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
Date of Report (Date of earliest event reported): January 5, 1999
VALLEY SYSTEMS, INC.
(Exact name of registrant as specified in charter)
Delaware 0-19343 34-1493345
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation Identification No.)
11580 Lafayette Drive, NW
Canal Fulton, Ohio 44614
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number including area code (404) 888-2750
(Former name or former address, if changed since last report) Not Applicable
<PAGE>
ITEM 2. DISPOSITION OF ASSETS
On January 5, 1999, Valley Systems, Inc. (the "Company") completed the sale
of substantially all of its operating assets and the operating assets of its
wholly-owned subsidiary, Valley Systems of Ohio, Inc. ("VSO") to HydroChem
Industrial Services, Inc. ("HydroChem"), pursuant to a Second Amended and
Restated Asset Purchase Agreement, dated as of September 8, 1998, among the
Company, VSO and HydroChem (the "Purchase Agreement").
Pursuant to the Purchase Agreement, the purchase price paid by HydroChem
was approximately $29.8 million, plus the assumption of the Company's bank debt
and certain other liabilities. At closing, $25.8 million was payable
immediately, with the balance of $4 million deposited into an escrow account.
Portions of the escrowed funds are to be held in the escrow account for up to
three years following the closing of the transaction. After all escrowed funds
have been released and distributed to the Company or HydroChem, the Company will
dissolve and cease its corporate existence and will distribute all remaining
funds to its shareholders. The consideration paid to acquire the operating
assets of the Company and VSO was determined as a result of arm's-length
negotiation between unrelated parties.
The description of the Purchase Agreement contained herein is qualified in
its entirety by reference to the Purchase Agreement dated as of September 8,
1998, among the Company, VSO and HydroChem which is incorporated herein by
reference to Appendix A of the Company's Definitive Information Statement filed
with the Securities and Exchange Commission on December 15, 1998, filed as
Exhibit 2.1 hereto and hereby incorporated by reference herein. Further
information regarding the sale is included in the Company's press release, filed
as Exhibit 99.1 and incorporated herein by reference.
ITEM 5. OTHER EVENTS.
The Company's common stock, $.01 per value, is quoted on the Nasdaq
SmallCap Stock Market under the symbol "Vale". On January 7, 1999, the Nasdaq
Listing Qualifications staff notified the Company that the staff had determined
to delist the Company's common stock from trading on The Nasdaq SmallCap Stock
Market as a result of the sale of substantially all of the Company's operating
assets, citing the staff's concern regarding the potential abuses to which
"shell" corporations may be subject. In accordance with the staff's letter, the
Company's common stock will be suspended from trading effective with the opening
of business on January 14, 1999.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
Not Applicable.
(b) Unaudited Pro Forma Consolidated Financial Information.
Set forth below are the following unaudited pro forma consolidated
financial statements:
1. Introduction to Consolidated Pro Forma Financial Statements.
2. Pro Forma Consolidated Income Statement for the Year Ended June 30,
1998 and the Six Months Ended September 30, 1998.
3. Pro Forma Consolidated Balance Sheet as of September 30, 1998.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following pro forma consolidated balance sheet of the Company as of
September 30, 1998, and the pro forma consolidated income statement for the
three months then ended, and the pro forma consolidated income statement for the
year ended June 30, 1998, give effect to the sale of substantially all of the
assets, except cash, of the Company for approximately $29.8 million in cash and
the assumption of certain liabilities. In connection with the sale, the pro
forma financial statements also give effect to the Company's intention to pay an
initial distribution of $2.13 per share for a total of approximately $16.8
million (which amount includes approximately $1.0 million of first quarter
income earned) on a pro rata basis.
<PAGE>
The following pro forma unaudited consolidated balance sheet as of
September 30, 1998, reflects the sale as if it occurred on that date, and the
consolidated income statements for the three months ended September 30, 1998 and
the year ended June 30, 1998 each reflect the transaction as if it were
consummated at the beginning of the respective periods presented.
The Company expects to maintain its corporate existence for at least three
years following the sale during which time it will collect portions of the
escrowed funds and will incur administrative expenses. The pro forma unaudited
financial information is not necessarily indicative of what the actual financial
position of the Company would have been had the sale occurred at September 30,
1998 or the results of operations had the transaction occurred at the beginning
of the three months ended September 30, 1998, or the year ended June 30, 1998
nor does it purport to represent the future financial position or results of
operations of the Company.
The pro forma financial information should be read in conjunction with the
Company's Form 10-K, as amended, for the year ended June 30, 1998 and Form 10-Q
for the quarter ended September 30, 1998 as filed with the Securities and
Exchange Commission.
<PAGE>
VALLEY SYSTEM, INC.
PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED JUNE 30, 1998
Historical Adjustments Pro Form
Year ended to record sale as adjusted
June 30, 1998
____________ ______________ __________
Sales $24,431,3855 $(24,431,385) $
Cost of sales 15,391,490 (15,391,490) --
____________ _____________ __________
Gross profit 9,039,895 (9,039,895) --
Selling, general and
administrative expenses 7,144,739 (7,032,739)[6] 112,000 [6]
Interest expense 593,127 (593,127) --
____________ _____________ __________
Income (loss) from operations
before income taxes 1,302,029 (1,414,029) (112,000)
Income taxes -- (44,000) (44,000)
____________ _____________ __________
Net income (loss) $ 1,302,029 $ (1,370,029) $ (68,000)
============ ============= ==========
Earnings per share:
Net earnings per common share
- basic $ 0.12 $ (0.13) $ (.01)
============ ============= ==========
Net earnings per common share
- assuming dilution $ 0.12 $ (0.13) $ (.01)
============ ============= ==========
<PAGE>
VALLEY SYSTEMS, INC.
PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
Unaudited
Historical Three Adjustments
months ended to record Pro Forma, as
September 30, 1998 sale adjusted
__________________ ___________ _____________
Sales $7,597,337 $(7,597,337) $ --
Cost of sales 4,643,927 (4,643,927) --
__________ ____________ __________
Gross profit 2,953,410 (2,953,410) --
Selling, general and administrative
expenses 1,785,594 (1,757,594)[6] 28,000[6]
Interest expense 140,532 (140,532) --
__________ ____________ __________
Income (loss) from operations before
income taxes 1,027,284 (1,055,284) (28,000)
Income taxes -- (11,000) (11,000)
__________ ____________ __________
Net income (loss) $1,027,284 $(1,044,284) $ (17,000)
========== ============ ==========
Earnings per share:
Net earnings per common share -
basic $ 0.12 $ (0.12) $ .00
========== ============ ==========
Net earnings per common share -
assuming dilution $ 0.12 $ (0.12) $ .00
========== ============ ==========
<PAGE>
VALLEY SYSTEMS, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Unaudited
Historical
September Adjustments Actions taken Pro Forma,
30, 1998 to record sale after sale as adjusted
__________ ______________ _____________ ____________
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash $ 48,916 $ 26,731,805 [1] $ (1,190,000) [3] $ 3,200,711
(48,916)[1] (5,500,000) [4]
(16,841,094) [5]
Accounts receivable 7,163,059 (7,163,059) [1] --
Prepaid supplies 550,833 (550,833) [1] --
Prepaid expenses 265,064 (265,064) [1] --
____________ _____________ _____________ _____________
Total current assets 8,027,872 18,703,933 (23,531,094) 3,200,711
Property and equipment, net 9,794,261 (9,794,261) [1] --
Intangible assets 376,750 (376,750) [1]
Escrow deposits 4,000,000 [1] 4,000,000
_____________ _____________ _____________ _____________
Total assets $ 18,198,883 $ 12,532,922 $ (23,531,094) $ 7,200,711
============= ============= ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 722,304 $ (722,304) [1] $ --
Accrued expenses 1,756,807 (1,756,807) [1] (1,190,000) [3] --
1,190,000 [1]
Current portion of long-term debt 845,425 (845,425) [1] --
Income tax payable -- 2,822,871 [2] 2,822,871
_____________ _____________ _____________ _____________
Total current liabilities 3,324,536 688,335 (1,190,000) 2,822,871
Long-term debt 8,589,720 (8,589,720) [1] --
Commitments and contingencies
Stockholders' Equity:
Preferred stock 5,500 (5,500) [4] --
Common stock 85,121 85,121
Paid-in capital 26,786,040 (5,494,500) [4] 4,975,727
(16,315,813) [5]
Accumulated deficit (19,909,026) 23,257,178 [1] (525,281) [5] --
Treasury stock - at cost (683,008) (2,822,871) [2] (683,008)
____________ _____________ _____________ _____________
6,284,627 20,434,307 (22,341,094) 4,377,840
____________ _____________ _____________ _____________
Total liabilities and stockholders' $ 18,198,883 $ 12,532,922 $ (23,531,094) $ 7,200,711
equity ============ ============= ============= =============
</TABLE>
<PAGE>
VALLEY SYSTEMS, INC.
NOTES TO PRO FORMA BALANCE SHEET
AS OF SEPTEMBER 30, 1998 AND NOTES TO THE PRO FORMA
CONSOLIDATED INCOME STATEMENT FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 1998 AND THE YEAR ENDED JUNE 30, 1998
[1] Adjustment to reflect the sale of substantially all of the assets of
the Company and assumption of substantially all of the Company's
liabilities by HydroChem Industrial Services, Inc. for $29.8 million.
The purchase price has been adjusted for the change in net assets from
June 30, 1998 to September 30, 1998. Expected expenses of the sale,
and other non-recurring items in connection with the transaction are
as follows:
Legal fees $ 400,000
Accounting and auditing fees 60,000
Severance pay 160,000
Termination of stock options 570,000
_________
Total $1,190,000
[2] To reflect income taxes on the sale.
[3] To reflect payment of liabilities not assumed as part of the sale.
[4] To reflect redemption of the Series C Preferred Stock.
[5] To reflect a distribution of $2.13 per share to owners of common
stock.
[6] Reflects estimated administrative expenses that will continue until
the Company is dissolved.
<PAGE>
(c) Exhibits.
EXHIBIT
NUMBER DESCRIPTION
2.1 Second Amended and Restated Asset Purchase Agreement, dated as of
September 8, 1998, among the Company, Valley Systems of Ohio, Inc. and
HydroChem Industrial Services, Inc. (Incorporated herein by reference
to Appendix A of the Registrant's Definitive Information Statement
filed with the Securities and Exchange Commission on December 15,
1998.)
99.1 Press Release
<PAGE>
SIGNATURES
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.
VALLEY SYSTEMS, INC.
Date: January __, 1999 By: /s/ Ed Strickland
---------------------
Ed Strickland
President and Chief
Executive Officer
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
2.1 Second Amended and Restated Asset Purchase Agreement, dated as of
September 8, 1998, among the Company, Valley Systems of Ohio, Inc. and
HydroChem Industrial Services, Inc. (Incorporated herein by reference
to Appendix A of the Registrant's Definitive Information Statement
filed with the Securities and Exchange Commission on December 15,
1998.)
99.1 Press Release
N E W S R E L E A S E
For more information, contact:
Joe Young, Valley Systems, Inc.
(404) 888-2750
COMPLETION OF ACQUISITION BY
HYDROCHEM OF VALLEY SYSTEMS, INC.
CANAL FULTON, OHIO, JANUARY 5, 1999 - Valley Systems, Inc. ("Valley
Systems") announced today that it has sold, effective January 1, 1999,
substantially all of its operating assets and the operating assets of its
wholly-owned subsidiary, Valley Systems of Ohio, Inc., to HydroChem Industrial
Services, Inc. ("HydroChem") for approximately $30 million, plus the assumption
of Valley Systems' bank debt and certain other liabilities. After payment of
expenses and liabilities of effecting the transaction, Valley Systems expects
that the initial amount which will be distributed to shareholders will be
approximately $2.13 per share (exclusive of escrowed funds). The initial
distribution to shareholders is expected to be made during January 1999.
Prior to the acquisition, Valley Systems, based in Canal Fulton, Ohio,
provided specialized industrial cleaning services, including ultra high pressure
water jetting, metal cutting and vacuum services, to the primary metals, power
generation, chemical, plastics and petroleum refining industries.
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