout the United States and abroad. Accounts receivable
from such sales are generally unsecured. Sales to three major
customers accounted for 26% of ESD's revenues for the year ended
December 31, 1995, of which, Motorola comprised 15%.
Note 2 - Summary of Significant Accounting Policies:
Inventories
Inventory values are determined on the first-in, first-out (FIFO)
method and are stated at the lower of cost or market.
Property and Equipment
Property and equipment, including purchased software, are stated at
cost. Depreciation and amortization are computed using accelerated
methods over the estimated useful lives of the related assets, which
range from three to thirty years. Upon retirement or sale of assets,
the cost and related accumulated depreciation or amortization are
removed from the respective accounts and any resulting gain or loss is
recognized currently. Maintenance and repairs are charged to expense
as incurred while betterments are capitalized.
Research and Development
Research and development expenses consist principally of the design
and development of software products (exclusive of costs capitalized
under SFAS No. 86) and significant improvements, refinements and
engineering support to existing products. Such costs are expensed as
incurred. Research and development expense aggregated $1,796,000
during the year ended December 31, 1995.
Revenue Recognition
Revenues are recognized when the products are shipped. Service
contract revenues are deferred and recognized on a straight-line basis
over the period of the related contract.
Fair Value of Financial Instruments
The carrying amount reported in the statement of net assets acquired
for cash, accounts receivable, accounts payable and accrued expenses
approximates fair value because of the immediate or short-term
maturity of these financial instruments. The carrying amount reported
for long-term debt approximates fair market value because the
underlying instruments are at rates similar to current rates offered
to ESD for debt with the same remaining maturities.
Credit risk is limited due to the fact that most of ESD's customers
are large wireless network operators with substantial resources.
Foreign Currency Translation
The statement of revenue and operating expenses of ESD's foreign
divisions is measured using each division's local currency as the
functional currency. Assets and liabilities of the foreign division
are translated to U.S. dollars using exchange rates in effect at the
date of the statement of net assets acquired. Income and expense
items are translated at monthly average rates of exchange. Transaction
gains or losses were not significant in the current year.
Income Taxes
The statement of revenues and operating expenses excludes a provision
for income taxes as federal income taxes were reported in the
personal income tax returns of the stockholders of Safco, which
elected S corporation status. State income taxes are not significant,
and are therefore not reported on the statement of revenues and
operating expenses.
Note 3 - Inventories:
Inventories at December 31, 1995 consist of the following:
Raw Materials $ 949,000
Work-in-Process 213,000
Finished Goods 423,000
---------
$1,585,000
=========
Note - 4 - Capital Lease Obligations:
Included in property and equipment at December 31, 1995 are assets
held under capital lease agreements with an aggregate cost and
accumulated depreciation of approximately $1,643,000 and $668,000,
respectively. Future minimum rentals under these lease agreements are
as follows:
1996 $ 564,000
1997 515,000
1998 237,000
1999 133,000
2000 93,000
---------
1,542,000
Less: amount representing interest 257,000
---------
Present value of minimum lease payments $ 1,285,000
=========
Note 5 - Employee Benefit Plans:
ESD maintains a qualified defined contribution plan (the "Plan")
covering employees under Section 401(k) of the Internal Revenue Code.
Pursuant to the terms of the Plan, ESD contributes an annual amount equal to
33% of each employee's contribution to the Plan, up to 6% of their
annual compensation, and an additional discretionary contribution as
determined by ESD's management. Total expense for the Plan aggregated
$56,000 in 1995.
Note 6 - Commitments:
ESD leases certain of its office and production facilities under
noncancelable operating leases, containing renewal options, escalation
clauses and requirements that ESD pay taxes, insurance and maintenance
costs.
Future minimum annual rental payments under the noncancelable
operating leases are as follows:
1996 $ 168,000
1997 169,000
1998 144,000
1999 135,000
2000 135,000
Rent expense under these leases aggregated approximately $167,000
during 1995.
Note 7 - Subsequent Event:
On September 30, 1996, Gilbert Associates, Inc. (the "Company")
acquired the net assets of Safco Corporation's Electronic Systems
Division (ESD). Terms of the acquisition call for the Company to pay
Safco shareholders approximately $5 million in cash at closing
(subject to certain adjustments), issue approximately $25 million in
notes payable and issue 7 year warrants exercisable to purchase
555,555 shares of the Company's stock at $18 per share. Of the $25
million in notes payable, $15 million is to be paid in early 1997 and
the remaining $10 million is to be paid over a 5 year term. The $10
million note carries a 7% coupon rate.
Also, in accordance with the agreement, the Company will pay Safco
shareholders additional amounts through 1999 based upon the
achievement of certain revenue and operating income levels. Any
additional payments will increase goodwill.
Note 8 - Selected Cash Flow Information:
Cash Flow Disclosures
For the year ended
December 31, 1995
Depreciation and Amortization $ 850,000
Capital Expenditures 1,177,000
Interest Paid 83,000
<PAGE>
Electronic Systems Division of Safco Corporation
Unaudited Statement of Net Assets Acquired
as of September 30, 1996
Assets Acquired
Current Assets:
Cash $ 82,000
Accounts receivable 3,437,000
Inventories 1,902,000
Other current assets 117,000
---------
5,538,000
---------
Property, plant and equipment 4,681,000
Less accumulated depreciation and amortization 2,798,000
---------
1,883,000
---------
Total Assets Acquired 7,421,000
=========
Liabilities Assumed
Current Liabilities:
Accounts Payable 909,000
Salaries and wages 184,000
Other accrued liabilities 575,000
Current portion of capital lease obligations 529,000
---------
2,197,000
Capital lease obligations 604,000
Other long term obligations 230,000
---------
Total Liabilities Assumed 3,031,000
=========
Net Assets Acquired $ 4,390,000
=========
The accompanying note is an integral part of this unaudited statement.
<PAGE>
Electronic Systems Division of Safco Corporation
Unaudited Statement of Revenues and Operating Expenses
for the nine months ended September 30, 1996
Nine months ended
September 30, 1996
Revenues $ 12,924,000
Operating expenses:
Cost of revenue 4,483,000
Selling, general and administrative 7,211,000
----------
11,694,000
Revenues in excess of operating expenses $ 1,230,000
=========
The accompanying notes are an integral part of this unaudited statement.
<PAGE>
Note to Unaudited Statements of Net Assets Acquired and Revenues and
Operating Expenses
1.) The 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. The
results of operations for the nine months ended September 30, 1996,
are not necessarily indicative of the results to be expected for the
full year.
<PAGE>
Gilbert Associates, Inc. and Subsidiaries
Introduction to Pro Forma Unaudited Condensed Financial Statements
On September 30, 1996, the Company acquired the net assets of Safco
Corporation's Electronic Systems Division (ESD). Terms of the
acquisition call for the Company to pay Safco shareholders
approximately $5 million in cash at closing (subject to certain
adjustments), issue approximately $25 million in notes payable and
issue 7 year warrants exercisable to purchase 555,555 shares of the
Company's stock at $18 per share. Of the $25 million in notes
payable, $15 million is to be paid in early 1997 and the remaining
$10 million is to be paid over a 5 year term. The $10 million note
carries a 7% coupon rate.
Also, in accordance with the agreement, the Company will pay Safco
shareholders additional amounts through 1999 based upon the
achievement of certain revenue and operating income levels. Any
additional payments will increase goodwill.
In connection with the ESD acquisition, $10,300,000, net of
$6,500,000 income tax benefit, of in-process research and development
costs will be expensed during the fourth quarter of 1996.
The following Pro Forma Unaudited Condensed Consolidated Balance
Sheet as of September 27, 1996 and the Pro Forma Unaudited Condensed
Consolidated Statements of Operations for the nine months ended
September 27, 1996 and the year ended December 29, 1995 are presented
to give effect of the purchase of ESD. Pro Forma adjustments made to
the Unaudited Condensed Consolidated Statements of Operations assume
the acquisition of ESD was consummated on January 2, 1995 and January 1,
1996, respectively, and the Pro Forma Condensed Consolidated
Balance Sheet assumes the acquisition of ESD was consummated on
September 27, 1996. The pro forma financial statements do not
reflect the pro forma effects of the XEL acquisition or the
Gilbert/Commonwealth, Inc. disposition which occurred on October 27,
1995 and April 1, 1995, respectively. Pro forma information relative
to these transactions was previously disclosed.
The aforementioned Pro Forma Unaudited Condensed Consolidated
Statements of Operations exclude the effect of a non-recurring write-
off of $10,300,000, after income taxes, for research and development
in process associated with the acquisition of ESD.
Historically, ESD has been highly seasonal with up to 40% and 65% of
its revenue and operating income, respectively, generated in the
fourth calendar quarter.
The pro forma condensed 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 1995 Annual Report on Form 10-K.
<PAGE>
Gilbert Associates, Inc. and Subsidiaries
Pro Forma Unaudited Condensed Consolidated Balance Sheet
as of September 27, 1996
<TABLE>
Consolidated Safco Pro Forma Consolidated
Historical Technologies Adjustments Pro Forma
<S> <C> <C> <C> <C> <C>
ASSETS:
Current assets
Cash and cash equivalents $ 4,335,000 $ 82,000 $ (5,655,000) (a) $ -
1,238,000 (b)
Accounts receivable, net of allowance
for doubtful accounts 26,893,000 3,437,000 30,330,000
Unbilled revenue 6,570,000 - 6,570,000
Inventories 14,197,000 1,902,000 16,099,000
Deferred income taxes 3,860,000 - 3,860,000
Other current assets 4,833,000 117,000 (275,000) (c) 4,675,000
---------- --------- --------- ----------
Total current assets 60,688,000 5,538,000 (4,692,000) 61,534,000
---------- --------- --------- ----------
Property, plant and equipment 77,630,000 4,681,000 82,311,000
Less accumulated depreciation and amortization 33,112,000 2,798,000 35,910,000
---------- --------- --------- ----------
44,518,000 1,883,000 - 46,401,000
---------- --------- --------- ----------
Deferred income taxes 605,000 - 6,500,000 (d) 7,105,000
Other assets 1,279,000 - 1,279,000
Intangible assets 34,317,000 - 10,665,000 (e) 44,982,000
----------- --------- ---------- -----------
TOTAL ASSETS $141,407,000 $ 7,421,000 $ 12,473,000 $161,301,000
=========== ========= ========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 6,727,000 $ 909,000 $ 1,238,000 (b) $ 8,874,000
Salaries and wages 4,512,000 184,000 4,696,000
Income taxes 2,265,000 - 2,265,000
Estimated liability for contract losses 3,032,000 - 3,032,000
Contractual billings in excess of
recognized revenue 477,000 - 477,000
Current maturities of long term debt 324,000 529,000 14,745,000 (f) 15,598,000
Other accrued liabilities 10,149,000 575,000 10,724,000
---------- --------- ---------- ----------
Total current liabilities 27,486,000 2,197,000 15,983,000 45,666,000
---------- --------- ---------- ----------
Long term debt 1,163,000 604,000 10,000,000 (g) 11,767,000
Other long term liabilities 6,994,000 230,000 7,224,000
Self insured retention 2,464,000 - 2,464,000
Commitments and contingencies - - -
Stockholders' equity
Common stock 8,985,000 - 8,985,000
Capital in excess of par value 38,098,000 4,390,000 (4,390,000) (h) 38,098,000
Deferred compensation - restricted stock (416,000) - (416,000)
Stock warrants outstanding - - 1,180,000 (i) 1,180,000
Retained earnings 96,553,000 - (10,300,000) (j) 86,253,000
Treasury stock (39,920,000) - (39,920,000)
----------- --------- ---------- ----------
Total Stockholders' Equity 103,300,000 4,390,000 (13,510,000) 94,180,000
----------- --------- ---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $141,407,000 $ 7,421,000 $ 12,473,000 $161,301,000
=========== ========= ========== ===========
</TABLE>
<PAGE>
Gilbert Associates, Inc. and Subsidiaries
Pro Forma Unaudited Condensed Consolidated Statement of Operations
for the nine months ended September 27, 1996
<TABLE>
Consolidated Safco Pro Forma Consolidated
Historical Technologies Adjustments Pro Forma
<S> <C> <C> <C> <C> <C>
Total revenue $134,663,000 $ 12,924,000 $ (225,000) (k) $147,362,000
Costs and expenses:
Cost of revenue 102,244,000 4,483,000 106,727,000
Selling, general and administrative 25,633,000 7,211,000 1,600,000 (l) 34,444,000
----------- ---------- --------- -----------
Total costs and expenses 127,877,000 11,694,000 1,600,000 141,171,000
Income before provision for taxes on income 6,786,000 1,230,000 (1,825,000) 6,191,000
Provision for taxes on income 2,590,000 467,000 (694,000) (m) 2,363,000
--------- ------- --------- ---------
Net income $ 4,196,000 $ 763,000 $ (1,131,000) $ 3,828,000
========= ======= ========= =========
Per share of common stock:
Net income $ 0.67 $ 0.61
Average number of shares of common
stock outstanding 6,293,186 6,293,186
Gilbert Associates, Inc. and Subsidiaries
Pro Forma Unaudited Condensed Consolidated Statement of Operations
for the fiscal year ended December 29, 1995
Total revenue $193,495,000 $ 16,225,000 $ (350,000) (n) $209,370,000
Costs and expenses:
Cost of revenue 147,132,000 5,847,000 152,979,000
Selling, general and administrative 41,355,000 7,897,000 1,933,000 (o) 51,185,000
----------- ---------- --------- -----------
Total costs and expenses 188,487,000 13,744,000 1,933,000 204,164,000
Income before provision for taxes on income
and net gain on dispositions of
subsidiaries 5,008,000 2,481,000 (2,283,000) 5,206,000
Net gain on dispositions of subsidiaries 21,042,000 - 21,042,000
---------- --------- --------- ----------
Income before provision for taxes on income 26,050,000 2,481,000 (2,283,000) 26,248,000
Provision for taxes on income 9,100,000 1,042,000 (959,000) (p) 9,183,000
---------- --------- --------- ----------
Net income $ 16,950,000 $ 1,439,000 $ (1,324,000) $ 17,065,000
========== ========= ========= ==========
Per share of common stock:
Net income $ 2.57 $ 2.59
Average number of shares of common
stock outstanding 6,592,174 6,592,174
</TABLE>
<PAGE>
Notes to Pro Forma Unaudited Condensed Consolidated Financial Statements
as of September 27, 1996
Notes to Pro Forma Unaudited Condensed Consolidated Balance Sheet as
of September 27, 1996
(a) To reflect cash paid at closing.
(b) To reflect short term borrowings under registrant's working capital
line of credit.
(c) Other acquisition costs including audit and consulting fees.
(d) To reflect a deferred tax asset associated with the $16,800,000 research
and development write-off.
(e) To reflect goodwill at the date of purchase.
(f) To reflect note payable to Safco shareholders due in early 1997.
(g) To reflect five year note payable to Safco shareholders.
(h) To eliminate Safco equity.
(i) Value of 555,555 warrants exercisable at $18 per share issued as part
of purchase price.
(j) Research and development write-off, net of $6,500,000 income tax benefit.
Notes to Pro Forma Unaudited Condensed Consolidated Statement of Operations
as of September 27, 1996
(k) To remove interest income that would have been earned on the cash paid
at closing.
(l) Interest expense on the notes payable ($1,200,000) and goodwill
amortization ($400,000).
Goodwill relative to ESD is being amortized over a 20 year life.
(m) Taxes are calculated at the Company's overall effective tax rate of 38%.
Notes to Pro Forma Unaudited Condensed Consolidated Statement of Operations
as of December 29, 1995
(n) To remove interest income that would have been earned on the cash paid
at closing.
(o) Interest expense on the notes payable ($1,400,000) and goodwill
amortization ($533,000).
Goodwill relative to ESD is being amortized over a 20 year life.
(p) Taxes are calculated at the Company's overall effective tax rate of 42%.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
GILBERT ASSOCIATES, INC.
(Registrant)
/s/Paul H. Snyder
Paul H. Snyder
Vice President and
Chief Financial Officer
Date: December 9, 1996
