<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 8-K / A
AMENDMENT NO. 1
-------------------------
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JUNE 21, 1995
IFR SYSTEMS, INC.
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
- --------------------------------------------------------------------------------
(STATE OR OTHER JURISDICTION OF INCORPORATION)
0-14224 48-0777904
- ---------------------------- ---------------------------------
(COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.)
10200 WEST YORK STREET, WICHITA, KANSAS 67215
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(316) 522-4981
- --------------------------------------------------------------------------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
<PAGE>
Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 21, 1995, the Registrant consummated the acquisition of
substantially all of the assets of York Technology Limited, a company
incorporated in England ("York Tech England"), and York Technology Inc. , a New
Jersey Corporation ("York Tech USA"), as well as the real estate and building
previously leased by York Tech England (the "York Tech Building"). The total
purchase price for all of these assets was approximately $6,900,000 (including
estimated acquisition costs of $300,000).
Cornibi Limited, a company incorporated in England and a subsidiary formed
by the Registrant for purposes of the York Tech England acquisition ("Cornibi"),
acquired substantially all of the assets of York Tech England pursuant to the
terms of an Agreement for the purchase of the business of York Technology
Limited dated June 21, 1995 by and among York Limited, the parent company of
York Tech England, York Tech England, Cornibi Limited, and the Registrant, as
amended by supplemental agreement dated June 29, 1995 (as amended, the "York
Tech England Acquisition Agreement"). Under the terms of the York Tech England
Acquisition Agreement, Cornibi acquired substantially all of the assets of York
Tech England for a total purchase price of $4,071,000, payable with a note in
the principal amount of $1,872,000 (the "Term Note") and with the balance paid
in cash at closing. The balance of the Term Note, without interest, is to be
paid on December 31, 1996, and may, at the option of Cornibi, be paid with
shares of the Registrant's common stock based on the average market price of the
Registrant's common stock for the twenty trading days ending the business day
prior to the date of delivery of the shares in full or partial payment of the
Term Note. Contemporaneously with the closing of the York Tech England
Acquisition Agreement, Cornibi also purchased the York Tech Building from TKM
Group Pension Trust Limited("TKM") for 700,000 British pounds or $1,123,000
pursuant to the terms and conditions of a Freehold Agreement dated June 21, 1995
by and between TKM and Cornibi (the "York Tech Building contract").
At the same time as the closing of the York Tech England Acquisition
Agreement and the York Tech Building Contract, Photon Kinetics, Inc., an Oregon
corporation and wholly-owned subsidiary of Registrant ("PK"), acquired
substantially all of the assets of York Tech USA pursuant to the terms of an
Agreement for the purchase of the business of York Technology Inc. dated June
21, 1995 by and among York Limited, the English parent company of York Tech USA,
York Tech USA, PK, and the Registrant (the "York Tech USA Acquisition
Agreement"). Under the terms of the York Tech USA Acquisition Agreement, PK
acquired substantially all of the assets of York Tech USA for a total purchase
price of $1,550,000, payable in cash at closing.
<PAGE>
York Tech England and York Tech USA designed, manufactured, and sold fiber
optic test and measurement equipment primarily for the fiber production and
preparation market. Registrant currently intends for Cornibi to continue the
business of York Tech England and for PK to continue the business of York Tech
USA.
The purchase prices for York Tech England and York Tech USA transactions
were determined by arms-length negotiations between representatives of the
Registrant and York Limited. The purchase price for the York Tech Building was
determined by arms-length negotiation between representatives of the Registrant
and TKM. With the exception of the Term Note, Registrant's source of funds for
the acquisitions was a combination of cash reserves and cash from existing
credit facilities.
The foregoing summary of the acquisition of substantially all of the assets
of York Tech England and York Tech USA as well as the York Tech Building is
qualified in its entirety by reference to the York Tech England Acquisition
Agreement, the York Tech USA Acquisition Agreement, and the York Tech Building
Contract, copies of which are exhibits hereto and are incorporated herein by
reference.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS.
Set forth below are the financial statements of York Tech England
appearing on pages F-1 through F-23 of the attached Appendix, which are hereby
incorporated by reference:
1. Independent auditors report for the year ended September 30,
1994.
2. Profit and loss account for year ended September 30, 1994
3. Balance sheet as of September 30, 1994.
4. Cash flow statement for year ended September 30, 1994.
5. Notes to the cash flow statement.
6. Notes to the financial statements.
7. Unaudited condensed profit and loss account for the six months
ended March 31, 1995.
8. Unaudited condensed balance sheet as of March 31, 1995.
<PAGE>
9. Unaudited condensed cash flow statement for the six months
ended March 31, 1995.
10. Notes to the unaudited condensed cash flow statement.
11. Notes to the unaudited condensed financial statements.
Financial information for York Tech USA and the York Tech Building is
not included in these financial statements of York Tech England, but such
information is included in the pro forma financial information described
below.
(b) PRO FORMA FINANCIAL INFORMATION.
Set forth below are the unaudited PRO FORMA condensed consolidated
financial statements and accompanying explanatory notes, appearing on pages P-1
through P-6 of the attached Appendix, which are hereby incorporated by
reference:
1. Unaudited PRO FORMA condensed consolidated balance sheet as
of March 31, 1995.
2. Unaudited PRO FORMA condensed consolidated statement of income
for the year ended June 30, 1994.
3. Unaudited PRO FORMA condensed consolidated statement of income
for the nine months ended March 31, 1995.
4. Notes to unaudited PRO FORMA condensed consolidated financial
statements.
(c) EXHIBITS.
2.1 Acquisition Agreement for York Technology, Inc. dated June 21, 1995. *
2.2 Acquisition Agreement for York Technology, Ltd. dated June 21, 1995. *
2.3 Building transfer agreement with TKM Group Pension Trust Limited dated
June 21, 1995. *
<PAGE>
2.4 Supplemental Agreement dated June 29, 1995. *
99 Press Release dated June 21, 1995. *
* Document has been previously filed with the Securities and Exchange
Commission and is incorporated herein by reference and made a part hereof.
SIGNATURE
Pursuant to the requirements of Securities Exchange Act of 1984, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
IFR Systems, Inc.
By /s/ Bruce C. Bingham
-----------------------------------
Bruce C. Bingham
Treasurer and Chief Financial Officer
<PAGE>
Annex I
YORK 1995 LIMITED
(FORMERLY YORK TECHNOLOGY LIMITED)
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 1994
Registered number 1721892
F-1
<PAGE>
York 1995 Limited (formerly York Technology Limited)
Financial statements
<TABLE>
<CAPTION>
CONTENTS PAGE
<S> <C>
Independent auditors' report 1
Profit and loss account 2
Balance sheet 3
Cashflow statement 4
Notes to the cash flow statement 5
Notes to the financial statements 6 - 16
Unaudited financial information for the six month period ended 31 March 1995
Profit and loss account 17
Balance sheet 18
Cash flow statement 19
Notes to the cash flow statement 20
Notes to the financial statements 21
</TABLE>
F-2
<PAGE>
KPMG [LOGO]
Dukes Keep
Marsh Lane
Southampton
Hampshire SO14 3EX
INDEPENDENT AUDITORS' REPORT
The Board of directors and shareholders
York 1995 Limited
We have audited the accompanying balance sheet of York 1995 Limited (formerly
York Technology Limited) as at September 30, 1994, and the related profit and
loss account and cash flow statement for the year ended September 30, 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 audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of York 1995 Limited (formerly
York Technology Limited) as of September 30, 1994 and the results of their
operations and cash flows for the year ended September 30, 1994 in conformity
with generally accepted accounting principles in the United Kingdom.
The accompanying financial statements have been prepared assuming the company
will continue as a going concern. As discussed in notes 1 and 20 to the
financial statements, the company's equity and liquidity position both before
and after the sale of its business raise substantial doubt about its ability to
continue as a going concern as of September 30, 1994 and about its ability to
meet its obligations, including the contingent obligations described in note 16
to the financial statements, after June 21, 1995. The financial statements do
not include any adjustments that might result from the outcome of these
uncertainties.
Accounting principles generally accepted in the United Kingdom vary in certain
significant respects from accounting principles generally accepted in the United
States. A description of certain significant differences, as applicable to the
company, is included in note 19 to the financial statements.
KPMG
Chartered Accountants
Registered Auditors
Southampton, England
12 December 1994, except as to note 20, which is as of .. August 1995.
F-3
<PAGE>
York 1995 Limited (formerly York Technology Limited)
Profit and loss account
FOR THE YEAR ENDED 30 SEPTEMBER 1994
<TABLE>
<CAPTION>
NOTE 1994
<S> <C> <C>
L
TURNOVER 1 & 2 4,778,324
Cost of sales (3,770,288)
----------
GROSS PROFIT 1,008,036
Selling and distribution expenses (508,987)
Administrative expenses (333,590)
----------
OPERATING PROFIT 165,459
Interest payable and similar charges 2 (1,093)
----------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 2 164,366
Taxation on profit on ordinary activities 5 (5,000)
----------
PROFIT FOR THE FINANCIAL YEAR 159,366
Accumulated deficit brought forward (1,359,924)
----------
ACCUMULATED DEFICIT CARRIED FORWARD (1,200,558)
----------
----------
</TABLE>
There are no recognised gains and losses other than those set out above. All
results arise from activities that have now been discontinued (note 20).
F-4
<PAGE>
York 1995 Limited (formerly York Technology Limited)
Balance sheet
AS AT 30 SEPTEMBER 1994
<TABLE>
<CAPTION>
NOTE 1994
L L
<S> <C> <S> <C>
FIXED ASSETS
Intangible assets 6 41,986
Tangible assets 7 152,656
-------
194,642
CURRENT ASSETS
Stocks 8 815,964
Debtors 9 975,569
----------
1,791,533
CREDITORS: amounts falling
due within one year 10 (2,580,678)
----------
NET CURRENT LIABILITIES (789,145)
--------
TOTAL ASSETS LESS CURRENT LIABILITIES (594,503)
CREDITORS: amounts falling due after
more than one year 11 (3,667)
PROVISIONS FOR LIABILITIES AND CHARGES 12 (93,097)
--------
NET LIABILITIES (691,267)
--------
--------
CAPITAL AND RESERVES
Called up share capital 13 100
Share premium account 14 509,191
Profit and loss account (1,200,558)
---------
(691,267)
---------
---------
</TABLE>
F-5
<PAGE>
York 1995 Limited (formerly York Technology Limited)
Cash flow statement
FOR THE YEAR ENDED 30 SEPTEMBER 1994
<TABLE>
<CAPTION>
NOTE 1994
L L
<S> <C> <C> <C>
NET CASH INFLOW FROM OPERATING
ACTIVITIES A 96,819
NET CASH OUTFLOW FROM SERVICING OF FINANCE
Interest paid (1,093)
TAXATION
Overseas tax paid (5,000)
INVESTING ACTIVITIES
Purchase of tangible fixed assets (108,537)
Purchase of intangible fixed assets (9,048)
Sale of fixed assets 5,430
--------
NET CASH OUTFLOW FROM INVESTING ACTIVITIES (112,155)
FINANCING:
Capital element of finance leases C (8,570)
---------
DECREASE IN CASH AND CASH EQUIVALENTS B (29,999)
---------
---------
</TABLE>
F-6
<PAGE>
York 1995 Limited (formerly York Technology Limited)
Notes to the cash flow statement
FOR THE YEAR ENDED 30 SEPTEMBER 1994
A NET CASH INFLOW FROM OPERATING ACTIVITIES
<TABLE>
<CAPTION>
1994
L
<S> <C>
Operating profit 165,459
Depreciation charges 76,138
Increase in debtors (202,758)
Decrease in creditors (83,923)
Decrease in stocks 188,201
Reduction in warranty provision (46,298)
-------
96,819
-------
-------
</TABLE>
B DECREASE IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
1994 Change 1993
L L L
<S> <C> <C> <C>
Bank overdraft 1,226,660 (29,999) 1,196,661
========== ========== ==========
</TABLE>
C ANALYSIS OF CHANGES IN FINANCING
<TABLE>
<CAPTION>
FINANCE LEASE
L
<S> <C>
At 1 October 1993 459
New financing 15,960
Repayments made (8,570)
-------
At 30 September 1994 7,849
=======
</TABLE>
F-7
<PAGE>
York 1995 Limited (formerly York Technology Limited)
Notes to the financial statements
1 ACCOUNTING POLICIES
The following accounting policies have been applied consistently in dealing
with items which are considered material in relation to the company's
financial statements.
BASIS OF PREPARATION
The financial statements have been prepared under the historical cost
accounting rules and in accordance with applicable accounting standards.
The financial statements have also been prepared on a going concern basis.
The validity of this basis is dependent upon the continued support of the
holding company for the company and certain other group undertakings, the
bank loans and overdrafts of which have been guaranteed by the company (see
note 16b).
The continued support of the holding company is in turn dependent on the
continued support of the group's bankers, creditors and shareholders.
If the company were unable to continue to trade, adjustments would have to
be made to reduce the value of assets to their recoverable amount and to
provide for any further liabilities that might arise.
See note 20 for the effects of the sale of the business.
TURNOVER
Turnover is stated at the value of sales net of discounts, returns and
value added tax.
DEPRECIATION
Depreciation is provided on a straight line basis to write off the cost of
fixed assets over their estimated useful lives. No depreciation is
provided until an asset is brought into use. The rates of depreciation are
as follows:-
Per annum
Leasehold improvements 10%
Intangible assets 20%
Computer aided design equipment 20%
Prototypes 50%
Tooling 100%
All other plant and equipment 33 1/3%
STOCKS
Stocks and work in progress are valued at the lower of cost and net
realisable value. The weighted average method is used in determining cost.
The cost of work in progress includes production overheads.
F-8
<PAGE>
York 1995 Limited (formerly York Technology Limited)
Notes to the financial statements (CONTINUED)
1 ACCOUNTING POLICIES (CONTINUED)
DEFERRED TAXATION
Deferred taxation is provided using the liability method in respect of the
taxation effect of all timing differences to the extent that it is probable
that liabilities will crystallise in the foreseeable future.
FOREIGN EXCHANGE
Assets and liabilities denominated in foreign currencies have been
translated into sterling at rates ruling at the balance sheet date and
transactions during the year have been translated at rates which
approximate to those ruling on the transaction date. The resulting gains
and losses arising on foreign exchange have been credited or charged to the
profit and loss account.
RESEARCH AND DEVELOPMENT
Expenditure on research and development is written off in the period during
which it is incurred.
GRANTS
Revenue based grants are credited to profit and loss account in the same
period in which the expenditure to which they relate is incurred.
WARRANTIES FOR PRODUCTS
Provision is made for the estimated liability on all products still under
warranty.
LEASES
Expenditure on operating leases is charged to the profit and loss account
on a basis representative of the benefit derived from the assets, normally
corresponding to the payment of rentals.
Assets acquired under finance leases are capitalised and the corresponding
liability is included as a creditor. Rentals paid are apportioned between
finance charges and a reduction in the liability.
PENSIONS
The company participates in a group pension scheme providing benefits based
on final pensionable pay. The assets of the scheme are held separately from
those of the group, being invested with an insurance company.
Contributions to the group pension scheme are charged to the profit and
loss account so as to spread the cost of pensions over employees' working
lives within the group.
SHORT TERM CONTRACTS
Amounts received in advance on short term development contracts are
deferred until the terms of the contract are substantially complete.
F-9
<PAGE>
York 1995 Limited (formerly York Technology Limited)
Notes to the financial statements (CONTINUED)
2 TURNOVER AND PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
Turnover and profit on ordinary activities before taxation derive from
sales of optical fibre instrumentation.
An analysis of turnover and profit on ordinary activities before
taxation by geographical area and activity has not been given because,
in the opinion of the directors, such disclosure would be seriously
prejudicial to the interests of the company.
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION IS STATED
<TABLE>
<CAPTION>
1994
L
<S> <C>
AFTER CHARGING/(CREDITING)
Redundancy and reorganisation costs 9,028
Depreciation
Owned tangible assets 64,523
Intangible fixed assets 11,615
Auditors' remuneration 10,000
Finance charges on finance leases 1,093
Hire of plant and machinery 55,740
Foreign currency exchange loss 3,994
======
</TABLE>
Bank overdraft interest is borne by the holding company, York Limited.
3 EMOLUMENTS OF DIRECTORS
<TABLE>
<CAPTION>
1994
L
<S> <C>
Directors' emoluments in the year were as follows:
As directors -
As executives 97,387
Pension costs 5,604
-------
102,991
=======
</TABLE>
F-10
<PAGE>
York 1995 Limited (formerly York Technology Limited)
Notes to the financial statements (CONTINUED)
3 EMOLUMENTS OF DIRECTORS (CONTINUED)
The emoluments of the Chairman in the year were LNil and those of the
highest paid director, excluding pension contributions, were L50,149.
The emoluments of the directors in the year were within the following
ranges:
<TABLE>
<CAPTION>
NUMBER OF DIRECTORS
1994
<S> <C>
L0 - L 5,000 4
L45,001 - L50,000 1
L50,001 - L55,000 1
</TABLE>
4 EMPLOYEE INFORMATION
The average number of persons employed (including directors) during
the year was as follows:
<TABLE>
<CAPTION>
1994
<S> <C>
Production and engineering 52
General administration, sales and marketing 17
-----
69
=====
The costs of these employees during the year
were as follows:
1994
L
Wages and salaries 1,371,743
Social security costs 115,673
Other pension costs (see note 17) 49,071
---------
1,536,487
=========
</TABLE>
F-11
<PAGE>
York 1995 Limited (formerly York Technology Limited)
Notes to the financial statements (CONTINUED)
5 TAXATION
<TABLE>
<CAPTION>
1994
L
<S> <C>
Foreign withholding tax 5,000
======
</TABLE>
There is no corporation tax charge for the year, due to losses
available. There are tax losses of approximately L1,039,000 available
for offset against future profits.
6 INTANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
Licences
and patents
L
<S> <C>
COSTS
At beginning of year 85,363
Additions 9,048
------
At end of year 94,411
------
AMORTISATION
At beginning of year 40,810
Charge for the year 11,615
------
At end of year 52,425
------
NET BOOK VALUE
AT 30 SEPTEMBER 1994 41,986
======
</TABLE>
F-12
<PAGE>
York 1995 Limited (formerly York Technology Limited)
Notes to the financial statements (CONTINUED)
7 TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
Leasehold Motor Plant and Furniture Total
improvements vehicles machinery and office
equipment
L L L L L
<S> <C> <C> <C> <C> <C>
COST
At beginning of year 222,912 57,311 417,109 311,841 1,009,173
Additions 872 13,655 35,023 74,947 124,497
Disposals - (23,902) - (1,514) (25,416)
-------- -------- -------- -------- -----------
At end of year 223,784 47,064 452,132 385,274 1,108,254
-------- -------- -------- -------- -----------
DEPRECIATION
At beginning of year 172,408 51,311 403,677 283,665 911,061
Charge for year 24,082 3,561 10,006 26,874 64,523
Disposals - (19,902) - (84) (19,986)
-------- -------- -------- -------- -----------
At end of year 196,490 34,970 413,683 310,455 955,598
-------- -------- -------- -------- -----------
NET BOOK VALUE
AT 30 SEPTEMBER 1994 27,294 12,094 38,449 74,819 152,656
-------- -------- -------- -------- -----------
-------- -------- -------- -------- -----------
</TABLE>
8 STOCKS
<TABLE>
<CAPTION>
1994
L
<S> <C>
Raw materials and consumables 154,923
Work in progress 476,793
Finished goods and goods for sale 184,248
---------
815,964
=========
</TABLE>
F-13
<PAGE>
York 1995 Limited (formerly York Technology Limited)
Notes to the financial statements (CONTINUED)
<TABLE>
<CAPTION>
9 DEBTORS
1994
L
<S> <C>
Trade debtors 866,800
Amounts owed by group companies 58,020
Other debtors 12,520
Prepayments and accrued income 38,229
-------
975,569
=======
</TABLE>
10 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1994
L
<S> <C>
Bank overdraft (secured) 1,226,600
Trade creditors 717,766
Payroll taxes and social security 85,648
Accruals and deferred income 546,422
Hire purchase creditors 4,182
---------
2,508,678
---------
---------
</TABLE>
The bank overdraft is secured by a fixed and floating charge over the
assets of York Limited, York 1995 Limited, York Ventures and Special
Optical Products Limited, York Fibres Limited and York Sensors
Limited.
11 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1994
L
<S> <C>
Total hire purchase and finance lease
liability (excluding finance charges
allocated to future periods) 7,849
Less: amounts falling due in one year (4,182)
-------
Hire purchase and finance lease
obligations due between two and five years 3,667
======
</TABLE>
F-14
<PAGE>
York 1995 Limited (formerly York Technology Limited)
Notes to the financial statements (CONTINUED)
12 PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
L
<S> <C>
a Warranty provision
At 1 October 1993 139,395
Credit to profit and loss account in year (46,298)
-------
At 30 September 1994 93,097
=======
</TABLE>
b Deferred taxation
The amounts provided for deferred tax, being the full
potential liability, are set out below:
<TABLE>
<CAPTION>
1994
L
<S> <C>
Accelerated capital allowances 234
Other timing differences (234)
-----
Provision at 30 September 1994 -
=====
</TABLE>
13 CALLED UP SHARE CAPITAL
<TABLE>
<CAPTION>
L
<S> <C>
AUTHORISED, ISSUED AND FULLY PAID
100 ordinary shares of L1 each at 30 September 1994 100
=====
</TABLE>
14 SHARE PREMIUM ACCOUNT
<TABLE>
<CAPTION>
L
<S> <C>
At 30 September 1994 509,191
=======
</TABLE>
F-15
<PAGE>
York 1995 Limited (formerly York Technology Limited)
Notes to the financial statements (CONTINUED)
15 COMMITMENTS
At the end of the financial year the company had annual commitments
under non-cancellable operating leases as follows:
<TABLE>
<CAPTION>
1994
LAND AND OTHER
BUILDINGS
L L
<S> <C> <C>
OPERATING LEASES WHICH EXPIRE:
Within one year - 3,038
In second to fifth year - 41,151
Over five years 90,000 -
------ ------
90,000 44,189
====== ======
</TABLE>
16 CONTINGENT LIABILITIES
a There are contingent liabilities amounting to L5,160 at 30
September 1994, in respect of guarantees given in the ordinary
course of business.
b There is a contingent liability amounting to L640,491 at
30 September 1994, in respect of a guarantee and debenture
between York Limited, York 1995 Limited, York Ventures and
Special Optical Products Limited, York Sensors Limited, York
Fibers Limited and Barclays Bank plc.
17 PENSIONS
As explained in the accounting policy note 1, the company participates
in a group pension scheme providing benefits based on final
pensionable pay, contributions being charged to the profit and loss
account so as to spread the cost of pensions over employees' working
lives with the company. The contributions are determined by a
qualified actuary on the basis of triennial valuations using the
projected unit method. The most recent valuation was at 1 June 1993.
The assumptions which have the most significant effect on the results
of the valuation are those relating to the rate of return on
investments and the rates of increase in salaries and pensions. It
was assumed that the investment returns would be 9% per annum, that
salary increases would average 7% per annum and that present and
future pensions would increase at the rate of 5% per annum.
The company pension charge for the year was L49,071.
The most recent actuarial valuation showed that the market value of
the scheme's assets was L1,079,417 and that the actuarial value of
those assets represented 94% of the benefits that had accrued to
members, after allowing for expected future increases in earnings.
F-16
<PAGE>
York 1995 Limited (formerly York Technology Limited)
Notes to the financial statements (CONTINUED)
17 PENSIONS (CONTINUED)
The contributions of the company and employees were 6% and 5%
respectively, with the company's contribution increasing to 7.3% with
effect from 1 June 1994.
At 30 September 1994 contributions amounting to L76,581 were payable
by the company to the pension scheme and are included in creditors.
18 ULTIMATE HOLDING COMPANY
York 1995 Limited is a wholly owned subsidiary of York Limited, a
company incorporated in England.
19 SIGNIFICANT DIFFERENCES BETWEEN UK GENERALLY ACCEPTED ACCOUNTING
PRACTICE "GAAP" AND US GAAP
DEFERRED TAXATION
Deferred corporation tax has, in accordance with UK GAAP, been
provided under the liability method to the extent that it is probable
that a liability will crystallise in the foreseeable future. US GAAP
requires that deferred taxes be provided fully under the liability
method for all temporary differences between carrying values for
financial reporting purposes and the tax bases of assets and
liabilities. A valuation allowance is recognised to the extent it is
more likely than not that any deferred tax assets will not be
realised.
LEASES
UK GAAP requires the capitalisation of a leased asset and recording of
the related lessee liability if the lease transfers substantially all
the risks and rewards of ownership of the asset to the lessee.
US GAAP requires the capitalisation of a lease by the lessee if one of
the following criteria applies:
- the lease transfers ownership;
- the lease contains a bargain purchase option;
- the lease term is equal to or greater that 75% of the
estimated economic life of the property; or
- the present value of the minimum lease payments equal
or exceeds 90% of the fair value of the property, less
any investment tax credit retained by the lessor.
CASH FLOW STATEMENTS
The principal differences between cash flow statements prepared in
conformity with UK GAAP and those prepared in conformity with US GAAP
are as follows:
- Under UK GAAP, net cash flow from operating activities is
determined before considering cash flows from (a) servicing of
finance and (b) taxes paid. Under US GAAP, net cash flow from
operating activities would be determined after these items.
- The UK GAAP definition of cash and cash equivalents
includes advances from banks or financial institutions with a
maturity of three months or less at the date of the advance.
Under US GAAP these liabilities would be part of financing
activities.
F-17
<PAGE>
York 1995 Limited (formerly York Technology Limited)
Notes to the financial statements (CONTINUED)
19 SIGNIFICANT DIFFERENCES BETWEEN UK GAAP AND US GAAP (CONTINUED)
PENSIONS
Under UK and US GAAP, pension costs are determined on a systematic
basis over the length of service of employees. US GAAP is more
prescriptive in the application of the actuarial method and
assumptions to be applied in the calculation of pension costs. As a
result, the calculations under US GAAP are more liable to amendment
from year to year, giving rise to adjustments by comparison with UK
GAAP.
COSTS BORNE BY HOLDING COMPANY
When costs and expenses (eg interest on overdraft positions) are borne
by a parent company, UK GAAP does not require that the effect of such
support be reflected in the accounts of the company. Under US GAAP,
these costs would be reflected in the company's financial statements
as an expense and a capital contribution.
OTHER DISCLOSURE REQUIREMENTS
US GAAP requires a number of significant additional footnote
disclosures which are not required under UK GAAP.
20 SUBSEQUENT SALE OF THE BUSINESS
On June 21, 1995, the company's business activities were sold to an
unrelated party for cash of L1,280,683 and a note receivable from the
acquiror for the balance of the purchase price which can be in the
range from L1,447,000 to L2,307,000 depending on the performance of
the business after acquisition. The aggregate proceeds may be
insufficient to eliminate the company's negative equity and, in any
case, will not permit the company to meet its obligations when due
since the note is not payable until December 31, 1996.
The company has not yet made any specific arrangements to overcome its
resulting liquidity problems or its potential insolvency nor is there
any assurance that such arrangements can be successfully made.
F-18
<PAGE>
York 1995 Limited (formerly York Technology Limited)
Profit and loss account
FOR THE SIX MONTH PERIOD ENDED 31 MARCH 1995
<TABLE>
<CAPTION>
199
<S> <C>
TURNOVER 1,886,42
Cost of sales (1,628,555
----------
GROSS PROFIT 257,86
Selling and distribution expenses (224,273
Administrative expenses (197,718
----------
OPERATING LOSS (164,126
Interest payable and similar charges ( 91,505
----------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION (255,631
Taxation on profit on ordinary activities
----------
LOSS FOR THE FINANCIAL YEAR (255,631
Accumulated deficit brought forward (1,200,558
----------
ACCUMULATED DEFICIT CARRIED FORWARD (1,456,189
----------
----------
<FN>
There are no recognised gains and losses other than those set out above. All
results arise from activities that have now been discontinued.
</TABLE>
F-19
<PAGE>
York 1995 Limited (formerly York Technology Limited)
Balance sheet
AS AT 31 MARCH 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Note
1995
L L
<S> <C> <C> <C>
FIXED ASSETS
Intangible assets 44,025
Tangible assets 150,184
-------
194,209
CURRENT ASSETS
Stocks 2 797,251
Debtors 1,164,780
---------
1,962,031
CREDITORS: amounts falling
due within one year (2,005,148)
---------
NET CURRENT LIABILITIES (1,043,118)
- --------
TOTAL ASSETS LESS CURRENT LIABILITIES (848,909)
CREDITORS: amounts falling due after more
than one year (3,667)
Provisions for liabilities and charges (94,322)
--------
NET LIABILITIES (946,898)
--------
--------
CAPITAL AND RESERVES
Called up share capital 100
Share premium account 509,191
Profit and loss account (1,456,189)
---------
(946,898)
---------
---------
</TABLE>
F-20
<PAGE>
York 1995 Limited (formerly York Technology Limited)
Cash flow statement
FOR THE SIX MONTH PERIOD ENDED 31 MARCH 1995
<TABLE>
<CAPTION>
1995
<S> <C> <C>
NET CASH OUTFLOW FROM OPERATING
ACTIVITIES (139,818)
NET CASH OUTFLOW FROM SERVICING OF
FINANCE
Interest paid (91,505)
INVESTING ACTIVITIES
Purchase of tangible fixed assets (64,326)
Purchase of intangible fixed assets (8,477)
Sale of fixed assets 33,531
--------
NET CASH OUTFLOW FROM INVESTING
ACTIVITIES (39,272)
FINANCING:
Capital element of finance leases (2,091)
--------
DECREASE IN CASH AND CASH EQUIVALENTS (272,686)
--------
--------
</TABLE>
F-21
<PAGE>
York 1995 Limited (formerly York Technology Limited)
Notes to the cash flow statement
(unaudited)
A NET CASH OUTFLOW FROM OPERATING ACTIVITIES
<TABLE>
<CAPTION>
1995
L
<S> <C>
Operating loss (164,126)
Depreciation charges 39,705
Increase in debtors (189,211)
Increase in creditors 153,876
Decrease in stocks 18,713
Increase in warranty provision 1,225
-------
(139,818)
-------
-------
</TABLE>
B DECREASE IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
1995 Change 1994
L L L
<S> <C> <C> <C>
Bank overdraft 1,499,346 272,686 1,226,660
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
C ANALYSIS OF CHANGES IN FINANCING
<TABLE>
<CAPTION>
FINANCE
LEASE
L
<S> <C>
At 1 October 1994 7,849
Repayments made (2,091)
-------
At 31 March 1995 5,758
-------
-------
</TABLE>
F-22
<PAGE>
York 1995 Limited (formerly York Technology Limited)
Notes to financial statements (unaudited)
1 BASIS OF PRESENTATION
The condensed interim financial statements included herein have been
prepared in conformity with generally accepted accounting principles in
the United Kingdom and should be read in conjunction with the
September 30, 1994 audited financial statements. The condensed interim
statements are unaudited but reflect all adjustments (consisting only
of normal recurring accruals) which, in the opinion of management, are
necessary for a fair presentation of the Company's financial position and
the results of operations for interim periods. The results for the six
months ended 31 March 1995 are not necessarily indicative of the results
to be expected for the full year.
2 STOCKS
<TABLE>
<CAPTION>
1995
L
<S> <C>
Raw materials and consumables 207,313
Work in progress 372,147
Finished goods and goods for sale 217,791
--------
797,251
--------
-------
</TABLE>
3 CONTINGENT LIABILITIES
a There are contingent liabilities amount to L19,153 at 31 March 1995,
in respect of guarantees given in the ordinary course of business.
b There is a contingent liability amounting to L248,468 at 31 March
1995, in respect of a guarantee and debenture between York Limited,
York 1995 Limited, York Ventures and Special Optical Products
Limited, York Sensors Limited, York Fibers Limited and Barclays
Bank plc.
4 POST BALANCE SHEET EVENT
On June 21, 1995, the company's business activities were sold to an
unrelated party for cash of L1,280,683 and a note receivable from the
acquiror for the balance of the purchase price which can be in the range
from L1,447,000 to L2,307,000 depending on the performance of the business
after acquisition. The aggregate proceeds may be insufficient to eliminate
the company's negative equity and, in any case, will not permit the company
to meet its obligations when due since the note is not payable until
December 31, 1996.
The company has not yet made any specific arrangements to overcome its
resulting liquidity problems or its potential insolvency nor is there any
assurance that such arrangements can be successfully made.
F-23
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
The following pro forma condensed consolidated balance sheet as of March
31, 1995, and the pro forma condensed consolidated statements of income for the
year ended June 30, 1994, and nine months ended March 31, 1995, give effect to
the acquisition of all of the inventory and fixed assets of York Technology
Limited, a company incorporated in England ("York Tech England"), and York
Technology, Inc., a New Jersey Corporation ("York Tech USA"), as well as the
real estate and building previously leased by York Tech England ("York Tech
Building") as if these acquisitions occurred at the beginning of the period
presented. The pro forma information is based on the historical financial
statements of York Tech England, York Tech USA (collectively "York") and IFR
Systems, Inc. and subsidiary ("IFR") giving effect to the transaction under
the purchase method of accounting and the assumptions and adjustments in the
accompanying notes to the pro forma financial statements.
The pro forma financial statements have been prepared by IFR management
based upon the financial statements of York Tech England, included elsewhere
herein, and York Tech USA. These pro forma statements may not be indicative
of the results that actually would have occurred if the combination had been
in effect on the dates indicated or which may be obtained in the future. The
pro forma financial statements should be read in conjunction with the audited
financial statements and notes of York Tech England appearing on pages F-1
through F-23 of the attached Appendix, and the audited consolidated financial
statements of IFR included in its 1994 Annual Report on Form 10-K.
P-1
<PAGE>
IFR SYSTEMS, INC. AND SUBSIDIARIES
PRO FORMA CONSENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 1995
-----------------------------------------------------------------
ACQUISITION
AS REPORTED PRO FORMA PRO FORMA
IFR ADJUSTMENTS CONSOLIDATED
-----------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 80 $ - $ 80
Accounts receivable 12,959 - 12,959
Inventory 20,748 1,791 (B) 22,539
Prepaid expenses and other 1,221 - 1,221
------------- ------------- -------------
Total current assets 35,008 1,791 36,799
Property and equipment, net 6,160 1,357 (B) 7,517
Property under capital lease, net 2,365 - 2,365
Other assets:
Cost in excess of net assets acquired 6,182 3,752 (B) 9,934
Patents, trademards and other intangibles 712 - 712
Sundry 495 - 495
Total other assets 7,389 3,752 11,141
------------- ------------- -------------
TOTAL ASSETS $ 50,922 $ 6,900 $ 57,822
------------- ------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term bank borrowings $ 2,175 $ 4,308 (B) $ 6,483
Accounts payable 3,211 - 3,211
Other liabilities and accrued expenses 4,808 22 (B) 4,830
------------- ------------- -------------
Total current liabilities 10,194 4,330 14,524
Capital lease obligations 2,430 - 2,430
Long-term debt 65 2,570 (B) 2,635
Deferred income taxes 451 - 451
Shareholders' equity
Common stock 62 - 62
Additional paid-in capital 6,403 - 6,403
Cost of common stock in treasury (6,400) - (6,400)
Unamortized deferred compensation (16) (16)
Retained earnings 37,733 - 37,733
------------- ------------- -------------
Total shareholders' equity 37,782 - 37,782
------------- ------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 50,922 $ 6,900 $ 57,822
------------- ------------- -------------
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
P-2
<PAGE>
IFR SYSTEMS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1994
-------------------------------------------------------------------------
AS REPORTED PRO FORMA PRO FORMA
IFR YORK ADJUSTMENTS CONSOLIDATED
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES $ 65,073 $ 8,705 $ -- $ 73,778
COST OF PRODUCTS SOLD 41,467 4,324 -- 45,791
--------- -------- -------- ---------
GROSS PROFIT 23,606 4,381 -- 27,987
OPERATING EXPENSES
Selling 7,867 1,402 (280(C) 8,989
Administrative 4,757 902 60(C) 5,719
Engineering 8,981 1,680 (25)(C) 10,411
--------- -------- -------- ---------
21,605 3,984 (470) 25,119
--------- -------- -------- ---------
OPERATING INCOME 2,001 397 470 2,868
OTHER INCOME (EXPENSE) (310) (41) (425)(C) (776)
INCOME BEFORE INCOME --------- -------- -------- ---------
TAXES 1,691 356 45 2,092
INCOME TAXES 704 18 178(C) 900
--------- -------- -------- ---------
NET INCOME $ 987 $ 338 $ (133) $ 1,192
--------- -------- -------- ---------
--------- -------- -------- ---------
Net Income Per Common
Share $ 0.19 $ 0.06 $ (0.03) $ 0.23
--------- -------- -------- ---------
--------- -------- -------- ---------
Average Common Shares
Outstanding 5,237 5,237 5,237 5,237
--------- -------- -------- ---------
--------- -------- -------- ---------
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
P-3
<PAGE>
IFR SYSTEMS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31, 1994
-------------------------------------------------------------------------
AS REPORTED PRO FORMA PRO FORMA
IFR YORK ADJUSTMENTS CONSOLIDATED
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES $ 57,800 $ 5,714 $ -- $ 63,514
COST OF PRODUCTS SOLD 36,330 3,047 -- 39,377
--------- -------- -------- ---------
GROSS PROFIT 21,470 2,667 -- 24,137
OPERATING EXPENSES
Selling 6,784 907 (210(C) 7,481
Administrative 3,851 701 45(C) 4,597
Engineering 7,600 1,295 (188)(C) 8,707
--------- -------- -------- ---------
18,235 2,903 (353) 20,785
--------- -------- -------- ---------
OPERATING INCOME 3,235 (236) 353 3,352
OTHER INCOME (EXPENSE) (290) (188) (319)(C) (797)
INCOME BEFORE INCOME --------- -------- -------- ---------
TAXES 2,945 (424) 34 2,555
INCOME TAXES 1,227 18 -- 1,245
--------- -------- -------- ---------
NET INCOME $ 1,718 $ (442) $ 34 $ 1,310
--------- -------- -------- ---------
--------- -------- -------- ---------
Net Income Per Common
Share $ 0.32 $ (0.08) $ (0.01) $ 0.24
--------- -------- -------- ---------
--------- -------- -------- ---------
Average Common Shares
Outstanding 5,391 5,391 5,391 5,391
--------- -------- -------- ---------
--------- -------- -------- ---------
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
P-4
<PAGE>
IFR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
(A) The pro forma condensed consolidated statements of income for the year
ended June 30, 1994 and the nine months ended March 31, 1995 have been
prepared as if the purchase had taken place on July 1, 1993 and July 1,
1994, respectively. The March 31, 1995 pro forma condensed consolidated
balance sheet has been prepared assuming the transaction occurred on
that date. Becuase IFR and York have different fiscal year ends, York's
results of operations for the period from July 1, 1994 to September 30,
1994, have been included in the pro forma condensed consolidated
statements of income for both the year ended June 30, 1994, and the nine
months ended March 31, 1995. Sales and net income for this period which
is included in both pro forma condensed consolidated statements of income
were $2,268,000 and $94,000, respectively.
(B) This transaction is being accounted for as a purchase. The purchase price
has been allocated to the assets based on their estimated fair market
values. Estimated fair market values may not represent fair market values
that ultimately may be determined. The following are the pro forma
adjustments made to reflect York's estimated fair market values as of June
21, 1995, the acquisition date.
<TABLE>
<CAPTION>
ASSETS
------
(in thousands)
<S> <C>
Inventories $1,791
Intangibles 3,752
Property and Equipment 1,357
------
Total Purchase Price $6,900
------
------
</TABLE>
The pro forma financial statements assume a $6,900,000 purchase price,
which includes transaction costs of approximately $300,000. This amount
includes approximately $5,028,000 representing estimated cash payments and
approximately $1,872,000 representing issuance of a non-interest bearing
note. The cash payments were financed with a term loan of $720,000 and
short-term bank borrowings. The purchase agreement specifies that the
purchase price may be increased or decreased by an amount not to exceed
$425,000, based on the level of sales achieved by the acquired businesses
in fiscal 1996. Any such change in purchase price will be reflected as an
adjustment to cost in excess of net assets acquired.
P-5
<PAGE>
(C) For purposes of determining the pro forma effect of the acquisition on
the IFR consolidated statement of income, the following pro forma
adjustments have been made:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
JUNE 30, 1994 MARCH 31, 1995
INCREASE (DECREASE) INCOME
<S> <C> <C>
1. Increase in amortization expense
resulting from amortization over 20
years of cost in excess of net assets
acquired. $( 188) $( 141)
2. Increase in interest expense
resulting from short-term bank
borrowings to finance cash
portion of the purchase price. ( 360) ( 270)
3. Increase in interest expense
resulting from term loan obtained
on building purchased. ( 65) ( 49)
4. Increase in depreciation expense
resulting from purchase of building ( 45) ( 34)
5. Decrease in rent expense
resulting from purchase of building. 173 130
6. Decrease in engineering cost
including travel due to redundancy
in positions at IFR subsidiary
Photon Kinetics and York. 250 188
7. Decrease in selling costs including
travel due to redundancy in positions
at IFR subsidiary Photon Kinetics. 280 210
8. Increase in income tax expense
resulting from pro forma adjustments
and normalizing of York's income
tax expense. ( 178)
TOTAL $( 133) $ 34
-------- --------
-------- --------
</TABLE>
P-6
<PAGE>
Exhibit Index
EXHIBIT SEQUENTIALLY
NO. DESCRIPTION OF EXHIBIT NUMBERED PAGE
- ------- ---------------------- -------------
2.1 Acquisition Agreement for York Technology, Inc.
dated June 21, 1995. *
2.2 Acquisition Agreement for York Technology, Ltd
dated June 21, 1995 *
2.3 Building transfer agreement with TKM Group Pension
Trust Limited dated June 21, 1995. *
2.4 Supplemental Agreement dated June 29, 1995. *
99 Press Release dated June 21, 1995. *
* Document has been previously filed with the Securities and Exchange
Commission and is incorporated herein by reference and made a part hereof.
