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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported) October 2, 1995
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II-VI INCORPORATED
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(Exact name of registrant as specified in its charter)
Pennsylvania 0-16195 25-1214948
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(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.
of incorporation)
375 Saxonburg Boulevard, Saxonburg, Pennsylvania 16056
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 412-352-4455
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________________
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(Former name or former address, if changed since last report.)
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Item 5. Other Events
The Registrant hereby files the financial statements of Virgo Optics (a
Division of Sandoz Chemicals Corporation) for the period January 1 to
December 29, 1994.
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Independent Auditors' Report
To the Board of Directors and Shareholders
II-VI Incorporated
Saxonburg, Pennsylvania
We have audited the accompanying statements of operations and changes in
Sandoz Chemicals Corporation Investment in Virgo Optics and cash flows of Virgo
Optics ("the Division" - formerly a division of Sandoz Chemicals Corporation -
Note 1) for the period from January 1, 1994 to December 29, 1994. These
financial statements are the responsibility of the management of the Division.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the statements of operations and changes in Sandoz Chemicals
Corporation Investment in Virgo Optics and cash flows referred to above present
fairly, in all material respects, the results of operations and cash flows of
Virgo Optics for the period January 1, 1994 to December 29, 1994 in conformity
with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, substantially all of the
assets and liabilities of the Division were acquired by II-VI Incorporated in
December 1994. Also, as discussed in Note 3, prior to the acquisition by II-VI
Incorporated, the Division was significantly dependent on its parent company,
Sandoz Chemicals Corporation, for financing of its operations.
Alpern, Rosenthal & Company
Pittsburgh, Pennsylvania
September 22, 1995
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VIRGO OPTICS
(A Division of Sandoz Chemicals Corporation)
Statement of Operations and Changes in Sandoz
Chemicals Corporation Investment in Virgo Optics
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For the Period from January 1, 1994 to December 29, 1994
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<TABLE>
<S> <C>
Net Sales $4,622,220
Cost of Sales 3,191,907
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Gross Profit 1,430,313
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Operating Expenses
Selling 358,644
Research and development 218,520
Royalties 231,593
General and administrative 823,792
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Total Operating Expenses 1,632,549
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Loss from Operations 202,236
Other Expense - Net 6,682
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Loss before Income Taxes (208,918)
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Income Tax Provision (Benefit)
Current provision 100,000
Deferred benefit (178,000)
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(78,000)
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Net Loss (130,918)
Sandoz Chemicals Corporation Investment in Virgo Optics -
January 1, 1994 2,616,404
Advances from Sandoz Chemicals Corporation 125,565
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Sandoz Chemicals Corporation Investment in Virgo Optics -
December 29, 1994 $2,611,051
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</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 3
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VIRGO OPTICS
(A Division of Sandoz Chemicals Corporation)
Statement of Cash Flows
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For the Period from January 1, 1994 to December 29, 1994
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<TABLE>
<S> <C>
Cash Flows Provided by (Used for) Operating Activities
Net loss ($ 130,918)
Adjustments to reconcile net loss to net cash
provided by operating activities
Depreciation 515,176
Provision for inventory obsolescence 405,187
Recovery of bad debts (40,000)
Loss on disposal of equipment 70,588
Changes in
Accounts receivable (106,956)
Inventory (534,683)
Other (154,544)
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Net Cash Provided by Operating Activities 23,850
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Cash Flows Provided by (Used for) Investing Activities
Purchase of equipment (187,415)
Proceeds from sale of equipment 38,000
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Net Cash Used for Investing Activities (149,415)
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Cash Flows Provided by Financing Activities
Advances from Parent Company 125,565
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Cash - Beginning of period 600
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Cash - End of period $ 600
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</TABLE>
The accompanying notes are an integral part of these financial statements.
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VIRGO OPTICS
(A Division of Sandoz Chemicals Corporation)
Notes to the Financial Statements
Note 1 - Summary of Significant Accounting Policies
A. Basis of Presentation
The financial statements include the accounts of Virgo Optics ("the
Division"), a division of Sandoz Chemicals Corporation ("the Parent"), for
the period from January 1, 1994 to December 29, 1994. Virgo Optics designs,
develops and manufactures infrared, electronic and electro-optic materials,
optics, components, and detectors used in industrial, medical and
scientific solid-state lasers and electro-optic equipment.
On December 29, 1994, the Parent sold certain assets and liabilities of
the Division to II-VI Incorporated. As a result of the transaction, the
Parent has agreed to reimburse II-VI Incorporated for any uncollectible
accounts receivable.
B. Inventory
Inventories are stated at the lower of cost or market using the average
cost method.
C. Property and Equipment
Depreciation is computed using the straight-line basis over the
estimated useful lives of the assets, ranging from three to ten years.
Maintenance, repairs and minor renewals are expensed as incurred. Major
renewals or betterments, which prolong the life of the assets, are
capitalized. When assets are sold or retired, the cost and accumulated
depreciation are removed from the accounts and any gain or loss is included
in income.
D. Use of Estimates in the Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions. These estimates and assumptions 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.
Note 2 - Rental Expense and Lease Commitments
The Division leases office space and real property under operating leases
with unexpired terms ranging from one to two years. Rental expense totaled
$203,308 in 1994. Minimum lease payments for fiscal years 1995 and 1996 total
$126,000 and $9,000, respectively.
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Note 3 - Related Party Transactions
The Division is dependent upon the Parent for financing of operations. The
Division participated in the Parent's centralized cash management system during
the period presented. Cash receipts attributable to the Division's operations
are collected by the Parent, and cash disbursements are provided by the Parent.
The net effect of these transactions are included in "Sandoz Chemicals
Corporation Investment in Virgo Optics".
The Parent provides accounting and administrative services to the Division.
During 1994, the Division paid the Parent a management fee totaling $64,000 for
these services. Management believes this allocation is a reasonable reflection
of the Division's use of services, but may not necessarily be indicative of
actual costs incurred or costs to be incurred in the future.
The Division paid royalties of approximately $232,000 and commissions of
approximately $25,000 in 1994 to Sandoz, Ltd., the parent company of Sandoz
Chemicals Corporation.
Retirement benefits were offered to employees of the Division by the
Parent. Those benefits consisted of a noncontributory defined benefit pension
plan and a defined contribution employee savings plan. The accompanying
statement of operations includes expense of approximately $75,000 and $30,000,
respectively, attributable to participation in such plans. Subsequent to
December 29, 1994, all employees vested in the retirement plans will be paid the
vested amounts.
Income taxes have been allocated from the Parent to the Division as if the
Division were a separate taxpayer. To the extent the Division's past losses
reduced taxable income of the consolidated group, a benefit has been allocated
to the Division. The impact of this benefit is included in Sandoz Chemicals
Corporation's investment in the Division. The current income tax provision of
$100,000 and deferred tax benefits totaling $178,000 related to the period ended
December 29, 1994 are included in the Parent's investment in the Division. The
significant components of the deferred tax benefits relate to inventory reserves
and accumulated depreciation.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
II-VI Incorporated
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(Registrant)
October 2, 1995 By: /s/ James Martinelli
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(Date) James Martinelli
Treasurer and
Director of Finance and Accounting
