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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 Exchange Act of 1934
October 13, 1998
Date of Report (Date of earliest event reported)
SYBRON CHEMICALS INC.
(Exact name of Registrant Specified in its Charter)
Delaware 0-19983 51-0301280
(State or other Jurisdiction (Commission File No.) (I.R.S. Employer
of Incorporation) Identification Number)
Birmingham Road, P.O. Box 66, Birmingham, NJ 08011
(Address of principal executive offices) (Zip Code)
(609) 893-1100
(Registrant's telephone number, including area code)
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<PAGE>
Item 2. Acquisition or Disposition of Assets
The information provided in this Current Report on Form 8-K is intended to
supplement the information previously provided in the Company's Report on Form
10-Q filed with the Securities and Exchange Commission on August 17, 1998.
Acquisition
On July 31, 1998, the Company acquired all of the outstanding capital stock
of Ruco Polymer Corporation ("Ruco NY"), and all of the outstanding membership
interests of Ruco Polymer Company of Georgia, LLC ("Ruco GA," and together with
Ruco NY, "Ruco") pursuant to the Capital Stock and Membership Interest Purchase
Agreement, dated July 30, 1998, effective July 31, 1998, by and among the
Company, Louis T. Camilleri, Anthony F. Forgione, Joseph Mitola and Joseph A.
Ruffing, a copy of which has been filed previously by the Company and is
incorporated herein by reference. Messrs. Camilleri, Forgione, Mitola and
Ruffing hereinafter are referred to as the "Sellers." Ruco is a leading North
American polymer intermediates company that produces polyester polyols,
polyester powder coating resins, polyurethane latexes and specialty polymers
which are intermediate chemical products used in the formulation and production
of coatings and plastics. The aggregate purchase price for the acquisition,
determined through arms-length negotiations between the parties, was $110
million, including the repayment of bank debt owed by Ruco. The purchase price
is subject to certain post-closing adjustments. The acquisition was pursued as
part of the Company's strategic initiative to develop a "third leg" business to
complement its existing Textile Chemical Specialties and Environmental Products
and Services segments. The Company intends to continue the business of Ruco and
the use of Ruco's facilities, equipment and physical property obtained through
the acquisition.
In connection with the acquisition of Ruco, each of the Sellers entered
into five-year non-compete agreements with the Company. In addition, the Company
entered into an agreement with Anthony F. Forgione, the President and Chief
Executive Officer of Ruco prior to the acquisition, pursuant to which Mr.
Forgione will serve as President of Ruco. The employment agreement anticipates a
minimum term of two years and will continue in full force and effect until
terminated by either party.
Financing
On July 31, 1998, the Company obtained from Donaldson, Lufkin & Jenrette
Securities Corporation, Morgan Guaranty Trust Company of New York Incorporated
and Mellon Bank, N.A. a $185 million senior secured credit facility. The
facility consists of a $145 million term facility and a $40 million revolving
facility. Proceeds of the term facility were used to refinance the Company's
outstanding indebtedness, to pay the cash consideration for the acquisition of
Ruco and to pay certain related fees and expenses. The revolving facility will
be available to fund the working capital requirements of the Company.
<PAGE>
The following financial statements related to the Company and to certain of
the transactions described above are included herein:
(a) Financial statements of Ruco Polymer Corporation and affiliate as of
September 30, 1996 and 1997 and for the three years ended September 30, 1997,
and as of June 30, 1998 (unaudited) and for the nine month periods ended June
30, 1997 and 1998 (unaudited).
(b) Unaudited pro forma combined financial statements of the Company as of
June 30, 1998 and for the year ended December 31, 1997 and for the six months
ended June 30, 1998.
Item 7. Financial Statements, Pro Forma Financial Information
(a) Financial Statements of Ruco Polymer Corporation and Affiliate,
the Business Acquired:
Combined Balance Sheets as of September 30, 1996, 1997 and
June 30, 1998 (unaudited).
Combined Statements of Earnings for the years ended September
30, 1995, 1996 and 1997 and for the nine months ended June 30,
1997 and 1998 (unaudited).
Combined Statement of Ownership for the period October 1, 1995
to June 30, 1998.
Combined Statements of Cash Flows for the years ended
September 30, 1995, 1996 and 1997 and for the nine months
ended June 30, 1997 and 1998 (unaudited).
Notes to Combined Financial Statements.
Report of Independent Public Accountants.
(b) Pro Forma Financial Information:
Unaudited Pro Forma Combined Income Statement for the year
ended December 31, 1997 and related notes.
Unaudited Pro Forma Combined Income Statement for the six
months ended June 30, 1998 and related notes.
Unaudited Pro Forma Balance Sheet as of June 30, 1998 and
related notes.
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<PAGE>
(c) Exhibits
Exhibit Description
2.1 Capital Stock and Membership Interest Purchase Agreement, effective as
of July 31, 1998, by and among Sybron Chemicals Inc., Louis T.
Camilleri, Anthony F. Forgione, Joseph Mitola, and Joseph A. Ruffing,
with exhibits:
A. Non-Competition Agreement, effective as of July 31, 1998, by
and among Sybron Chemicals Inc., Ruco NY, Ruco GA and Anthony
Forgione (substantially similar agreements with Messrs.
Mitola, Camilleri and Mitola not included).
B. Employment Agreement by and among Ruco Polymer Corp., Ruco
Polymer Company of Georgia, LLC, Sybron Chemicals Inc. and
Anthony F. Forgione, dated as of July 31, 1998, with exhibits
(attached as Exhibit 10.1).
C. Form Opinion of Jacobson, Mermelstein & Squire, dated as of
July 31, 1998.
D. Amendment to Employment Agreement of Michael J. McCann and
Waiver of Certain Rights Thereunder, dated as of July 31,
1998.
10.1 Employment Agreement by and among Ruco Polymer Corp., Ruco Polymer
Company of Georgia LLC, Sybron Chemicals Inc. and Anthony F. Forgione,
dated as of July 31, 1998, with material exhibits:
C. Bonus Incentive Plan for Mr. Forgione.
10.2 Credit Agreement, dated as of July 31, 1998, by and among Sybron
Chemicals Inc., DLJ Capital Funding, Inc., Morgan Guaranty Trust
Company of New York and Mellon Bank, N.A.
10.3 Promissory Notes, dated as of July 31, 1998, by Sybron Chemicals Inc.
in favor of DLJ Capital Funding, Inc., Morgan Guaranty Trust Company
of New York and Mellon Bank, N.A.
10.4 Security Agreement, dated as of July 31, 1998, among Sybron Chemicals
Inc. and Mellon Bank, N.A.
10.5 Trademark Security Agreement, dated as of July 31, 1998, among Sybron
Chemicals Inc., the Subsidiary Guarantors to the Credit Agreement, and
Mellon Bank, N.A. re: Sybron Chemicals Inc.'s trademarks and licenses.
-3-
<PAGE>
10.6 Trademark Security Agreement, dated as of July 31, 1998, among Sybron
Chemicals Inc., the Subsidiary Guarantors to the Credit Agreement, and
Mellon Bank, N.A. re: Ruco NY's trademarks and licenses.
10.7 Trademark Security Agreement, dated as of July 31, 1998, among Sybron
Chemicals Inc., the Subsidiary Guarantors to the Credit Agreement, and
Mellon Bank, N.A. re: Ruco GA's trademarks and licenses.
10.8 Patent Security Agreement, dated as of July 31, 1998, among Sybron
Chemicals Inc., the Subsidiary Guarantors to the Credit Agreement, and
Mellon Bank, N.A. re: Sybron Chemicals Inc.'s patents and licenses.
10.9 Patent Security Agreement, dated as of July 31, 1998, among Sybron
Chemicals Inc., the Subsidiary Guarantors to the Credit Agreement, and
Mellon Bank, N.A. re: Ruco NY's patents and licenses.
10.10 Patent Security Agreement, dated as of July 31, 1998, among Sybron
Chemicals Inc., the Subsidiary Guarantors to the Credit Agreement, and
Mellon Bank, N.A. re: Ruco GA's patents and licenses.
10.11 Subsidiary Guaranty Agreement, dated as of July 31, 1998, by and among
Sybron Chemical Holdings Inc., Ruco NY, Ruco GA and DLJ Capital
Funding, Inc., Morgan Guaranty Trust Co. of New York and Mellon Bank,
N.A.
10.12 Subordination Agreement, dated as of July 31, 1998 by Sybron Chemie
Nederland B.V.
10.13 Subordination Agreement, dated as of July 31, 1998 by Sybron Chemical
Industries Nederland B.V.
20.1 Press Release dated July 31, 1998
Re: The Company's Purchase of Ruco.
23.1 Consent of Independent Public Accountants of the Company.
23.2 Consent of Independent Public Accountants of Ruco.
99 Financial statements of the Company, filed with the Company's Annual
Report on Form 10-K for the year ended December 31, 1997.
-4-
<PAGE>
EXHIBIT INDEX
Exhibit Method of Filing
2.1 Capital Stock and Membership Interest Purchase (1)
Agreement, effective as of July 31, 1998, by
and among Sybron Chemicals Inc., Louis T.
Camilleri, Anthony F. Forgione, Joseph
Mitola, and Joseph A. Ruffing, with exhibits:
A. Non-Competition Agreement, effective
as of July 31, 1998, by and among
Sybron Chemicals Inc., Ruco NY,
Ruco GA and Anthony Forgione
(substantially similar agreements with
Messrs. Mitola, Camilleri and Mitola
not included).
B. Employment Agreement by and among
Ruco Polymer Corp., Ruco Polymer
Company of Georgia, LLC, Sybron
Chemicals Inc. and Anthony F. Forgione,
dated as of July 31, 1998, with exhibits
(attached as Exhibit 10.1).
C. Form Opinion of Jacobson, Mermelstein
& Squire, dated as of July 31, 1998.
D. Amendment to Employment Agreement
of Michael J. McCann and Waiver of
Certain Rights Thereunder, dated as
of July 31, 1998.
10.1 Employment Agreement by and among Ruco (1)
Polymer Corp., Ruco Polymer Company of
Georgia LLC, Sybron Chemicals Inc. and
Anthony F. Forgione, dated as of July 31,
1998, with material exhibits:
C. Bonus Incentive Plan for Mr. Forgione.
-5-
<PAGE>
Exhibit Method of Filing
10.2 Credit Agreement, dated as of July 31, 1998, by (1)
and among Sybron Chemicals Inc., DLJ
Capital Funding, Inc., Morgan Guaranty Trust
Company of New York and Mellon Bank, N.A.
10.3 Promissory Notes, dated as of July 31, 1998, by (1)
Sybron Chemicals Inc. in favor of DLJ Capital
Funding, Inc., Morgan Guaranty Trust Company
of New York and Mellon Bank, N.A.
10.4 Security Agreement, dated as of July 31, 1998, (1)
among Sybron Chemicals Inc. and Mellon
Bank, N.A.
10.5 Trademark Security Agreement, dated as of (1)
July 31, 1998, among Sybron Chemicals Inc., the
Subsidiary Guarantors to the Credit Agreement,
and Mellon Bank, N.A. re: Sybron Chemicals
Inc.'s trademarks and licenses.
10.6 Trademark Security Agreement, dated as of (1)
July 31, 1998, among Sybron Chemicals Inc.,
the Subsidiary Guarantors to the Credit
Agreement, and Mellon Bank, N.A.
re: Ruco NY's trademarks and licenses.
10.7 Trademark Security Agreement, dated as of (1)
July 31, 1998, among Sybron Chemicals Inc.,
the Subsidiary Guarantors to the Credit
Agreement, and Mellon Bank, N.A.
re: Ruco GA's trademarks and licenses.
10.8 Patent Security Agreement, dated as of (1)
July 31, 1998, among Sybron Chemicals Inc.,
the Subsidiary Guarantors to the Credit
Agreement, and Mellon Bank, N.A. re: Sybron
Chemicals Inc.'s patents and licenses.
10.9 Patent Security Agreement, dated as of (1)
July 31, 1998, among Sybron Chemicals Inc.,
the Subsidiary Guarantors to the Credit
Agreement, and Mellon Bank, N.A.
re: Ruco NY's patents and licenses.
-6-
<PAGE>
Exhibit Method of Filing
10.10 Patent Security Agreement, dated as of (1)
July 31, 1998, among Sybron Chemicals Inc.,
the Subsidiary Guarantors to the Credit
Agreement, and Mellon Bank, N.A.
re: Ruco GA's patents and licenses.
10.11 Subsidiary Guaranty Agreement, dated as of (1)
July 31, 1998, by and among Sybron Chemical
Holdings Inc., Ruco NY, Ruco GA and DLJ
Capital Funding, Inc., Morgan Guaranty Trust
Co. of New York and Mellon Bank, N.A.
10.12 Subordination Agreement, dated as of (1)
July 31, 1998 by Sybron Chemie Nederland B.V.
10.13 Subordination Agreement, dated as of July 31, (1)
1998 by Sybron Chemical Industries Nederland B.V.
20.1 Press Release dated July 31, 1998 (1)
Re: The Company's Purchase of Ruco.
23.1 Consent of Independent Public Accountants *
of the Company
23.2 Consent of Independent Public Accountants *
of Ruco
99 Financial statements of the Company, filed with (2)
the Company's Annual Report on Form 10-K for the
year ended December 31, 1997
* Filed electronically herewith.
(1) Previously filed as an Exhibit to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998 and incorporated herein
by reference.
(2) Previously filed with the Company's Annual Report on Form 10-K for
year ended December 31, 1997 and incorporated herein by reference.
-7-
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto authorized, on October 13, 1998.
SYBRON CHEMICALS INC.
/s/ Steven F. Ladin
--------------------
Steven F. Ladin
Vice President, Finance and
Chief Financial Officer
-8-
<PAGE>
Independent Auditors' Report
The Board of Directors and Members
Ruco Polymer Corporation and Affiliate
Hicksville, New York
We have audited the accompanying combined balance sheets of Ruco Polymer
Corporation and Affiliate as of September 30, 1996 and 1997, and the related
combined statements of earnings, ownership and cash flows for each of the three
years ended September 30, 1997. 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 combined financial position of Ruco Polymer
Corporation and Affiliate as of September 30, 1996 and 1997, and the results of
their operations and their cash flows for each of the three years ended
September 30, 1997 in conformity with generally accepted accounting principles.
HOLTZ RUBENSTEIN & CO., LLP
Melville, New York
December 2, 1997
<PAGE>
RUCO POLYMER CORPORATION AND AFFILIATE
COMBINED BALANCE SHEETS
(in thousands)
September 30, June 30,
------------- --------
ASSETS 1996 1997 1998
------ ---- ---- ----
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 816 $ 842 $ 155
Accounts receivable, less allowance
for doubtful accounts of $100 10,365 10,386 9,659
Inventories (Note 3) 6,877 8,315 8,366
Prepaid expenses and other current
assets (Note 8) 272 340 670
--- --- ---
Total current assets 18,330 19,883 18,850
PROPERTY, PLANT AND EQUIPMENT,
net (Notes 4 and 5) 19,897 20,662 19,430
OTHER ASSETS 504 537 58
--- --- --
$38,731 $41,082 $38,338
======= ======= =======
LIABILITIES AND OWNERSHIP
CURRENT LIABILITIES:
Current portion of long-term debt $ 1,746 $ 1,807 $ 1,807
(Note 5)
Accounts payable 5,942 6,850 5,884
Accrued wages 853 912 821
Accrued dividends 1,553 2,704 764
Accrued expenses 1,039 946 695
----- --- ---
Total current liabilities 11,133 13,219 9,971
------ ------ -----
LONG-TERM DEBT (Note 5) 16,556 15,725 15,383
------ ------ ------
COMMITMENTS AND CONTINGENCIES (Notes 6 and 8)
OWNERSHIP:
Common stock, $.01 par value; authorized
950,000 shares, 428,640 shares issued 4 4 4
Additional paid-in capital 86 86 86
Retained earnings 9,904 9,143 7,697
Members' equity 1,048 2,905 5,197
----- ----- -----
11,042 12,138 12,984
------ ------ ------
$38,731 $41,082 $38,338
======= ======= =======
See notes to combined financial statements
<PAGE>
RUCO POLYMER CORPORATION AND AFFILIATE
COMBINED STATEMENTS OF EARNINGS
(in thousands except shares and pro forma per share data)
<TABLE>
<CAPTION>
Years Ended Nine Months Ended
September 30, June 30,
-------------------------------- ----------------------
1995 1996 1997 1997 1998
---- ---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
NET SALES $ 63,508 $ 74,998 $ 80,789 $ 61,244 $ 60,624
COST OF PRODUCTS SOLD 53,355 62,603 66,347 49,745 48,661
------ ------ ------ ------ ------
GROSS PROFIT 10,153 12,395 14,442 11,499 11,963
------ ------ ------ ------ ------
OPERATING EXPENSES:
Selling (Note 6) 1,286 1,282 1,561 1,150 1,193
General and administrative
(Notes 6 and 8) 3,622 4,380 4,106 3,114 3,035
----- ----- ----- ----- -----
4,908 5,662 5,667 4,264 4,228
----- ----- ----- ----- -----
EARNINGS FROM OPERATIONS 5,245 6,733 8,775 7,235 7,735
----- ----- ----- ----- -----
OTHER INCOME (EXPENSE):
Interest income 3 4 5 - 4
Interest expense (1,696) (1,609) (1,382) (1,026) (1,062)
Miscellaneous, net 90 1 19 6 6
-- -- -- - -
(1,603) (1,604) (1,358) (1,020) (1,052)
------ ------ ------ ------ ------
EARNINGS BEFORE INCOME TAXES 3,642 5,129 7,417 6,215 6,683
STATE INCOME TAX PROVISION
(Note 7) 230 76 117 95 273
--- -- --- -- ---
NET EARNINGS $ 3,412 $ 5,053 $ 7,300 $ 6,120 $ 6,410
======= ======= ======= ======= =======
PRO FORMA INFORMATION (Note 9):
Historical earnings before income
taxes $ 3,642 $ 5,129 $ 7,417 $ 6,215 $ 6,683
Pro forma income taxes 1,396 1,898 2,716 2,257 2,573
----- ----- ------- ------- -------
Pro forma net earnings $ 2,246 $ 3,231 $ 4,701 $ 3,958 $ 4,110
======= ======= ======= ======= =======
Pro forma net earnings per share $ 4.25 $ 6.11 $ 8.89 $ 7.49 $ 7.77
======= ======= ======== ======= =======
</TABLE>
See notes to combined financial statements
<PAGE>
RUCO POLYMER CORPORATION AND AFFILIATE
COMBINED STATEMENT OF OWNERSHIP
(in thousands except shares)
<TABLE>
<CAPTION>
Ruco
Polymer
of Georgia,
Ruco Polymer Corp. LLC
--------------------------------------------------- -----------
Common Stock Additional Members'
Shares Paid-in Retained Equity
Outstanding Amount Capital Earnings (Deficit) Total
----------- ------ ------- -------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE, October 1, 1995 428,640 $4 $ 86 $ 9,968 $ (93) $ 9,965
NET EARNINGS -- -- -- 4,008 (596) 3,412
DIVIDENDS -- -- -- (3,180) -- (3,180)
-- -- -- ------- ---- ------
BALANCE, September 30, 1995 428,640 4 86 10,796 (689) 10,197
NET EARNINGS -- -- -- 3,316 1,737 5,053
DIVIDENDS -- -- -- (4,208) -- (4,208)
-- -- -- ------ -- ------
BALANCE, September 30, 1996 428,640 4 86 9,904 1,048 11,042
NET EARNINGS -- -- -- 5,443 1,857 7,300
DIVIDENDS -- -- -- (6,204) -- (6,204)
-- -- -- ------ -- ------
BALANCE, September 30, 1997 428,640 4 86 9,143 2,905 12,138
NET EARNINGS -- -- -- 4,118 2,292 6,410
DIVIDENDS -- -- -- (5,564) -- (5,564)
-- -- -- ------ -- ------
BALANCE, June 30, 1998 428,640 $4 $ 86 $ 7,697 $5,197 $12,984
======= == ==== ======== ======= =======
</TABLE>
See notes to combined financial statements
<PAGE>
RUCO POLYMER CORPORATION AND AFFILIATE
COMBINED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended Nine Months Ended
September 30, June 30,
----------------------------------- -------------------------
1995 1996 1997 1997 1998
---- ---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 3,412 $ 5,053 $ 7,300 $ 6,120 $ 6,410
- ----- - ------ - ------ - ------ - -----
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 2,274 2,345 2,548 1,984 1,999
Loss on disposal of fixed assets 63 8 7 - 3
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (1,614) (1,918) (21) 1,262 727
Inventories (1,269) (980) (1,438) (2,733) (51)
Prepaid expenses 126 (8) (68) (183) (330)
Other assets 58 216 (63) (94) 456
Increase (decrease) in liabilities:
Accounts payable (218) 617 908 1,363 (966)
Accrued wages (439) 443 59 157 (91)
Accrued expenses 25 (109) (92) (403) (251)
--- ---- --- ---- ----
Total adjustments (994) 614 1,840 1,353 1,496
---- ---- ------ ------ -----
Net cash provided by operating activities 2,418 5,667 9,140 7,473 7,906
------ ------ ------ ------ -----
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (1,611) (921) (3,290) (2,818) (747)
------ ---- ------ ------ ----
Net cash used in investing activities (1,611) (921) (3,290) (2,818) (747)
------ ---- ------ ------ ----
FINANCING ACTIVITIES:
Increase in other assets (23) - - - -
Proceeds from line of credit 39,356 42,103 43,476 33,925 33,531
Repayments of line of credit (36,790) (44,823) (42,553) (34,376) (35,044)
Proceeds from term loan 3,990 2,000 - - 2,500
Repayments of term loan (4,240) (1,538) (1,694) (1,256) (1,329)
Distributions to stockholders (3,180) (2,655) (5,053) (3,253) (7,504)
------ ------ ------ ------ ------
Net cash used in financing activities (887) (4,913) (5,824) (4,960) (7,846)
---- ------ ------ ------ ------
Increase (decrease) in cash and cash equivalents (80) (167) 26 (305) (687)
Cash and cash equivalents
at beginning of period 1,063 983 816 816 842
------ ---- ---- ---- ---
Cash and cash equivalents
at end of period $ 983 $ 816 $ 842 $ 511 $ 155
= ==== = ==== = ==== = ==== = ===
SUPPLEMENTAL DISCLOSURE:
Income taxes paid $ 129 $ 48 $ 153 $ 129 $ 201
= ==== = === = ==== = ==== = ===
Interest paid $ 1,789 $ 1,784 $ 1,382 $ 1,030 $ 1,037
= ====== = ====== = ====== = ====== = =====
</TABLE>
See notes to combined financial statements
<PAGE>
RUCO POLYMER CORPORATION AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
(Information with respect to the nine months ended June 30, 1997
and 1998 is unaudited) (dollars in thousands except
shares and pro forma per share data)
1. Nature of Operations:
The Company is engaged in the manufacturing of various polyesters and
polyurethanes which are sold to manufacturers for further processing. The
majority of sales are domestic and geographically dispersed throughout the
United States.
2. Summary of Significant Accounting Policies:
a. Principles of combination
The accompanying financial statements include the accounts of Ruco Polymer
Corporation ("Ruco NY") and its affiliate, Ruco Polymer Company of Georgia,
L.L.C. ("Ruco Georgia"), collectively the "Company." Significant intercompany
accounts and transactions have been eliminated.
b. Cash and cash equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.
c. Inventories
Inventories are valued at the lower of cost (last-in, first-out (LIFO)
method) or market.
d. Property, plant and equipment
Property and equipment are recorded at cost. The carrying amount of assets
and related accumulated depreciation and amortization are removed from the
accounts when such assets are disposed of, and the resulting gain or loss is
included in operations. Depreciation is computed by the straight-line method
over the estimated useful lives of the assets.
e. Environmental expenditures
The Company capitalizes environmental expenditures that increase the life
or efficiency of property or that reduce or prevent environmental contamination.
The Company expenses environmental expenditures resulting from existing
conditions that relate to past operations when the costs are probable and
reasonably estimable.
f. Pension plans
The Company maintains a defined benefit pension plan covering substantially
all union personnel and a 401(a) profit sharing plan covering substantially all
non-union personnel. The Company's policy is to fund pension costs as accrued.
<PAGE>
2. Summary of Significant Accounting Policies: (Cont'd)
g. Income taxes
The shareholders of Ruco NY elected to be taxed as a "Small Business
Corporation," for federal income tax purposes. As a result of this election, the
income of the Company will be taxed directly to the individual shareholders.
Accordingly, no provision for federal income taxes is included in the financial
statements of the Company.
For New York State tax purposes, investment tax and research and
development credits are recorded as a reduction of the provision for income
taxes by use of the flow-through method. Effective January 1, 1998, the
shareholders of Ruco NY elected to be taxed as a "Small Business Corporation,"
for New York State tax purposes.
Ruco Georgia reports income, deductions and credits as a partnership and as
such is not subject to federal, state or local income taxes and, accordingly,
makes no provision for income taxes in its financial statements. The limited
liability corporation's income or loss is reportable for income tax purposes by
the partners.
h. Concentrations of credit
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash investments
and trade receivables. The Company places its temporary cash investments with
high credit quality financial institutions. Concentrations of credit risk with
respect to trade receivables are limited due to the quality of the Company's
customer base and their dispersion across many industries.
i. Estimates
The preparation of 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 at the
date of the financial statements and the reported amount of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
j. Interim financial statements
The unaudited financial statements as of June 30, 1998 and for the nine
months ended June 30, 1997 and 1998 reflect all adjustments, consisting only of
normal recurring accruals, which are, in the opinion of management, necessary
for a fair statement of the results for the period. The results of operations
are not necessarily indicative of the results expected for the fiscal year.
k. New accounting standards
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income," which establishes standards for
reporting and display of comprehensive income, its components and accumulated
balances. Comprehensive income is defined to include all changes in equity
except those resulting from investments by owners and distribution to owners.
Among other disclosures, SFAS No. 130 requires that all items that are required
to be recognized under current accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements.
<PAGE>
2. Summary of Significant Accounting Policies: (Cont'd)
k. New accounting standards (Cont'd)
In addition, in June 1997, the FASB issued SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information," which establishes standards
for reporting information about operating segments. It also establishes
standards for disclosures regarding products and services, geographic areas and
major customers.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosure
About Pensions and Other Post Retirement Benefits," which establishes standards
for the standardization of disclosure pertaining to pensions and other post
retirement benefits. It provides for a reconciliation of projected benefit
obligation and the fair value of plan assets for the reported period. It also
provides for reduced disclosure for non-public entities.
These new standards are effective for periods beginning after December 15,
1997 and require comparative information for earlier years to be restated. The
implementation of these new standards will not affect the Company's results of
operations and financial position, but may have an impact on future financial
statement disclosures.
3. Inventories:
Inventories consist of:
September 30, June 30,
-------------------- --------
1996 1997 1998
---- ---- ----
Finished goods $ 5,721 $ 6,724 $ 6,722
Raw materials and supplies 2,180 2,129 1,940
----- ----- -----
7,901 8,853 8,662
Allowance to value inventory
at cost on the LIFO method (1,024) (538) (296)
------ ---- ----
$ 6,877 $ 8,315 $ 8,366
= ===== = ===== = =====
Inventories are stated at the lower of cost determined by the LIFO method
or market. If the first-in, first-out method had been used, net income for years
ended September 30, 1995, 1996, 1997 and the nine months ended June 30, 1997 and
1998 would have been $3,598, $4,728, $6,814, $5,756 and $6,148, respectively.
4. Property, Plant and Equipment:
Property, plant and equipment, at cost, is summarized as follows:
September 30, June 30,
------------------- -------
1996 1997 1998
---- ---- ----
Land $ 980 $ 980 $ 980
Buildings and building improvements 7,263 7,447 7,489
Machinery and equipment 26,377 29,404 29,688
Construction in progress 97 77 489
-- -- ---
34,717 37,908 38,646
Less accumulated depreciation
and amortization 14,820 17,246 19,216
------ ------ ------
$ 19,897 $ 20,662 $ 19,430
= ====== = ====== = ======
<PAGE>
4. Property, Plant and Equipment: (Cont'd)
Depreciation expense for the years ended September 30, 1995, 1996 and 1997
amounted to $2,264, $2,315 and $2,518, respectively. Depreciation for the nine
months ended June 30, 1997 and 1998 amounted to $1,961 and $1,976, respectively.
5. Long-Term Debt:
Long-term debt consists of the following:
September 30, June 30,
-------------------- --------
1996 1997 1998
---- ---- ----
Revolving credit line $ 4,222 $ 5,146 $ 3,633
Term loan - Ruco NY 3,961 3,447 3,024
Term loan - Ruco Georgia 4,085 3,870 3,709
Equipment loan - Ruco Georgia 6,034 5,069 6,824
----- ----- -----
18,302 17,532 17,190
Less current portion 1,746 1,807 1,807
----- ----- -----
Long-term debt $ 16,556 $ 15,725 $ 15,383
= ====== = ====== = ======
Pursuant to Ruco NY's credit facility, as amended, the Company may borrow
up to $8,000 under a revolving credit facility and $3,961 under a seven year
term loan. The revolving line of credit bears interest at the bank's prime rate,
payable monthly and matures on October 1, 1999. The term loan is payable in
quarterly installments of $141 through July 2003, at which time the entire
unpaid balance is due. Interest is payable at the bank's prime rate plus 1/4%,
payable monthly, through July 1, 2003.
Ruco Georgia entered into a loan and security agreement with three banks
which, as amended, provides borrowings up to $8,534 under an equipment loan and
$4,085 under a term loan facility. The equipment loan bears interest at the lead
bank's prime rate plus 1/4% and is payable in quarterly principal installments
of $241 through March 31, 1998, at which time the payment will be $262 through
January 1, 2005. The term loan bears interest at the lead bank's prime rate plus
3/4%, payable monthly. Principal is payable in quarterly installments of $54
through July 1, 2000, at which time the entire unpaid balance is due.
The prime rate at September 30, 1997 and June 30, 1998 was 8.5%.
Borrowings under the above financing agreements are secured by
substantially all assets of the Company and require, among other things, the
maintenance of a stated current ratio, minimum tangible net worth, minimum cash
flows, minimum aggregate net earnings and stated debt to equity ratio on a
combined basis.
Current maturities are as follows:
Year Ending
September 30,
-------------
1998 $ 1,807
1999 1,828
2000 6,973
2001 1,828
2002 1,683
Thereafter 3,413
-----
$ 17,532
==========
<PAGE>
6. Commitments and Contingencies:
a. Environmental costs
The Company is subject to a variety of environmental and pollution control
regulations in the jurisdictions in which it operates. These laws and
regulations require the Company to make expenditures for capital improvements
and operating environmental protection equipment. Future developments and
changes in environmental regulations may require the Company to make additional
environmental expenditures.
The Company's New York facility is located on a superfund site as
designated by the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980. The Company has received full indemnification from its
prior owners and any costs incurred to date have been funded under this
indemnification agreement. In the opinion of management, future costs to the
Company will be minimal and not material to the Company's financial position or
results of operation.
b. Litigation
The Company is subject to several lawsuits and claims with respect to such
matters as personal injury, product liability and other actions arising out of
the normal course of business. The Company intends to defend its position on all
actions. In the opinion of management, the ultimate liabilities, if any, from
these lawsuits and claims will not materially affect the financial position of
the Company. Nevertheless, due to the uncertainty of the settlement process,
management's view of the outcome may be modified in the future.
c. Incentive awards
The Company has established an incentive award to certain key individuals
effective in the event the Company is sold or effects an initial public
offering. In the event of a qualifying transaction, the individuals will receive
an amount equal to 5.75% of the net proceeds received in excess of $30,000. The
expense of this award will be recognized immediately preceding the closing of
the transaction.
d. Employment agreements
The Company has employment and consulting agreements with certain officers
and/or stockholders which provided for aggregate minimum payments as follows:
Year Ending
September 30,
-------------
1998 $ 432
1999 682
2000 421
2001 69
--
$1,604
======
e. Operating leases
The Company leases warehouse equipment, trailers, autos, office equipment
and computer equipment under operating lease agreements which expire through
September 30, 1999. Lease expense amounted to $238, $206 and $114 for the years
ended September 30, 1995 through 1997, respectively. Lease expense amounted to
$86 and $80 for the nine months ended June 30, 1997 and 1998, respectively.
<PAGE>
6. Commitments and Contingencies: (Cont'd)
e. Operating leases (Cont'd)
Minimum rental commitments for the terms of the leases are as follows:
Year Ending
September 30,
-------------
1998 $ 88
1999 55
2000 34
2001 9
2002 5
-----
$191
====
7. Income Taxes:
The provision for state income taxes has been fully reduced by available
investment tax credits. The Company was subject to the alternative minimum tax
for the years ended September 30, 1997 and 1996.
8. Benefit Plans:
a. Retirement benefits
The Company maintains a 401(a) profit sharing plan for all non-union
employees. Contributions are discretionary as determined by the Board of
Directors. All full time non-union employees are eligible to 100% of the Plan
benefits provided that they have completed one full year of employment at the
Plan's year end. Contributions of $255, $323 and $366 were made for the Plan
years ended 1995 through 1997, respectively.
Ruco NY continues its non-contributory defined benefit Employees' Pension
Plan for union personnel. The benefits are based on years of service and the
employee's compensation during the last five years of employment. Contributions
to the Plan reflect benefits attributed to employees' services to date, as well
as services expected to be earned in the future. Plan assets are invested in
fixed rate group insurance contracts.
With respect to the non-contributory defined benefit union employee pension
plan, pension expense includes the following components: September 30, 1995 1996
1997
Service cost $ 113 $ 101 $ 106
Interest cost on projected benefit obligation 79 84 97
Expected return on assets held in Plan (99) (104) (133)
Amortization of prior service cost,
transition liability and net gain 11 15 5
--- --- ---
Net periodic pension cost $ 104 $ 96 $ 75
= ==== = === = ==
<PAGE>
8. Benefit Plans: (Cont'd)
a. Retirement benefits (Cont'd)
The following sets forth the funded status of the non-contributory defined
benefit union employee pension plan and the amounts shown in the accompanying
balance sheet:
September 30,
-------------
1995 1996 1997
---- ---- ----
Actuarial present value of benefit
obligation:
Vested benefit obligation $ 970 $1,186 $1,357
Non-vested benefit obligation 61 69 49
-- --- --
Accumulated benefit obligation 1,031 1,255 1,406
Effect of future salary increases 292 127 183
--- ---- ---
Projected benefit obligation 1,323 1,382 1,589
Plan assets at fair value 1,201 1,257 1,608
----- ----- -----
Plan assets in excess (less than)
benefit obligation 122 (125) 19
Unrecognized net loss 248 255 152
Unrecognized transition amount 41 37 34
-- --- --
Prepaid pension costs $ 167 $ 167 $ 205
= === = === = ===
The discount rate used to measure the projected benefit obligation is 7%,
the rate of increase in future compensation levels is 4%, and the expected
long-term rate of return on assets is 9%. The Company uses the straight-line
method of amortization for prior service cost and unrecognized gains and losses.
b. Post-employment benefits
In addition to providing pension benefits, the Company provides certain
health care benefits to union retirees which are funded as costs are incurred.
These benefits are provided through the union's welfare fund. Retirees
contribute a percentage of the benefit costs in accordance with the collective
bargaining agreement. This expense amounted to $22, $19 and $17 for the years
ended September 30, 1995, 1996 and 1997, respectively. The expense for the nine
months ended June 30, 1997 and 1998 amounted to $13 and $10, respectively.
9. Pro Forma Information (Unaudited):
a. Pro forma tax expense
Pursuant to an acquisition of Ruco Polymer Corporation's stock and Ruco
Polymer of Georgia L.L.C.'s members interest, these entities would become
taxable corporations for federal tax purposes. The objective of the pro forma
financial information is to show what the significant effects on the historical
financial information might have been had the entity been subject to federal tax
as of October 1, 1994 and during the three years ended September 30, 1997 and
nine months ended June 30, 1997 and 1998.
<PAGE>
9. Pro Forma Information (Unaudited): (Cont'd)
b. Pro forma earnings per share
Earnings per share were computed by dividing earnings by the weighted
average number of shares (units) of common stock outstanding during each period
presented. The weighted average number of shares was computed as follows:
<TABLE>
<CAPTION>
Years Ended Nine Months Ended
September 30, June 30,
--------------------------------- -----------------------
1995 1996 1997 1997 1998
---- ---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Ruco Polymer Corporation
Weighted shares outstanding 428,640 428,640 428,640 428,640 428,640
Ruco Polymer of Georgia LLC
Weighted units outstanding 100,000 100,000 100,000 100,000 100,000
------- ------- ------- ------- -------
Pro forma weighted shares
outstanding 528,640 528,640 528,640 528,640 528,640
======= ======= ======= ======= =======
</TABLE>
<PAGE>
UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data of the Company (the "Pro
Forma Financial Data") have been derived by the application of pro forma
adjustments to the historical Consolidated Financial Statements of Sybron, which
have been previously filed and which are incorporated herein by reference, and
of Ruco included elsewhere in this report. Pro Forma Financial Data of the
Company are adjusted to give effect to the acquisition of Ruco, the refinancing
of certain indebtedness of Sybron, the Senior Secured Credit Facility and the
Company's July 29, 1997 acquisition of IVAX Industries, Inc., IVAX Industries
Canada, Inc. and IVAX Industries U.K. Ltd. (collectively, the "Pro Forma
Transactions"). The following unaudited pro forma consolidated statement of
operations data for the year ended December 31, 1997 and the six months ended
June 30, 1998 give effect to the Pro Forma Transactions as if such events had
occurred at the beginning of each period presented. The following unaudited pro
forma consolidated balance sheet data at June 30, 1998 give effect to the Pro
Forma Transactions as if such events had occurred as of June 30, 1998. The Pro
Forma Financial Data reflect adjustments based on preliminary estimates and
certain assumptions that management believes are reasonable in the
circumstances. The Pro Forma Financial Data do not purport to be indicative of
the Company's financial position or results of operations that would actually
have been obtained had the Pro Forma Transactions been completed as of the dates
assumed, or to project the Company's financial position or results of operations
at any future date. The Pro Forma Financial Data should be read in conjunction
with the historical financial statements and notes thereto of the Company, which
have been previously filed and which are incorporated herein by reference, and
of Ruco included elsewhere in this report.
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET
As of June 30, 1998
<TABLE>
<CAPTION>
Actual
------------------
Sybron Ruco Adjustments Pro Forma
(dollars in thousands)
Assets
<S> <C> <C> <C> <C>
Current assets
Cash and cash equivalents $ 6,597 $ 155 $ 7,215 (1) $ 13,967
Accounts receivable, net 41,084 9,659 -- 50,743
Inventories, net 27,360 8,366 500 (2) 36,226
Prepaid and other current assets 2,973 670 -- 3,643
Deferred income taxes 108 -- -- 108
-------- ------- --------- --------
Total current assets 78,122 18,850 7,715 104,687
Property, plant and equipment, net 36,848 19,430 7,916 (3) 64,194
Intangible assets, net 23,497 -- 73,146 (4) 96,643
Other assets 845 58 -- 903
-------- ------- -------- --------
Total assets $139,312 $38,338 $88,777 $266,427
======== ======= ======= ========
Liabilities and Stockholders' Equity
Current liabilities
Notes payable $ 2,181 $ -- $ -- $ 2,181
Current portion of long-term debt 2,429 1,807 (4,236)(5) --
Accounts payable 18,727 5,884 -- 24,611
Accrued liabilities 14,209 2,280 (764)(6) 15,725
Income taxes payable 2,261 -- -- 2,261
Deferred income taxes 14 -- -- 14
-------- ------- ------- --------
Total current liabilities 39,821 9,971 (5,000) 44,792
-------- ------- ------- --------
Long-term debt 22,856 15,383 (38,239)(5) --
Senior Secured Credit Facility -- -- 145,000 (7) 145,000
Deferred income taxes 2,401 -- -- 2,401
Postretirement benefits 3,879 -- -- 3,879
Other liabilities 2,169 -- -- 2,169
-------- ------- -------- --------
Total liabilities 71,126 25,354 101,761 198,241
Commitments and contingencies
Stockholders' equity
Preferred stock, $.01 par value -- -- -- --
Common stock - $.01 par value 59 4 (4)(8) 59
Additional paid-in capital 23,905 86 (86)(8) 23,905
Retained earnings 58,264 7,697 (7,697)(8) 58,264
Accumulated other comprehensive
losses (9,525) -- -- (9,525)
Treasury stock (4,517) -- -- (4,517)
Members' equity -- 5,197 (5,197)(8) --
-------- ------- -------- --------
Total stockholders' equity 68,186 12,984 (12,984) 68,186
-------- ------- -------- --------
Total liabilities and
stockholders' equity $139,312 $38,338 $ 88,777 $266,427
======== ======= ======== ========
</TABLE>
(see notes on following page)
<PAGE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
As of June 30, 1998
(dollars in thousands)
(1) Cash added to working capital after receipt of the proceeds of borrowings
under the bank financing, net of payment of the purchase price,
refinancing of certain Sybron indebtedness and related acquisition costs.
(2) Reflects the step-up of Ruco inventory purchased to fair value in
accordance with the purchase method of accounting.
(3) Reflects the step-up of Ruco acquired property, plant and equipment to
fair value.
(4) Reflects the following purchased Ruco identifiable intangible assets and
the excess costs over the fair value of the net assets acquired:
Excess cost over the fair value of net assets acquired $67,946
Non-compete agreement 1,200
Customer lists 1,500
Fees for acquisition services 2,500
-------
Total $73,146
=======
(5) Represents the repayment of certain existing debt obligations.
(6) Represents the payment of Ruco accrued dividends prior to the closing of
the Ruco Acquisition.
(7) Debt incurred under the bank financing in connection with the Ruco
Acquisition and repayment of certain Sybron indebtedness.
(8) Elimination of Ruco's historical equity capitalization in accordance with
the purchase method of accounting.
<PAGE>
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
Year Ended December 31, 1997
<TABLE>
<CAPTION>
Adjustments
-----------------------------------------------
Actual IVAX Ruco
------------------------
Sybron(6) Ruco(14) Acquisition(1) Acquisition(2) Pro Forma
--------- -------- -------------- -------------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Net sales:
Environmental Products and Services $ 55,362 $ $ $ -- $ 55,362
Textile Chemical Specialties 133,452 -- 11,010 -- 144,462
Intermediate Polymers -- 80,789 -- -- 80,789
-------- -------- ------- ------- --------
Net Sales 188,814 80,789 11,010 -- 280,613
-------- -------- ------- ------- --------
Cost of sales 115,180 66,347 7,886 1,225 (7) 190,638
Selling 35,148 1,561 2,529 774 (8) 40,012
General and administrative 11,340 4,106 -- (2,286) (9) 13,160
Research and development 3,710 -- 490 112 (8) 4,312
------- -------- ------ ------ --------
Operating income 23,436 8,775 105 175 32,491
------- ------- ------ ------ --------
Other income (expense):
Interest income 497 5 -- -- 502
Interest expense (1,968) (1,382) (510)(3) (7,859)(10) (11,719)
Amortization of intangible assets (1,585) -- (338)(4) (2,239)(11) (4,162)
Terminated merger costs (1,270) -- -- -- (1,270)
Other, net (1,048) 19 124 -- (905)
------- --------- ------- -------- --------
(5,374) (1,358) (724) (10,098) (17,554)
------- --------- ------- -------- --------
Income before income taxes and
extraordinary item 18,062 7,417 (619) (9,923) 14,937
Provision for income taxes 7,422 117 (109)(5) (777)(12) 6,653
------- -------- ------- -------- ------
Income before extraordinary item(13) $ 10,640 $ 7,300 $ (510) $(9,146) $ 8,284
======== ======== ======== ======== =======
</TABLE>
(see notes on following page)
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
Year Ended December 31, 1997
(dollars in thousands)
(1) Reflects the pro forma results of the IVAX Acquisition for the period
from January 1, 1997 to July 28, 1997, which is the period before the
acquisition of such business by Sybron.
(2) Reflects the effect of the Ruco Acquisition purchase accounting and the
indebtedness incurred to finance the acquisition and certain of Sybron's
indebtedness, as if the acquisition and financing had been completed on
January 1, 1997.
(3) Reflects incremental interest expense of $510 as a result of borrowings
made to complete the IVAX Acquisition as if the debt had been outstanding
for the entire period. A 1/4% change in the interest rate would change
this adjustment by $35.
(4) Reflects the amortization of intangibles purchased in connection with the
IVAX Acquisition, including patents (estimated life of 10 years),
customer lists (estimated life of 10 years) and goodwill (estimated life
of 30 years).
(5) Reflects the provision for income taxes on the IVAX Acquisition including
the effect of pro forma adjustments at a 34% statutory rate.
(6) Includes the operating results of the IVAX Acquisition from July 29,
1997, the date of acquisition.
(7) Reflects the following:
(a) Expensing of step-up fair market value of inventory acquired
in the Ruco Acquisition..................................... $ 500
(b) Additional depreciation expense with respect to the
properties, plant and equipment purchased in connection with
the Ruco Acquisition using the straight-line method over
seven years................................................. $ 725
------
Total.................................................. $1,225
(8) Reflects reclassification of certain general and administrative costs
related to technical support to selling and to research and development
expenses.
(9) Reflects elimination of $1,400 of expenses related to salaries of prior
owners of the Ruco business. Also reflects the reclassification
described in (8) above.
(10) Reflects incremental interest expense of $7,859 related to the senior
secured credit facility with an assumed interest rate of 8% as if the
debt had been outstanding for the entire period. Each 1/4% change in the
interest rate would change this adjustment by $353.
(11) Reflects the amortization of intangible assets purchased in connection
with the Ruco Acquisition, including a noncompete agreement (estimated
life of 5 years), customer lists (estimated life of 10 years) and
goodwill (estimated life of 40 years).
(12) Reflects the provision for income taxes on the Ruco pro forma adjustments
described in (7) - (11) above. In addition, because Ruco NY is a
subchapter S corporation and Ruco GA is a limited liability company that
is taxed as a partnership, the historical results of Ruco for the year
ended September 30, 1997 were attributed directly to Ruco's shareholders
for federal income tax purposes and the pro forma adjustments include a
provision for federal income taxes for that period.
(13) In connection with the senior secured credit facility, certain debt was
retired at July 31, 1998 resulting in an extraordinary loss of $313, net
of taxes, which will be recognized in the third quarter of 1998.
(14) Represents the historical consolidated financial statements of Ruco for
the year ended September 30, 1997.
<PAGE>
UNAUDITED PRO FORMA INCOME STATEMENT
Six Months Ended June 30, 1998
<TABLE>
<CAPTION>
Adjustments
Actual for Ruco
-----------------
Sybron Ruco Acquisition(1) Pro Forma
------ ---- -------------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C>
Net sales:
Environmental Products and Services $25,173 $ -- $ -- $ 25,173
Textile Chemical Specialties 72,382 -- -- 72,382
Intermediate Polymers -- 41,669 -- 41,669
------- ------- ----- --------
Net sales 97,555 41,669 -- 139,224
------- ------- ----- --------
Cost of sales 58,754 33,214 863 (2) 92,831
Selling 18,481 773 411 (3) 19,665
General and administrative 5,626 2,053 (1,170)(4) 6,509
Research and development 1,986 -- 59 (3) 2,045
------- ------- ------ -------
Other income (loss) 12,708 5,629 (163) 18,174
------- ------- ------ -------
Other income (expense):
Interest income 111 3 -- 114
Interest expense (838) (693) (4,329)(5) (5,860)
Amortization of intangible assets (1,035) -- (1,120)(6) (2,155)
Other, net (278) 6 -- (272)
------- ------- ------ -------
(2,040) (684) (5,449) (8,173)
Income before income taxes and
extraordinary item 10,668 4,945 (5,612) 10,001
Provision for income taxes 4,393 128 (132)(7) 4,389
------- ----- ------ ------
Income before extraordinary item (8) $ 6,275 $ 4,817 $(5,480) $ 5,612
======= ======= ======== =======
</TABLE>
(see notes on following page)
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
Six Months Ended June 30, 1998
(dollars in thousands)
(1) Reflects the effect of the Ruco Acquisition purchase accounting, and
indebtedness incurred to finance the acquisition and certain of Sybron's
indebtedness, as if the acquisition and financing had been completed on
January 1, 1998.
(2) Reflects the following:
(a) Expensing of step-up to fair value of inventory acquired in
the Ruco Acquisition........................................ $500
(b) Additional depreciation expense with respect to the
properties, plant and equipment purchased in connection with
the Ruco Acquisition using the straight-line method over
seven years................................................. 363
Total...................................................... $863
(3) Reflects reclassification of certain general and administrative costs
related to technical support to selling and to research and development
expenses.
(4) Reflects elimination of $700 of expenses related to salaries of prior
owners of the Ruco business. Also reflects the reclassification described
in (3) above.
(5) Reflects incremental interest expense of $4,329 related to the senior
secured credit facility with an assumed interest rate of 8% as if the
debt had been outstanding for the entire period. Each 1/4% change in the
interest rate would change this adjustment by $181.
(6) Reflects the amortization of intangibles purchased in connection with the
Ruco Acquisition, including a noncompete agreement (estimated life of 5
years), customer lists (estimated life of 10 years) and goodwill
(estimated life of 40 years).
(7) Reflects the provision for income taxes on the Ruco pro forma adjustments
described in (2) - (6) above. In addition, because Ruco NY is a
subchapter S corporation and Ruco GA is a limited liability company that
is taxed as a partnership, the historical results of Ruco for the six
months ended June 30, 1998 were attributed directly to Ruco's
shareholders for federal income tax purposes, the pro forma adjustments
include a provision for federal income taxes for that period.
(8) In connection with the senior secured credit facility, certain debt was
retired at July 31, 1998 resulting in an extraordinary loss of $313, net
of taxes which will be recognized in the 1998 third quarter results.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 No. 333-29543 of Sybron Chemicals Inc. of our report dated
February 24, 1998 appearing on Page F-2 of Sybron Chemicals Inc.'s Annual Report
on Form 10-K for the year ended December 31, 1997, which is incorporated by
reference in this Current Report on Form 8-K.
PRICE WATERHOUSE LLP
Philadelphia, PA
October 13, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation into Form 8-K of Sybron Chemicals, Inc.
of our report dated December 2, 1997 with respect to the combined financial
statements of Ruco Polymer Corporation and Affiliate for the years ended
September 30, 1997 and 1996.
Holtz Rubenstein & Co., LLP
Melville, New York
October 12, 1998
<PAGE>
