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UNITED STATES 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): March 6, 1997
--------------
SEROLOGICALS CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 0-26126 58-2152225
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(State of other (Commission file (IRS Employer
jurisdiction) number) Identification No.)
780 Park North Blvd.
Suite 110
Clarkston, Georgia 30021
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(Address of Principal executive offices) (Zip code)
Registrant's telephone number, including area code: (404) 296-5595
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(Former name or former address, if changed since last report)
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Item 7. Financial Statements and Exhibits.
(A) Financial statements of businesses acquired.
1. Audited Combined Financial Statements of the Nations Group for
the year ended December 31, 1996
a. Report of Independent Public Accountants
b. Combined Balance Sheet as of December 31, 1996
c. Combined Statement of Operations for the year ended
December 31, 1996
d. Combined Statement of Stockholders' Deficit for the year
ended December 31, 1996
e. Combined Statement of Cash Flows for the year ended
December 31, 1996
f. Notes to Combined Financial Statements
(B) Pro forma financial information.
1. Unaudited Pro forma Consolidated Financial Statements of the
Company as of and for the year ended December 29, 1996
(C) Exhibits.
1. Exhibit 23: Consent of Arthur Andersen LLP
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1933, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Serologicals Corporation
(Registrant)
April 30, 1997 /s/ Russell H. Plumb//
-------------------------
Russell H. Plumb
Vice President, Finance and
Chief Financial Officer
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Boards of Directors
of The Nations Group:
We have audited the accompanying combined balance sheet of Nations Biologics,
Inc. and its Affiliates ("The Nations Group" - as described in Note 1) as of
December 31, 1996 and the related combined statements of operations,
stockholders' deficit and cash flows for the year then ended. These combined
financial statements are the responsibility of The Nations Group's management.
Our responsibility is to express an opinion on these combined financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of The Nations Group
as of December 31, 1996 and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
/s/ ARTHUR ANDERSEN LLP
New Orleans, Louisiana
April 18, 1997
THE NATIONS GROUP (Note 1)
COMBINED BALANCE SHEET
DECEMBER 31, 1996
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 332,354
Accounts receivable 214,967
Inventories 1,379,478
Current portion of note receivable (Note 5) 95,253
Prepaids and other current assets 73,790
-----------
Total current assets 2,095,842
-----------
PROPERTY AND EQUIPMENT:
Building 150,000
Furniture, fixtures and equipment 1,193,294
Leasehold improvements 829,237
-----------
2,172,531
Less accumulated depreciation and amortization (398,180)
-----------
Net property and equipment 1,774,351
-----------
OTHER ASSETS:
Goodwill, net of accumulated amortization of $293,305 4,102,242
Note receivable (Note 5) 167,245
Other 180,053
-----------
Total other assets 4,449,540
-----------
$8,319,733
-----------
-----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Notes payable (Note 4) $6,339,378
Accounts payable 234,319
Accrued liabilities 882,577
Deferred revenue (Note 2) 916,322
-----------
Total current liabilities 8,372,596
-----------
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' DEFICIT:
Common stock, no par value; 205,100 shares authorized,
7,100 shares issued and outstanding 481,800
Accumulated deficit (534,663)
------------
Total stockholders' deficit (52,863)
------------
$ 8,319,733
------------
------------
The accompanying notes are an integral part of this combined balance sheet.
THE NATIONS GROUP (Note 1)
COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
NET SALES $9,073,822
----------
COSTS AND EXPENSES:
Cost of sales 6,046,525
Selling, general and administrative 2,311,174
Depreciation and amortization 936,900
Interest expense 309,908
----------
9,604,507
----------
LOSS BEFORE GAIN ON SALE (530,685)
GAIN ON SALE (Note 5) 554,728
----------
INCOME BEFORE TAXES 24,043
INCOME TAX EXPENSE (Note 8) 103,836
----------
NET LOSS $(79,793)
----------
----------
The accompanying notes are an integral part of this combined financial
statement.
THE NATIONS GROUP (Note 1)
COMBINED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1996
Common Stock Total
--------------- Accumulated Stockholders'
Shares Amount Deficit Deficit
------ ------ ---------- ---------
BALANCE, December 31, 1995 7,100 $481,000 $(454,870) $ 26,930
Net loss -- -- (79,793) (79,793)
----- -------- ---------- --------
BALANCE, December 31, 1996 7,100 $481,800 $(534,663) $(52,863)
----- -------- ---------- --------
----- -------- ---------- --------
The accompanying notes are an integral part of this combined financial
statement.
THE NATIONS GROUP (Note 1)
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
OPERATING ACTIVITIES: $(79,793)
Net loss
Adjustments to reconcile net loss to net cash provided
by operating activities-
Depreciation and amortization 936,900
Gain on sale (554,728)
Changes in operating assets and liabilities-
Accounts receivable (127,404)
Inventories (920,830)
Deferred revenue 916,322
Net change in other current assets and liabilities 120,801
---------
Net cash provided by operating activities 291,268
---------
INVESTING ACTIVITIES:
Purchases of businesses (Note 3) (4,050,000)
Purchases of property and equipment (833,616)
Proceeds from sale of assets 110,000
Payments on note receivable 37,502
---------
Net cash used in investing activities (4,736,114)
---------
FINANCING ACTIVITIES:
Proceeds from notes payable 4,915,369
Payments on notes payable (180,626)
---------
Net cash provided by financing activities 4,734,743
---------
---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 289,897
CASH AND CASH EQUIVALENTS, beginning of year 42,457
---------
CASH AND CASH EQUIVALENTS, end of year $332,354
---------
---------
CASH PAID FOR INTEREST $239,250
---------
---------
CASH PAID FOR TAXES $ 13,000
---------
---------
The accompanying notes are an integral part of this combined financial
statement.
THE NATIONS GROUP (Note 1)
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS OPERATIONS:
Nations Biologics, Inc. and its Affiliates ("The Nations Group") consist of 8
corporations under common control which operate 15 donor centers located in
Alabama, Illinois, California, Wisconsin, Louisiana, Oklahoma and Texas. 14 of
the centers are licensed by the U. S. Food and Drug Administration, and the
remaining center is in the process of obtaining a license. The majority of the
common stock of The Nations Group is owned by one principal stockholder (the
"Principal Stockholder"). The donor centers collect antibodies derived from
source plasma used primarily as the active ingredient in Intravenous Immune
Globulin ("IVIG"), a therapeutic pharmaceutical product The Nations Group sells
to Alpha Therapeutic Corporation, Baxter Healthcare Corporation, and Bayer
Corporation under the terms of plasma supply agreements. The supply agreements
provide for the purchase of specified amounts over the life of the agreements,
generally 2 to 5 years. There can be no guarantees that customers will not
reduce their supply requirements pursuant to provisions in the agreements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Combination and Presentation
The accompanying combined financial statements of The Nations Group have been
presented on a combined basis because of common ownership, control and
management, and because the entities were acquired by Serologicals Corporation
("Serologicals"), a Delaware corporation, on March 6, 1997 (Note 10). The
combined financial statements contain all accounts of The Nations Group. All
significant intercompany accounts and transactions have been eliminated in
combination.
Use of Estimates
The preparation of these combined financial statements in conformity with
generally accepted accounting principles requires 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 financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Inventories
Inventories are stated at the lower of cost or market, cost being determined on
a first-in, first-out basis. Market for antibody-based product inventories is
net realizable value. Inventories consist entirely of antibody-based products.
Property and Equipment
Fixed assets are stated at cost (estimated fair value at acquisition date for
assets acquired as part of business combinations) and are depreciated using
straight-line and accelerated methods over their estimated useful lives.
Depreciable lives for furniture, fixtures and equipment range from 5 to 10
years. Leasehold improvements are amortized over the shorter of the lease
terms or the economic lives of the assets. Expenditures for maintenance and
repairs are charged to expense as incurred.
Revenue Recognition
The Nations Group's policy is to recognize revenue upon the shipment of its
products. Customer payments received in advance of product shipment are
recorded as deferred revenue.
Income Taxes
All but three of the entities in The Nations Group are organized as limited
liability corporations or "S" corporations for Federal income tax purposes
(Note 1) and, accordingly, all tax attributes (i.e., items of gains, loss,
credits, etc.) are reported on the respective stockholders' individual income
tax returns for these companies.
The C corporations of The Nations Group are included in the consolidated
federal income tax returns of their respective parent companies. The income
tax provisions for the C corporations are computed on a separate company
(stand-alone) basis. State income taxes are based on the state income tax
rates in effect in the states where the C corporations operate. The C
corporations do not have formal tax sharing arrangements with their parent
companies.
The C corporations of The Nations Group apply Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes ("SFAS No. 109"). SFAS No. 109
requires an asset and liability approach to accounting for deferred income
taxes based on the differences between financial reporting and income tax bases
using enacted tax rates in effect for the year in which the differences are
expected to reverse (Note 8).
Goodwill
The excess of cost over the net assets acquired in business combinations
("goodwill") is being amortized to income on a straight-line basis over a
period of 25 years. The goodwill relates to the purchase of five donor centers
during 1995 and seven donor centers during 1996. The Nations Group
periodically reviews the carrying values assigned to goodwill based upon
expectations of undiscounted future cash flows and operating income generated
by the underlying tangible assets in determining whether goodwill is
recoverable.
Cash Equivalents
For purposes of the statement of cash flows, The Nations Group considers all
investments purchased with an original maturity of three months or less to be
cash equivalents.
Recent Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of", which became effective for fiscal years beginning after
December 15, 1995. SFAS 121 establishes standards for determining when
impairment losses on long-lived assets have occurred and how impairment losses
should be measured. The Nations Group adopted SFAS 121 effective January 1,
1996. The financial statement impact of adopting SFAS 121 was not material.
3. ACQUISITIONS:
On January 2, 1996, The Nations Group acquired a donor center and certain other
assets in New Orleans, Louisiana from Plasma Center of East New Orleans, Inc.
for total consideration of approximately $175,000 (the "Lake Forest
Acquisition"); on July 1, 1996, The Nations Group acquired all of the
outstanding capital stock of MBW Enterprises, Inc., which operated donor
centers in Lawton, Oklahoma and Waco, Texas, for total consideration of
approximately $1,500,000 (the "MBW Acquisition"); on July 2, 1996, The Nations
Group acquired donor centers in Lake Charles, Louisiana and Tuscaloosa,
Alabama; $110,000 in cash; and a $300,000 note receivable from SeraCare, Inc.
in exchange for a donor center The Nations Group operated in Las Vegas, Nevada,
(the "SeraCare Acquisition"); on June 28, 1996, The Nations Group acquired all
of the outstanding capital stock of Alameda Plasma Center, Inc., which operated
a donor center in El Paso, Texas, for total consideration of approximately
$725,000 (the "Alameda Acquisition"); on September 30, 1996, The Nations Group
acquired a donor center in Milwaukee, Wisconsin and certain other assets from
American Plasma Centers, Inc. for total consideration of approximately
$1,000,000 (the "Milwaukee Acquisition"); and on October 12, 1996, The Nations
Group acquired a donor center in Gretna, Louisiana and certain other assets
from American Plasma, Inc. for total consideration of approximately $650,000
(the "Gretna Acquisition").
Each of these acquisitions was accounted for as a purchase in accordance with
APB No. 16, "Business Combinations," and accordingly, the purchase price has
been preliminarily allocated to the assets acquired based on the estimated fair
values as of the applicable acquisition date. The excess of acquisition cost
over the estimated fair value of the assets acquired has been preliminarily
allocated to goodwill.
The following unaudited pro forma data summarizes the results of operations for
the year ended December 31, 1996 as if the Alameda Acquisition, the Milwaukee
Acquisition, the Gretna Acquisition and the MBW Acquisition had occurred on
January 1, 1996. The pro forma information does not include the actual results
of operations for the centers acquired in the Lake Forest Acquisition and the
SeraCare Acquisition prior to their acquisition date as the impact of these
results was not material. The unaudited pro forma information has been
prepared for comparative purposes only and does not purport to represent what
the results of operations of The Nations Group would actually have been had the
transactions occurred January 1, 1996 or what the results of operations may be
in any future period.
PRO FORMA YEAR ENDED
DECEMBER 31, 1996
(unaudited)
Net sales $12,428,379
Loss before gain on sale (429,795)
Net loss (4,126)
4. NOTES PAYABLE:
Notes payable at December 31, 1996 consisted of the following:
Notes payable to a bank, bearing interest at 10%,
secured by property $ 522,375
Notes payable to a bank, bearing interest at
variable rates based on LIBOR or prime, secured
by inventory, equipment and stockholder guarantees 543,926
Notes payable to individuals, bearing no interest 350,000
Notes payable to a bank, bearing interest at rates
ranging from 10.75% to prime plus 2.5%, secured by
inventory and equipment 185,702
Other notes at varying rates 158,397
Borrowings under lines of credit (see below) 3,685,800
Notes payable to stockholders, bearing interest at
rates ranging from 0% to 10% 893,178
----------
Total $6,339,378
----------
----------
All notes payable and lines of credit are classified as current because they
were repaid in connection with the sale discussed in Note 10.
The Nations Group has $2,125,000 outstanding under a nonrevolving line of
credit bearing interest at prime plus 2% (10.25% at December 31, 1996),
$1,460,800 outstanding under a nonrevolving line of credit bearing interest at
10.25%, and $100,000 outstanding under a line of credit bearing interest at
11.25% with a bank. These borrowings are secured by The Nations Group's note
receivable (see Note 5) as well as assets pledged by and the guaranty of the
Principal Stockholder.
The Nations Group's debt obligations do not contain any restrictive covenants.
5. NOTE RECEIVABLE:
During 1996, The Nations Group sold a donor center which it had owned and
operated in Nevada in exchange for two donor centers operated by the purchaser
in Louisiana and Alabama, $110,000 in cash and a $300,000 note receivable
resulting in a gain of $554,728. The note bears interest at 8% and is due in
monthly installments through August, 1999. The assets of the two donor centers
acquired in this transaction were recorded at their estimated fair values of
$390,000.
6. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
Cash Equivalents
The Nations Group estimates that the fair value of cash equivalents
approximates their carrying value due to the relatively short maturity of these
instruments.
Note Receivable
The Nations Group estimates that the fair value of the note receivable
approximates its carrying value based upon the current interest rate
environment for instruments with similar terms and maturities.
Notes Payable
The Nations Group estimates that the fair value of notes payable approximates
their carrying values based upon its effective current borrowing rate for
issuance of debt with similar terms and remaining maturities.
7. COMMITMENTS AND CONTINGENCIES:
Operating Leases
The Nations Group leases certain office space, equipment and virtually all of
its donor centers under non-cancelable operating lease agreements. Future
minimum annual rental obligations under noncancelable operating leases at
December 31, 1996 were as follows:
Year ending December 31:
1997 $541,057
1998 517,209
1999 454,427
2000 231,964
2001 123,348
Rent expense totaled approximately $346,077 during 1996.
Other Contingencies
The Nations Group's professional liability insurance provides coverage on a
claims-made basis for claims in excess of the policy deductible of $10,000 per
claim up to a maximum of $500,000 per claim. Various claims have been made
against The Nations Group by various claimants. The amount of ultimate
liability, if any, with respect to such matters cannot be determined, but
management believes that any such liability would not have a material effect on
The Nations Group's financial position.
8. INCOME TAXES:
The 1996 income tax provision consists of $103,836 which is payable currently.
Deferred income tax assets and liabilities reflecting the impact of temporary
differences between the amounts of assets and liabilities for financial
reporting and income tax reporting purposes are not material as of December 31,
1996.
The components of the deferred tax assets and liabilities of the S corporations
are not material to the combined financial position of The Nations Group.
The federal statutory corporate rate is 15% of the first $50,000 of income and
35% of any additional income. The only significant reconciling items between
the federal statutory rate and The Nations Group's effective tax rate for the
period ended December 31, 1996 are the effect of S corporations and state
taxes, net of the federal income tax benefit.
9. RELATED-PARTY TRANSACTIONS:
The Nations Group rents a facility and certain equipment from the Principal
Stockholder under short-term lease agreements. During 1996, The Nations Group
paid the Principal Stockholder approximately $500 for rent associated with such
leases.
The Nations Group has advances to the Principal Stockholder totaling
approximately $32,000 at December 31, 1996 which have no scheduled repayment
terms. See Note 4 for a description of notes payable to stockholders.
Legal fees of approximately $45,000 were paid to a stockholder.
Subsequent to year-end, the Principal Stockholder exercised an option to
purchase a building owned by The Nations Group for $150,000. No gain or loss
as recognized on the sale.
During 1996, The Nations Group assigned an option to the Principal Stockholder
to purchase land and a building for $287,000 from a non-affiliated third party.
10. SUBSEQUENT EVENT:
Effective March 6, 1997, Serologicals, through its subsidiaries, acquired all
of the outstanding capital stock of Nations Biologics, Inc. and two of the
other corporations under common control and substantially all of the assets of
the remaining corporations within The Nations Group for approximately $14.2
million, subject to adjustment to be based primarily upon the post-acquisition
performance of the acquired businesses. The acquisition will be accounted for
under the purchase method of accounting in accordance with APB No. 16.
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated balance sheet as of
December 29, 1996 and unaudited pro forma condensed consolidated statement of
income for the year ended December 29, 1996 (collectively, the "Pro Forma
Statements") are based on the audited historical Consolidated Financial
Statements of the Company, included in the Company's Annual Report on Form 10-K
and the audited historical Combined Financial Statements of the Nations Group
included elsewhere in this report on Form 8-K/A, adjusted to give effect to the
acquisition of the Nations Group (the "Nations Acquisition") and the related
issuance of the Convertible Note (collectively, the "Transactions") using the
purchase method of accounting and the assumptions and adjustments in the
accompanying Notes to the Pro Forma Statements. The pro forma condensed
consolidated balance sheet gives effect to the Transactions as if they occurred
on December 29, 1996 and the pro forma condensed consolidated statement of
income gives effect to the Transactions as if they occurred on January 1, 1996.
The pro forma adjustments are based upon available information and certain
assumptions that the Company believes are reasonable. The Pro Forma Statements
do not purport to represent what the Company's financial position and results
of operations would actually have been had the Transactions in fact occurred on
such dates or to project the Company's financial position or results of
operations for any future period.
The Pro Forma Statements and the Notes thereto should be read in conjunction
with the historical Consolidated Financial Statements of the Company and Notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 29, 1996 and the historical Combined Financial Statements of the
Nations Group and Notes thereto for the year ended December 31, 1996 included
elsewhere in this report on Form 8-K/A.
SEROLOGICALS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 29, 1996
Nations
Company Group Pro Forma Pro Forma
Historical Historical Adjustments Consolidated
----------- ---------- ------------- ------------
ASSETS
CURRENT ASSETS:
Cash and cash
equivalents $21,231,906 $332,354 ($10,164,854) (a) $11,399,406
Trade accounts
receivable, net 5,235,336 214,967 -- 5,450,303
Inventories 5,746,181 1,379,478 -- 7,125,659
Other current assets 1,130,384 169,043 (95,253) (b) 1,204,174
----------- ---------- ------------ -----------
Total current assets 33,343,807 2,095,842 (10,260,107) 25,179,542
----------- ---------- ------------ -----------
PROPERTY AND
EQUIPMENT, net 9,800,448 1,774,351 (150,000) (c) 11,424,799
---------- ---------- ------------ -----------
OTHER ASSETS:
Goodwill, net 33,540,837 4,102,242 7,390,837 (d) 45,133,916
FDA licenses, net 2,813,057 -- 1,400,000 (e) 4,213,057
Other, net 1,338,393 347,298 (167,245) (b) 1,518,446
----------- ---------- ------------ -----------
37,692,287 4,449,540 8,623,592 50,865,419
----------- ---------- ------------ -----------
$80,836,542 $8,319,733 ($1,786,515) $87,469,760
----------- ---------- ------------ -----------
----------- ---------- ------------ -----------
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current maturities
of long-term debt
and capital lease
obligations $ 3,566,741 $6,339,378 ($5,006,045) (f) $4,900,074
Accounts payable 2,794,999 234,319 -- 3,029,318
Accrued liabilities 6,206,869 882,577 500,000 (g) 7,589,446
Deferred revenue 69,183 916,322 -- 985,505
----------- ---------- ------------ -----------
Total current
liabilities 12,637,792 8,372,596 (4,506,045) 16,504,343
----------- ---------- ------------ -----------
LONG-TERM DEBT AND CAPITAL
LEASE OBLIGATIONS,
less current
maturities 147,158 -- 2,666,667 (h) 2,813,825
----------- ---------- ------------ -----------
OTHER LIABILITIES 168,266 -- -- 168,266
----------- ---------- ------------ -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock 141,211 481,800 (481,800) (i) 141,211
Additional paid-in
capital 52,163,703 -- -- 52,163,703
Retained earnings
(accumulated
deficit) 15,367,806 (534,663) 534,663 (i) 15,367,806
Cumulative translation
adjustment 210,606 -- -- 210,606
----------- ---------- ------------ -----------
Total stockholders'
equity (deficit) 67,883,326 (52,863) 52,863 67,883,326
----------- ---------- ------------ -----------
$80,836,542 $8,319,733 ($1,786,515) $87,369,760
----------- ---------- ------------ -----------
----------- ---------- ------------ -----------
See accompanying notes to unaudited pro forma condensed consolidated balance
sheet
SEROLOGICALS CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 29, 1996
The historical condensed consolidated balance sheet presented for the
Company is as of December 29, 1996 and the historical condensed combined
balance sheet presented for the Nations Group is as of December 31, 1996.
The following pro forma adjustments reflect the Nations Acquisition using
the purchase method of accounting. The total purchase price for the
Nations Acquisition has been preliminarily allocated to tangible and
identifiable intangible assets and liabilities based upon management's
estimate of their respective fair market values with the excess of cost
over the fair value of net assets acquired allocated to goodwill. The
allocation of the purchase price is subject to revision when additional
information concerning asset and liability valuations is obtained.
Additionally, the purchase price is subject to adjustment over the 14-month
period following the closing date based primarily on the post-acquisition
performance of the Nations Group.
In February 1997, the Company declared a 3-for-2 split of its common stock
paid in the form of a stock dividend on February 28, 1997 for holders of
record on February 10, 1997. Accordingly, all share and per share data
included in these Pro Forma Statements have been restated to retroactively
reflect such split.
(a) To reflect cash paid for acquisition:
Cash paid to Nations Group stockholders $3,825,476
Repayment of Nations Group debt 6,339,378
-----------
$10,164,854
-----------
-----------
(b) Adjustment to reflect note receivable not purchased:
Current portion $95,253
Long-term portion 167,245
-----------
$262,498
-----------
-----------
(c) Adjustment to exclude building not purchased.
(d) Preliminary allocation of excess of purchase price over
the estimated fair market value of the tangible and
identifiable intangible assets and liabilities acquired.
(e) Allocation of purchase price to estimated fair market
value of FDA licenses acquired.
(f) Adjustment to reflect Nations Group debt repaid, which
was all classified as current at December 31, 1996, and
issuance of Convertible Note (current portion):
Repayment of Nations Group debt ($6,339,378)
Issuance of Convertible Note 1,333,333
-----------
Net decrease ($5,006,045)
-----------
-----------
(g) Adjustment to record estimated transaction costs.
(h) Adjustment to reflect issuance of Convertible Note
(long-term portion):
Face value of Convertible Note $4,000,000
Less: current potion (1,333,333)
-----------
Long-term portion of Convertible Note $2,666,667
-----------
-----------
(i) Adjustment to eliminate Nation Group's historical
stockholders' deficit
SEROLOGICALS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 29, 1996
Nations
Company Group Pro Forma Pro Forma
Historical Historical Adjustments Consolidated
----------- ---------- ------------- ------------
----------- ---------- ------------ -----------
Net Sales $65,571,247 $9,073,822 $ -- $74,645,069
Costs and expenses:
Cost of sales 38,752,305 6,046,525 1,561,588 (a) 46,360,418
Selling, general
and administrative
expenses 9,394,342 2,311,174 (1,886,088) (b) 9,819,428
Product development
expenses 2,241,872 -- -- 2,241,872
Other expense, net 1,846,673 936,900 355,633 (c) 3,139,206
Interest expense,
net 220,085 309,908 378,335 (d) 908,328
----------- ---------- ------------- ------------
Income (loss ) before income
taxes, gain on sale of
facility and extraordinary
loss 13,115,970 (530,685) (409,468) 12,175,817
Gain on sale of
facility -- 554,728 -- 554,728
----------- ---------- ------------- ------------
Income (loss) before
income taxes and
extraordinary loss 13,115,970 24,043 (409,468) 12,730,545
Provision (benefit) for
income taxes 4,865,872 103,836 (43,506) (e) 4,926,202
----------- ---------- ------------- ------------
Income (loss) before
extraordinary loss $8,250,098 ($79,793) ($365,962) $7,804,343
----------- ---------- ------------- ------------
Net income per common share:
Income before extraordinary
loss $ 0.58 $ 0.54
----------- ---------- ------------- ------------
Weighted average shares
outstanding 14,321,644 213,220 (f) 14,534,864
----------- ---------- ------------- ------------
----------- ---------- ------------- ------------
See accompanying notes to unaudited pro forma condensed consolidated statement
of income
SEROLOGICALS CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 29, 1996
The historical consolidated statement of income presented for the Company is
for the year ended December 29, 1996 and the historical combined statement of
income presented for the Nations Group is for the year ended December 31, 1996.
The following pro forma adjustments reflect the Nations Acquisition using the
purchase method of accounting and certain estimated operational and financial
benefits which are a direct result of the Transactions.
(a) The pro forma reclassification from selling, general and
administrative expenses to cost of sales is to conform
the Nations Group's historical accounting and financial
reporting policies with that of the Company. $1,561,588
------------
------------
(b) The pro forma adjustment to selling, general and
administrative expense represents (i) the elimination of
owner compensation which is non-recurring, net of the
compensation expected to be paid to such former stockholder
of the Nations Group pursuant to an employment agreement
with the Company; (ii) the elimination of the expense
related to tail insurance coverage purchased by the Nations
Group as a result of its acquisition by the Company and for
the sole benefit of the previous stockholders of the Nations
Group; (iii) the elimination of non-recurring accounting fees
incurred by the Nations Group in connection with its acquisition
by the Company and (iv) to conform the Nations Group's historical
accounting and financial reporting policies with that of the
Company:
Owner compensation paid by the Nations Group to former
stockholder ($320,000)
Annual salary to be paid to former stockholder pursuant to an
employment agreement with the Company 120,000
Tail insurance premiums (42,000)
Accounting fees (82,500)
Reclassification to cost of sales (1,561,588)
------------
Net pro forma decrease to selling, general and
administrative expense ($1,886,088)
------------
------------
(c) The pro forma adjustment to other expense, net represents
the estimated increase in amortization expense related to the
intangible assets acquired in the Nations Acquisition based upon
the preliminary purchase price allocation:
Goodwill (amortized on a straight-line basis over 25 years) $299,633
FDA licenses (amortized on a straight-line basis over 25 years) 56,000
------------
$355,663
------------
------------
(d) The pro forma adjustment to interest expense, net reflects
the loss of interest income on cash used by the Company in
the Nations Acquisition at an average rate of 5% plus the
interest expense on the Convertible Note, less interest expense
on debt repaid:
Loss of interest income on cash used for acquisition $508,243
Interest expense on Convertible Note (stated rate of 4 1/2%) 180,000
Elimination of interest expense on debt extinguished (309,908)
------------
Net pro forma increase to interest expense $378,335
------------
------------
(e) The pro forma adjustment to income taxes represents (i)
the imputed tax expense on the operating results of
certain corporate entities acquired in the Nations
Acquisition at statutory rates in effect during the
periods presented as such companies were "S" corporations
for income tax purposes and therefore did not provide for
income taxes; and (ii) the tax impact of applying the
Company's pro forma effective tax rate to the pro forma adjustments:
Imputed tax expense on S corporations $49,819
Tax benefit of pro forma adjustments (93,325)
------------
------------
Net pro forma decrease to tax expense ($43,506)
------------
------------
(f) The pro forma adjustment to weighted average shares outstanding
represents the assumed conversion of the Convertible Note using the
"if converted" method.
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated April 18, 1997 and to all references to our
firm, included in this Form 8-K/A, into the Company's previously filed
Registration Statements on Form S-8 (File Nos. 333-97640, 333-03771, 333-03769
and 333-09549).
/s/ ARTHUR ANDERSEN LLP
New Orleans, Louisiana
April 24, 1997
