SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Events Reported)
January 23, 1997
SEMICONDUCTOR PACKAGING MATERIALS CO., INC.
(Exact name of registrant as specified in its charter.)
Delaware 1-10938 13-3584740
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
431 Fayette Avenue, Mamaroneck, New York 10543
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (914) 698-5353
<PAGE>
Item 2. Acquisition or Disposition of Assets
On January 23, 1997, American Silicon Products, Inc. ("ASP"),
a wholly owned subsidiary of the Registrant, completed the acquisition of
substantially all of the assets of Silicon Materials Service of Garland, Texas
and acquired 100% of the outstanding stock of Silicon Materials Service, B.V. of
Helmond, Netherlands (collectively "SMS") from Air Products and Chemicals, Inc.
The purchase price of $12,971,746 was financed through a five year term loan
with First Union Bank of Connecticut and Fleet National Bank.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
The following financial statements and pro forma information
is filed as part of this Report:
A. Combined Financial Statements of business acquired:
1) SMS Combined Financial Statements for the period ended September 30,
1996:
a) Independent Auditor's Report;
b) Combined Statement of Assets Acquired and Liabilities
Assumed;
c) Combined Statement of Revenue and Direct Operating Expenses;
d) Combined Statement of Cash Flows; and
e) Notes to Combined Financial Statements.
B. Pro Forma Financial Information for Semiconductor Packaging Materials Co.,
Inc. and Subsidiaries and SMS for the period ended December 31, 1996:
a) Pro Forma Information;
b) Unaudited Pro Forma Consolidated Balance Sheet;
c) Notes to Unaudited Pro Forma Consolidated Balance Sheet;
d) Unaudited Pro Forma Consolidated Statement of Income; and
e) Notes to Unaudited Pro Forma Consolidated Statement of
Income.
<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, herewith duly authorized.
SEMICONDUCTOR PACKAGING
MATERIALS CO., INC.
Dated: April 7, 1997 By: /s/ Andrew A. Lozyniak
------------------------
Andrew A. Lozyniak
Executive Vice President and
Chief Financial Officer
<PAGE>
SILICON MATERIALS SERVICE AND
SILICON MATERIALS SERVICE, B.V.
(divisions of Air Products and Chemicals, Inc.)
COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
<PAGE>
SILICON MATERIALS SERVICE AND
SILICON MATERIALS SERVICE, B.V.
(divisions of Air Products and Chemicals, Inc.)
CONTENTS
September 30, 1996
================================================================================
Independent Auditor's Report 1
Combined Financial Statements:
Statement of Assets Acquired and Liabilities Assumed 2
Statement of Revenue and Direct Operating Expenses 3
Statement of Cash Flows 4
Notes to Combined Financial Statements 5 - 8
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of
Semiconductor Packaging Materials Co., Inc.
We have audited the accompanying combined statement of assets acquired and
liabilities assumed of Silicon Materials Service and Silicon Materials Service,
B.V. (divisions of Air Products and Chemicals, Inc.) ("SMS") as of September 30,
1996, the net assets of which were acquired by Semiconductor Packaging Materials
Co., Inc. (the "Company"), and the related statements of revenue and direct
operating expenses, and cash flows for the year then ended. These combined
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
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.
The accompanying financial statements were prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission for
inclusion in the current report on Form 8-K of the Company as described in Note
1 and are not intended to be a complete presentation of SMS' financial position
or the results of its operations and its cash flows.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the assets acquired and liabilities assumed of
SMS as of September 30, 1996 and the revenue and direct operating expenses and
cash flows for the year then ended in conformity with generally accepted
accounting principles.
GOLDSTEIN GOLUB KESSLER & COMPANY, P.C.
New York, New York
January 10, 1997, except for paragraph 2 of Note 1 and Note 6, as to which the
date is January 23, 1997
<PAGE>
SILICON MATERIALS SERVICE AND
SILICON MATERIALS SERVICE, B.V.
(divisions of Air Products and Chemicals, Inc.)
<TABLE>
<CAPTION>
COMBINED STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
======================================================================================================================
September 30, 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS ACQUIRED
Current Assets Acquired:
Cash $ 217,129
Accounts receivable, net of allowance for doubtful accounts of $8,000 1,895,397
Inventories (Notes 2 and 3) 477,610
Prepaid expenses and other current assets (Note 4) 892,453
- ----------------------------------------------------------------------------------------------------------------------
Total current assets acquired 3,482,589
Property and Equipment - at cost, net of accumulated depreciation
and amortization of $7,716,758 (Notes 2 and 5) 8,117,740
Other Assets 236,625
- ----------------------------------------------------------------------------------------------------------------------
Total Assets Acquired 11,836,954
- ----------------------------------------------------------------------------------------------------------------------
LIABILITIES ASSUMED
Current Liabilities Assumed:
Accounts payable 500,074
Accrued expenses and other current liabilities (Note 7) 311,075
- ----------------------------------------------------------------------------------------------------------------------
Total current liabilities assumed 811,149
Deferred Taxes (Note 2) 326,912
- ----------------------------------------------------------------------------------------------------------------------
Total liabilities assumed 1,138,061
- ----------------------------------------------------------------------------------------------------------------------
Commitments (Note 6)
- ----------------------------------------------------------------------------------------------------------------------
Excess of Assets Acquired Over Liabilities Assumed $10,698,893
======================================================================================================================
</TABLE>
The accompanying notes and independent auditor's report should
be read in conjunction with the combined financial statements
2
<PAGE>
SILICON MATERIALS SERVICE AND
SILICON MATERIALS SERVICE, B.V.
(divisions of Air Products and Chemicals, Inc.)
COMBINED STATEMENT OF REVENUE AND DIRECT OPERATING EXPENSES
================================================================================
Year ended September 30, 1996 (Notes 1 and 11)
- --------------------------------------------------------------------------------
Service revenue (Notes 1, 2, 8 and 10) $15,505,573
Cost of services performed 12,747,362
- --------------------------------------------------------------------------------
Gross profit 2,758,211
Selling, general and administrative expenses (Notes 9 and 11) 1,769,346
- --------------------------------------------------------------------------------
Excess of revenue and direct operating expenses $ 988,865
================================================================================
The accompanying notes and independent auditor's report should
be read in conjunction with the combined financial statements
3
<PAGE>
<TABLE>
<CAPTION>
SILICON MATERIALS SERVICE AND
SILICON MATERIALS SERVICE, B.V.
(divisions of Air Products and Chemicals, Inc.)
COMBINED STATEMENT OF CASH FLOWS
======================================================================================================================
Year ended September 30, 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
Cash flows from operating activities:
Excess of revenue and direct operating expenses $ 988,865
Adjustments to reconcile excess of revenue and direct operating
expenses to net cash provided by operating activities:
Depreciation and amortization 1,520,540
Changes in operating assets and liabilities:
Decrease in accounts receivable 7,029
Increase in inventories (23,720)
Increase in prepaid expenses and other current assets (265,669)
Increase in other assets (131,359)
Decrease in accounts payable (111,121)
Increase in accrued expenses and other current liabilities 21,331
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 2,005,896
Cash flows used in investing activity - purchases of property and equipment (1,083,580)
Cash flows used in financing activity - distributions to owners (999,555)
Effect of exchange rate changes on cash 213,158
- ----------------------------------------------------------------------------------------------------------------------
Net increase in cash 135,919
Cash at beginning of year 81,210
- ----------------------------------------------------------------------------------------------------------------------
Cash at end of year $ 217,129
======================================================================================================================
</TABLE>
The accompanying notes and independent auditor's report should
be read in conjunction with the combined financial statements
4
<PAGE>
SILICON MATERIALS SERVICE AND
SILICON MATERIALS SERVICE, B.V.
(divisions of Air Products and Chemicals, Inc.)
NOTES TO COMBINED FINANCIAL STATEMENTS
September 30, 1996
================================================================================
1. BASIS OF PRESENTATION: The accompanying combined statements of assets
acquired and liabilities assumed, revenue and
direct operating expenses, and cash flows include
the accounts of Silicon Materials Service and
Silicon Materials Service, B.V. (divisions of Air
Products and Chemicals, Inc.) Certain assets and
certain liabilities of Silicon Materials Service
and the common stock of Silicon Materials Service,
B.V. (collectively "SMS") were acquired by a
wholly owned subsidiary of Semiconductor Packaging
Materials Co., Inc. (the "Company"), and these
combined financial statements have been prepared
for the purpose of complying with the rules and
regulations of the Securities and Exchange
Commission for inclusion in the current report
required to be filed on Form 8-K. These combined
financial statements are not intended to be a
complete presentation of SMS' financial position
or its results of operations and its cash flows.
Intercompany transactions and balances have been
eliminated in combination.
Effective January 23, 1997, pursuant to a purchase
agreement dated January 16, 1997 (the
"Agreement"), the Company acquired SMS for
approximately $13,000,000 which included the
working capital of SMS as of January 23, 1997
which was approximately $2,600,000. The related
acquisition costs are estimated to be $500,000.
The accompanying combined statement of assets
acquired and liabilities assumed includes only
those assets and liabilities as specified in the
Agreement. These assets and liabilities have been
recorded at Air Products and Chemicals, Inc.'s
historical carrying value. The combined statement
of revenue and direct operating expenses includes
only those revenue and expenses directly related
to the silicon wafer polishing and reclamation
services. All nondirect costs allocated to SMS
from Air Products and Chemicals, Inc., such as
interest expense, income tax expense and a general
corporate overhead allocation (see Note 11), have
been excluded from the combined statement of
revenue and direct operating expenses.
2. PRINCIPAL BUSINESS SMS provides silicon wafer polishing and
ACTIVITY AND SUMMARY reclamation services to the semiconductor
OF SIGNIFICANT industry.
ACCOUNTING POLICIES:
Service revenue is recognized when the services
are performed.
SMS maintains cash in bank accounts which, at
times, may exceed federally insured limits. SMS
has not experienced any loss on these accounts.
Inventories include labor and processing costs and
are stated at the lower of cost, determined by the
first-in, first-out method, or market.
Depreciation and amortization of property and
equipment is provided by the straight-line method
over the estimated useful lives of the related
assets.
Temporary differences giving rise to the deferred
tax liability consist of excess depreciation for
tax purposes over the amount for financial
reporting purposes.
The preparation of combined financial statements
in conformity with generally accepted accounting
principles requires the use of estimates by
management
5
<PAGE>
SILICON MATERIALS SERVICE AND
SILICON MATERIALS SERVICE, B.V.
(divisions of Air Products and Chemicals, Inc.)
NOTES TO COMBINED FINANCIAL STATEMENTS
September 30, 1996
================================================================================
affecting the reported amounts of assets and
liabilities and revenue and expenses and the
disclosure of contingent assets and liabilities.
Actual results could differ from those estimates.
Silicon Materials Service, B.V.'s functional
currency is Dutch guilders. Cumulative translation
adjustments have been excluded from the combined
statement of assets acquired and liabilities
assumed at September 30, 1996 as such amount is
not readily determinable. Foreign currency
translation resulted in an aggregate exchange loss
of $6,417 for the year ended September 30, 1996
and has been included in selling, general and
administrative expenses on the accompanying
combined statement of revenue and direct operating
expenses.
3. INVENTORIES: At September 30, 1996, the components of
inventories are as follows:
Work-in-process $400,810
Finished goods 76,800
--------------------------------------------------
$477,610
==================================================
4. PREPAID At September 30, 1996, prepaid expenses and other
EXPENSES AND current assets consist of:
OTHER CURRENT
ASSETS: Prepaid supplies $638,723
Other 253,730
--------------------------------------------------
$892,453
==================================================
5. PROPERTY AND At September 30, 1996, property and equipment, at
EQUIPMENT: cost, consists of the following:
Estimated
Useful Life
- --------------------------------------------------------------------------------
Machinery and equipment $14,595,313 5 to 10 years
Furniture and fixtures 115,388 10 years
Computer equipment 419,285 3 years
Automobiles 39,642 3 years
- --------------------------------------------------------------------------------
15,169,628
Construction-in-progress (machinery
and equipment) 664,870
- --------------------------------------------------------------------------------
$15,834,498
================================================================================
6
<PAGE>
SILICON MATERIALS SERVICE AND
SILICON MATERIALS SERVICE, B.V.
(divisions of Air Products and Chemicals, Inc.)
NOTES TO COMBINED FINANCIAL STATEMENTS
September 30, 1996
================================================================================
6. COMMITMENTS: Prior to the Agreement described in Note 1, SMS
owned two buildings. The buildings were not
purchased by the Company and therefore, have not
been included in the accompanying statement of
assets acquired and liabilities assumed. In
conjunction with the Agreement, SMS, through the
Company, leases the office and manufacturing
facilities of these buildings from Air Products
and Chemicals, Inc. The leases expire in January
1999, at which time there is an option to purchase
the buildings for $1,000,000 and $500,000,
respectively. SMS also has the option of a
one-year renewal of the leases.
SMS has other noncancelable operating lease
agreements which expire through January 1999 for
the rental of office and manufacturing facilities.
The leases also require payments for real estate
taxes and other operating costs.
Rent expense for the year ended September 30, 1996
was approximately $139,000.
Future minimum lease payments due under lease
agreements are as follows:
Year ending September 30,
1997 $180,000
1998 285,000
1999 60,000
--------------------------------------------------
$525,000
==================================================
7. ACCRUED At September 30, 1996, accrued expenses and other
EXPENSES AND OTHER current liabilities consist of the following:
CURRENT LIABILITIES:
Accrued property taxes $188,199
Accrued payroll 99,000
Other current liabilities 23,876
--------------------------------------------------
$311,075
==================================================
8. MAJOR CUSTOMERS: For the year ended September 30, 1996,
approximately 15% of service revenue resulted from
services provided to each of two customers.
9. PENSION PLANS: Silicon Materials Service, B.V. has defined
contribution pension plans for eligible employees.
Silicon Materials Service, B.V.'s contribution to
the plan is based on a percentage of total wages.
Contributions for the year ended September 30,
1996 amounted to approximately $35,000.
7
<PAGE>
SILICON MATERIALS SERVICE AND
SILICON MATERIALS SERVICE, B.V.
(divisions of Air Products and Chemicals, Inc.)
NOTES TO COMBINED FINANCIAL STATEMENTS
September 30, 1996
================================================================================
<TABLE>
<CAPTION>
<S> <C> <C>
10. FOREIGN SMS operates in two principal geographic areas: the United States and Europe.
OPERATIONS: Following is a summary of information by area for the year ended September 30, 1996:
Service revenue from unaffiliated customers:
United States $12,402,835
Europe 3,102,738
----------------------------------------------------------------------------------------
Service revenue as reported in the
accompanying combined statement of
revenue and direct operating expenses $15,505,573
========================================================================================
Excess of revenue over direct operating expenses:
United States $ 841,706
Europe 147,159
----------------------------------------------------------------------------------------
Excess of revenue and direct operating
expenses as reported in the accompanying
combined statement of revenue and direct
operating expenses $ 988,865
========================================================================================
Identifiable assets:
United States $ 8,138,929
Europe 3,698,025
----------------------------------------------------------------------------------------
Total assets as reported in the accompanying combined
statement of assets acquired and liabilities assumed $11,836,954
========================================================================================
11. OMITTED The indirect costs which have been excluded from the combined statement of revenue and
HISTORICAL direct operating expenses for the year ended September 30, 1996 include the following:
EXPENSES
(unaudited): General corporate overhead allocation $347,496
Interest expense 236,356
Income tax expense 232,735
----------------------------------------------------------------------------------------
These costs have been excluded from the combined statement of revenue and direct
operating expenses because such costs were allocated by Air Products and Chemicals, Inc.
to SMS without specific criteria and such allocated costs are not representative of the
results of operations of SMS on a continuing basis.
Included in selling, general and administrative expenses are costs directly allocated
from Air Products and Chemicals, Inc. amounting to approximately $194,000. This
allocation primarily included insurance expense, human resources expenses, support
services and other corporate overhead charges.
</TABLE>
<PAGE>
Pro Forma Information
The following unaudited pro forma combined financial statements and
explanatory notes are presented to reflect the acquisition of the net assets of
Silicon Materials Service of Garland, Texas, and 100% of the outstanding stock
of Silicon Materials Service, B.V. of Helmond, Netherlands ( collectively "SMS")
by American Silicon Products, Inc, a subsidiary of Semiconductor Packaging
Materials Co., Inc. (the "Company") on January 23, 1997.
The pro forma balance sheet gives effect to this transaction as if it had
occurred at the end of the period presented. The pro forma statement of income
gives effect to this transaction as if it had occurred at the beginning of the
period presented.
The pro forma information should be read in conjunction with (1) the
historical financial statements for the Company, including the related notes
thereto, included in the Company's Form 10-KSB for the fiscal year ended
December 31, 1996, (2) the historical financial statements of SMS, including the
related notes thereto and (3) the Company's Form 8-K filed on February 4, 1997.
The pro forma information is not necessarily indicative of the combined
results of operations or combined financial position that would have resulted
had the acquisition been consummated as of the date noted above, nor is it
necessarily indicative of the combined results of operations in any future
period or of the future combined financial position.
<PAGE>
<TABLE>
<CAPTION>
SEMICONDUCTOR PACKAGING MATERIALS CO., INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
(UNAUDITED)
December 31, 1996
--------------------------------------------------------------------
HISTORICAL
SEMICONDUCTOR
PACKAGING MATERIALS
CO., INC. AND PRO FORMA
SUBSIDIARIES SMS ADJUSTMENTS AS ADJUSTED
------------------- --------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 3,531,099 $ 317,427 $ 15,000,000 (1) $ 6,276,780
(12,571,746)(2)
Accounts Receivable- net 5,637,158 1,369,045 7,006,203
Inventories 9,078,471 608,056 9,686,527
Prepaid expenses and other current assets 885,644 914,772 1,800,416
----------- ------------ ------------ -----------
Total Current Assets 19,132,372 3,209,300 2,428,254 24,769,926
Property and Equipment-net 20,700,573 6,847,067 3,362,247(2) 30,909,887
Other Assets-net of accumulated amortization
Goodwill 14,816,454 2,182,895(2)(3) 16,999,349
Technology rights and intellectual property 749,523 749,523
Other 1,090,403 7,791 (400,000)(2) 698,194
----------- ------------ ------------ -----------
Total Other Assets 16,656,380 7,791 1,782,895 18,447,066
----------- ------------ ------------ -----------
Total Assets $56,489,325 $ 10,064,158 $ 7,573,396 $74,126,879
=========== ============ ============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 3,462,227 504,811 3,967,038
Accrued expenses 856,810 103,439 500,000 (3) 2,960,249
1,500,000 (3)
Income taxes payable 1,143,518 29,304 1,172,822
Current portion of long-term debt 1,416,000 3,000,000 (1) 4,416,000
Current portion of obligations under
capital leases 1,306,763 1,306,763
----------- ------------ ------------ -----------
Total Current Liabilities 8,185,318 637,554 5,000,000 13,822,872
Deferred income taxes 1,470,460 1,470,460
Long-term Debt 6,719,333 12,000,000 (1) 18,719,333
Obligations under capital leases 4,242,415 4,242,415
----------- ------------ ------------ -----------
Total Liabilities 20,617,526 637,554 17,000,000 38,255,080
----------- ------------ ------------ -----------
Minority interest in subsidiary 1,932,171 1,932,171
Shareholders' Equity
Preferred stock
Common stock 635,552 635,552
Additional paid-in capital 28,070,464 9,426,604 (9,426,604) (2) 28,070,464
Retained earnings 5,233,612 5,233,612
----------- ------------ ------------ -----------
33,939,628 9,426,604 (9,426,604) 33,939,628
Less: treasury stock at cost
----------- ------------ ------------ -----------
Shareholders' Equity 33,939,628 9,426,604 (9,426,604) 33,939,628
Total Liabilities and Shareholders' Equity $56,489,325 10,064,158 7,573,396 74,126,879
=========== ============ ============ ===========
</TABLE>
3
<PAGE>
Semiconductor Packaging Materials Co., Inc. and Subsidiaries
Notes to Unaudited Pro Forma Consolidated Balance Sheet
December 31, 1996
(1) Adjustment which records proceeds from borrowing under a five year term
loan amounting to $15,000,000, with a an effective interest rate of
approximately 8.25%.
(2) Adjustment which records payment of $12,971,746 in cash at closing, which
includes a $400,000 deposit previously paid, to acquire SMS as of January
23, 1997, in accordance with the purchase method of accounting.
(3) Adjustment which records estimated closing expenses of $500,000 and
$1,500,000 of costs associated with integration and relocation of certain
acquired activites of SMS.
4
<PAGE>
<TABLE>
<CAPTION>
SEMICONDUCTOR PACKAGING MATERIALS CO., INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
For The Year Ended December 31, 1996
--------------------------------------------------------------------
HISTORICAL
SEMICONDUCTOR
PACKAGING MATERIALS
CO., INC. AND PRO FORMA
SUBSIDIARIES SMS ADJUSTMENTS AS ADJUSTED
------------------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $33,140,074 $ $33,140,074
Service revenue 12,887,129 15,505,573 28,392,702
----------- ----------- ----------- -----------
Total revenue 46,027,203 15,505,573 61,532,776
Cost of goods sold 23,551,851 23,551,851
Cost of services performed 7,165,232 12,747,362 (499,609)(1) 19,412,985
----------- ----------- ----------- -----------
Total cost of goods sold and services performed 30,717,083 12,747,362 (499,609) 42,964,836
Gross profit 15,310,120 2,758,211 499,609 18,567,940
Selling, general and administrative expenses 8,203,114 1,769,346 87,316 (3) 10,059,776
----------- ----------- ----------- -----------
Operating income 7,107,006 988,865 412,293 8,508,164
Interest expense (net) 920,379 1,142,510 (2) 2,062,889
----------- ----------- ----------- -----------
Income before provision for income taxes and
minority interest in loss in consolidated sub. 6,186,627 988,865 (730,217) 6,445,275
Provision for income taxes 2,445,000 105,010 (4) 2,550,010
----------- ----------- ----------- -----------
Income before minority interest in loss 3,741,627 988,865 (835,227) 3,895,265
of consolidated subsidiary
Minority interest in loss of consolidated sub. 63,828 63,828
----------- ----------- ----------- -----------
Net income $ 3,805,455 $ 988,865 $ (835,227) $ 3,959,093
=========== =========== =========== ===========
Net income per common share $ .62 $ .64
=========== =========== =========== ===========
Weighted average number of common
shares outstanding 6,175,556 6,175,556
=========== =========== =========== ===========
1
</TABLE>
<PAGE>
SEMICONDUCTOR PACKAGING MATERIALS CO., INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(1) Adjustment which reflects full year depreciation expense on SMS's machinery
and equipment and furniture and fixtures at appraised values amounting to
$10,209,314, assuming an estimated useful life of ten years on a straight
line basis adjusted by actual depreciation expense on machinery and
equipment and furniture and fixtures recorded by SMS for the full year
ended September 30, 1996, amounting to $1,520,540.
(2) Adjustment which records interest expense on a $15,000,000 term note with
an effective interest rate of 8.25%.
(3) Adjustment which records the amortization of the excess of the purchase
price paid for the fair market value of all tangible and identifiable
intangible assets acquired less liabilities assumed, totaling $2,182,895,
amortized over an estimated useful life of twenty-five years.
(4) Federal income taxes have been provided for the fiscal year ended September
30, 1996 primarily because SMS prior to its acquisition by the Company, was
a division of Air Products and Chemicals, Inc. and therefore no provision
for federal income tax purposes has been made. The income tax provision of
$105,010 represents SMS's pre-tax income of $988,865 less total pre-tax pro
forma adjustments of $730,217 adjusted for state and foreign income taxes
of 10% and federal income taxes of 34%.
2
