SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT TO APPLICATION OR REPORT
Filed Pursuant to Section 12, 13 of 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
HARROW INDUSTRIES, INC.
(Exact name of registrant as specified in charter)
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report on Form 8-K
relating to events occurring on January 4, 1995 as set forth in the pages
attached hereto.
(List all such items, financial statements, exhibits of other portions amended)
Item 7. Financial Statements, pro forma financial information and
exhibits
(a) Financial statements of business acquired
(b) Pro forma financial information
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by
the undersigned, thereunto duly authorized.
HARROW INDUSTRIES, INC.
Date March 17, 1995 By /s/ Gary L. Humphreys
Gary L. Humphreys
Vice President & Corporate
Controller
(Chief Accounting Officer)
Item 7. Financial Statements, Pro Forma Condensed Consolidated Financial
Statements and Exhibits
(a) Financial statements of business acquired are attached hereto.
(b) Pro Forma Condensed Consolidated Financial Statements
The following unaudited pro forma financial statements present the historical
consolidated financial statements of the Registrant adjusted for the
acquisition of Recognition System, Inc. (RSI). The accompanying unaudited
pro forma condensed consolidated balance sheet and statement of operations
assume the acquisition was completed at the beginning of fiscal 1994. Prior
to the acquisition, RSI had a fiscal year end of March 31. The historical
RSI amounts included on the pro forma statement of operations represent
unaudited income and expense for the twelve months ended November 27, 1994.
These pro forma financial statements are not necessarily indicative of the
results of operations which would have actually been obtained had the
acquisition occurred at the beginning of fiscal 1994 or the financial
position which would have been obtained had the acquisition occurred on that
date.
[CAPTION] HARROW INDUSTRIES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
NOVEMBER 27, 1994
Harrow Recognition Pro Forma Pro Forma
Industries, Systems, Inc. Adjustments Consolidated
Inc. and (Unaudited) (Unaudited)
Subsidiaries
[S] [C] [C] [C] [C]
Assets
Current Assets:
Cash and cash equivalents
$919,000 $897,000 $10,000,000 (1)
(10,453,000)(2)
142,000 (3) $ 1,505,000
Accounts receivable 17,484,000 729,000 18,213,000
Inventories 11,461,000 202,000 11,663,000
Other current assets 1,366,000 14,000 1,380,000
31,230,000 1,842,000 (311,000) 32,761,000
Property, plant and equipment:
Cost 41,196,000 62,000 41,258,000
Less allowances for
depreciation 22,422,000 34,000 22,456,000
18,774,000 28,000 18,802,000
Other assets:
Intangible assets 4,942,000 9,734,000(2)
(381,000)(3) 14,295,000
Prepaid pension costs 5,623,000 5,623,000
Other 809,000 809,000
11,374,000 9,353,000 20,727,000
$61,378,000 1,870,000 9,042,000 72,290,000
Liabilities and stockholders' equity (deficit)
Current liabilities:
Accounts payable 9,482,000 205,000 9,687,000
Accrued expenses 5,289,000 186,000 5,475,000
14,771,000 391,000 15,162,000
Long-term debt 45,005,000 10,000,000(1) 55,005,000
Other noncurrent liabilities5,332,000 760,000(2)
(74,000)(3) 6,018,000
Stockholders' equity (deficit):
Junior preferred stock 4,000 4,000
Common stock 11,000 1,075,000 (1,075,000)(2) 11,000
Additional paid-in
capital 4,006,000 (494,000) 494,000(2) 4,006,000
Retained earnings 6,485,000 898,000 (898,000)(2)
(165,000)(3) 6,320,000
Accumulated translation
adjustments (deduct) (128,000) (128,000)
Deficit arising from
restructuring
transactions (14,108,000) (14,108,000)
(3,730,000) 1,479,000 (1,644,000) (3,895,000)
(61,378,000) 1,870,000 9,042,000 72,290,000
[/TABLE]
<TABLE>
<CAPTION> HARROW INDUSTRIES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS
Year Ended November 27, 1994
Harrow Recognition Pro Forma Pro Forma
Industries, Inc. Systems, Inc. Adjustments Consolidated
and Subsidiaries (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales 139,393,000 3,300,000 142,693,000
Cost of products
sold 93,076,000 999,000 94,075,000
Gross margin 46,317,000 2,301,000 48,618,000
Selling,
administrative and
general expenses 37,558,000 1,058,000 381,000(1) 38,997,000
Operating income 8,759,000 1,243,000 (381,000) 9,621,000
Other expenses (income):
Interest expense 6,313,000 1,012,000(2) 7,325,000
Interest income (66,000) (19,000) 24,000(3) (61,000)
Other (79,000) (79,000)
6,168,000 (19,000) 1,036,000 7,185,000
Earnings before
income taxes 2,591,000 1,262,000 (1,417,000) 2,436,000
Income taxes 976,000 498,000 (488,000)(4) 986,000
Net earnings $ 1,615,000 $ 764,000 $ (929,000) $ 1,450,000
Earnings
attributable to
common stock 1,415,000 $ 1,250,000
Net earnings
per share $1.29 $1.14
</TABLE>
See notes to pro forma financial statements.
HARROW INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA FINANCIAL STATEMENTS (Unaudited)
November 27, 1994
Note A - Basis of Presentation
The accompanying unaudited pro forma financial statements should be read in
conjunction with the consolidated financial statements and related notes of
Harrow Industries, Inc. (the "Company") and subsidiaries for the year ended
November 27, 1994 included in the Annual report on Form 10-K filed with the
Securities and Exchange Commission and the financial statements of
Recognition Systems, Inc. ("RSI") filed herewith under item 7(a). Certain
financial information which is normally included in financial statements
prepared in accordance with generally accepted accounting principles, but is
not required for pro forma financial statements has been condensed or omitted.
The accompanying pro forma financial statements are unaudited but, in
management's opinion, all adjustments, consisting of normal recurring
adjustments and pro forma adjustments necessary for a fair presentation,
have been reflected therein.
Note B - Pro Forma Adjustments
The adjustments to the pro forma balance sheets as of November 27, 1994 are
described as follows:
(1) To reflect proceeds from borrowings under the Company's revolving
credit agreement.
(2) To reflect the acquisition of RSI for cash of $10,453,000 including
related transaction expenses and the resulting purchase price allocation
adjustments assuming the acquisition occurred as of the beginning of fiscal
1994.
(3) To reflect the impact of the pro forma adjustments to the statement of
operations for the fiscal year ended November 27, 1994.
The adjustments to the pro forma statement of operations for the year ended
November 27, 1994 are described as follows:
(1) To reflect amortization of patents and goodwill on a straight-line
basis over 10 1/3 years and 40 years, respectively.
(2) To reflect interest expense at prime (8.5% at November 27, 1994)
plus 1 5/8% on long-term debt used to finance the acquisition of RSI.
(3) To reflect reduction in interest income on existing cash
equivalents used in the acquisition of RSI.
(4) To reflect income tax effect of pro forma adjustments (excluding
goodwill amortization) using an effective tax rate of 40%.
Financial Statements
Recognition Systems, Inc.
Years ended March 31, 1994 and 1993
Recognition Systems, Inc.
Financial Statements
Years ended March 31, 1994 and 1993
Contents
Report of Independent Auditors. . . . . . . . . . . . . . .
Audited Financial Statements. . . . . . . . . . . . . . . .
Balance Sheets. . . . . . . . . . . . . . . . . . . . . . .. . .
Statements of Operations and Retained Earnings. . . . . . .
Statements of Cash Flows. . . . . . . . . . . . . . . . . .
Notes to Financial Statements . . . . . . . . . . . . . . .
Report of Independent Auditors
Board of Directors
Recognition Systems, Inc.
We have audited the accompanying balance sheets of Recognition Systems, Inc.
as of March 31, 1994 and 1993, and the related statements of operations and
retained earnings and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these Financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Recognition Systems, Inc. at
March 31,1994 and 1993, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
November 17,1994
<TABLE>
<CAPTION> Recognition Systems, Inc.
Balance Sheets
March 31
1994 1993
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 841,702 $512,594
Trade accounts receivable 253,973 203,047
Inventories 145,577 90,935
Other current assets 12,639 19,055
Total current assets 1,253,891 825,631
Fixed assets:
Machinery and equipment 43,923 27,069
Furniture and fixtures 7,151 6,256
51,074 33,325
Less accumulated depreciation 28,153 20,290
22,921 13,035
$1,276,812 $838,666
</TABLE>
<TABLE>
March 31
1994 1993
<S> <C> <C>
Liabilities and shareowners' equity
Current liabilities:
Accounts payable $ 26,224 $ 17,917
Salaries, wages and other compensation 166,413 126,713
Income taxes 79,420 110,847
Total current liabilities 272,057 255,477
Shareowners' equity:
Common stock, $1 par value:
Authorized - 10,000,000 shares
Issued and outstanding - 1,074,833 shares 1,074,833 1,074,833
Excess of par value over invested capital
(deduct) (855,778) (855,778)
Retained earnings 785,700 364,134
1,004,755 583,189
$1,276,812 $ 838,666
</TABLE>
See accompanying notes of financial statements.
<TABLE>
<CAPTION> Recognition Systems, Inc.
Statements of Operations and Retained Earnings
Year ended March 31
1994 1993
<S> <C> <C>
Net sales $2,152,092 $1,371,123
Cost of products sold 705,350 491,612
Gross margin 1,446,742 879,511
Selling, general and administrative expenses 765,400 471,370
Earnings before income taxes 681,342 408,141
Income taxes (Note B) 259,776 159,419
Net earnings 421,566 248,722
Retained earnings at beginning of year 364,134 115,412
Retained earnings at end of year $785,700 $364,134
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION> Recognition Systems, Inc.
Statements of Cash Flows
Year ended March 31
1994 1993
<S> <C> <C>
Operating activities
Net earnings $421,566 $248,722
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 7,862 5,258
Changes in operating assets and liabilities:
Trade accounts receivable (50,926) (98,717)
Inventories (54,642) (4,058)
Other current assets 6,416 (8,052)
Accounts payable 8,307 7,989
Other current liabilities 8,273 108,097
Net case provided by operating activities 346,856 259,239
Investing activities
Equipment purchases (17,748) (6,777)
Increase in cash and cash equivalents 329,108 252,462
Cash and cash equivalents at beginning of year 512,594 260,132
Cash and cash equivalents at end of year 841,702 $512,594
</TABLE>
() Denotes reduction in cash and cash equivalents.
See accompanying notes to financial statements.
Recognition Systems, Inc.
Notes to Financial Statements
March 31, 1994 and 1993
Note A - Summary of Significant Accounting Policies
Cash Equivalents
Cash equivalents consist of money market accounts.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined by
the first-in, first-out method.
Fixed Assets
Fixed assets are stated on the basis of cost and include expenditures for
major renewals and betterments. Normal repairs and maintenance are expensed
as incurred.
Depreciation is computed primarily using the straight-line method at rates
designed to amortize the costs of such assets over their estimated useful
lives.
Income Taxes
The provision for income taxes is based on the earnings reported in the
financial statements. The Company's policy is to recognize a deferred income
tax asset or liability, if any, determined by applying currently enacted tax
laws and rates to the cumulative temporary differences between the carrying
value of assets and liabilities for financial statement and income tax
purposes. Deferred income tax expense (credit) is measured by the change
in the net deferred income tax asset or liability accounts during the year.
Recognition Systems, Inc.
Notes to Financial Statements (continued)
Note B--Income Taxes
The provisions for income taxes consist of the following:
<TABLE>
Year ended March 31
1994 1993
<S> <C> <C>
Currently payable:
Federal $201,179 $121,261
State 58,597 38,158
$259,776 $159,419
</TABLE>
There are no significant temporary differences between the carrying value of
assets and liabilities for financial reporting and income tax purposes. The
Company had income tax credits of $6,900 in 1994 and $4,900 in 1993, which
were recognized in calculating the federal income tax provision.
The Company made net cash income tax payments of $291,203 in 1994 and $30,120 in
1993.
Note C - Leases
The Company rents manufacturing and office space under an operating lease
agreement expiring on October 31, 1995. The agreement, which was amended
effective September 1, 1994 to provide additional space, requires the lessor
to pay property taxes, insurance and other occupancy costs.
At March 31, 1994 future rental commitments under the lease, as amended, are
as follows:
1995 $63,518
1996 34,260
Total rent expense for the years ended March 31, 1994 and 1993 was $56,208 and
$36,601, respectively.
