<PAGE> 1
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 event reported): May 24, 1996
THE CERPLEX GROUP, INC.
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
DELAWARE 0-23602 33-0411354
- -----------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1382 BELL AVENUE, TUSTIN, CALIFORNIA 92780
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(714) 258-5600
- -----------------------------------------------------------------------------
(Registrant's telephone number including area code)
NOT APPLICABLE
- -----------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Attached are the financial statements for Cerplex
S.A.S., a French company ("Cerplex S.A.S."), the
business acquired by the Registrant and its
wholly-owned subsidiary, Cerplex Limited, an English
company ("Cerplex Limited"), from Rank Xerox - The
Document Company, SA, a French company and Rank Xerox
Limited, an English company.
(B) UNAUDITED PRO FORMA FINANCIAL INFORMATION.
Attached is the pro forma financial information with
respect to the acquisition by the Registrant and
Cerplex Limited of one hundred percent (100%) of the
shares of Cerplex S.A.S.
[SIGNATURE PAGE TO FORM 8-K/A FOLLOWS]
2
<PAGE> 3
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 thereunto duly authorized.
Date: August 5, 1996
THE CERPLEX GROUP, INC.
By: /s/ JAMES R. ECKSTAEDT
-------------------------------
James R. Eckstaedt
Chief Financial Officer
3
<PAGE> 4
[BEFEC-PRICE WATERHOUSE LETTERHEAD]
To the Board of Directors
of the Cerplex Group, Inc.
We agree to the inclusion in the Form 8-K/A of The Cerplex Group, Inc. relating
to the acquisition of Cerplex S.A.S., of our report, dated July 31, 1996, on
our audit of the financial statements of Rank Xerox et Compagnie (now Cerplex
S.A.S.) as of, and for the years ended, December 31, 1995 and December 31, 1994.
Befec-Price Waterhouse
/s/ BRIAN TOWHILL
- -------------------------
Brian Towhill
Partner
Paris, France
August 2, 1996
<PAGE> 5
RANK XEROX ET COMPAGNIE SNC
FINANCIAL STATEMENTS FOR THE YEARS
ENDED DECEMBER 31, 1995 AND 1994
<PAGE> 6
RANK XEROX ET COMPAGNIE SNC
BALANCE SHEETS
<TABLE>
<CAPTION>
(FF in thousands)
March 22, December 31,
--------------------------------------
1996 1995 1994
--------------------------------------
<S> <C> <C> <C>
(Unaudited)
ASSETS
Cash and cash equivalents 2 17 43
Advances to Xerox Group companies - 90 107 61 414
Due from Xerox Group companies 173 148 69 614 83 797
Inventories 4 920 5 425 2 532
Prepaid expenses and other current assets 2 595 8 960 6 057
------- ------- -------
TOTAL CURRENT ASSETS 180 665 174 123 153 843
------- ------- -------
Plant and equipment, net 53 286 54 444 70 798
Other assets 6 806 1 784 2 871
------- ------- -------
TOTAL ASSETS 240 757 230 351 227 512
======= ======= =======
LIABILITIES
Trade accounts payable 63 213 46 843 62 117
Current portion of long-term lease obligations 3 807 3 710 -
Accrued liabilities and other current liabilities 97 597 50 087 37 734
------- ------- -------
TOTAL CURRENT LIABILITIES 164 617 100 640 99 851
------- ------- -------
Long-term lease obligations 3 074 4 099 -
Other long-term liabilities 21 100 21 100 19 831
------- ------- -------
TOTAL LIABILITIES 188 791 125 839 119 682
------- ------- -------
Commitments and Contingencies (see Note 12)
STOCKHOLDERS' EQUITY
Common stock 29 000 84 400 84 400
Par value FF 100, 844 000 shares issued
authorized and outstanding during 1995 and 1994 22 966 20 112 23 430
------- ------- -------
Retained earnings
TOTAL STOCKHOLDERS' EQUITY 51 996 104 512 107 830
------- ------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 240 757 230 351 227 512
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
<PAGE> 7
RANK XEROX ET COMPAGNIE SNC
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(FF in thousands)
Three months ended Year ended
-----------------------------------------------------
March 22, March 24, December 31,
1996 1995 1995 1994
-----------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales
- Xerox Group Companies 75 335 56 877 289 779 269 201
- Third parties 1 193 892 5 353 93
------ ------ ------- -------
76 528 57 769 295 132 269 294
Cost of sales 68 722 50 070 273 288 233 303
------ ------ ------- -------
GROSS PROFIT 7 806 7 699 21 844 35 991
Sales, general and administrative
expenses 5 859 5 453 22 568 27 287
Non recurring items (see Note 14) - - 7 000 8 974
------ ------ ------- -------
Operating Profit/(Loss) 1 947 2 246 (7 724) (270)
Interest income 1 061 944 5 612 4 290
Interest expense (154) (112) (1 206) (170)
------ ------ ------- -------
NET INCOME (LOSS) 2 854 3 078 (3 318) 3 850
====== ====== ======= =======
</TABLE>
The accompanying notes are an integral part of these Financial Statements
<PAGE> 8
RANK XEROX ET COMPAGNIE SNC
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(FF IN THOUSANDS EXCEPT SHARES)
TOTAL
COMMON RETAINED STOCKHOLDERS'
SHARES STOCK EARNINGS EQUITY
---------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1993 844 000 84 400 19 580 103 980
Net income for the period - 3 850 3 850
-------- ------- ------ -------
Balance at December 31, 1994 844 000 84 400 23 430 107 830
Net loss for the period - (3 318) (3 318)
-------- ------- ------ -------
Balance at December 31, 1995 844 000 84 400 20 112 104 512
Reduction in Capital (see Note 15) (554 000) (55 400) - (55 400)
Net income for the period
(unaudited) - - 2 854 2 854
-------- ------- ------ -------
Balance at March 22, 1996
(unaudited) 290 000 29 000 22 966 51 996
======== ======= ====== =======
</TABLE>
The accompanying notes are an integral part of these Financial Statements
<PAGE> 9
RANK XEROX ET COMPAGNIE SNC
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(FF in thousands)
Three months ended Year ended
------------------------------------------------
March 22, March 24, December 31,
1996 1995 1995 1994
------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) 2 854 3 078 (3 318) 3 850
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
FLOWS PROVIDED BY OPERATING ACTIVITIES
Add back/(subtract):
Depreciation and amortization 3 244 5 052 18 463 37 445
Changes in:
Inventories 505 (13 949) (2 893) (232)
Receivable from Rank Xerox Ltd (103 534) (68 731) 14 183 (35 962)
Prepaid expenses and other receivables 6 365 711 (2 903) 5 306
Other long term assets (5 022) 728 1 087 (16)
Trade accounts payable 16 371 38 963 (15 275) 35 242
Accrued liabilities and other current
liabilities 47 509 24 306 12 354 (11 102)
Other - - 1 269 925
--------- -------- -------- -------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (31 708) (9 842) 22 967 35 456
--------- -------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment (21 113) (1 064) (2 109) (18 724)
Proceeds from sale of fixed assets 19 027 2 724 11 168 -
--------- -------- -------- -------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES (2 086) 1 660 9 059 (18 724)
--------- -------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (increase)/decrease in advances to Xerox
companies 90 107 8 181 (28 693) (16 749)
Repayments of capital lease obligation (928) - (3 359) -
Share capital reduction (55 400) - - -
--------- -------- -------- -------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 33 779 8 181 (32 052) (16 749)
--------- -------- -------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS (15) (1) (26) (17)
Cash and Cash Equivalents at Beginning of Period 17 43 43 60
--------- -------- -------- -------
Cash and Cash Equivalents at End of Period 2 42 17 43
========= ======== ======== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for interest 154 112 1 206 170
========= ======== ======== =======
</TABLE>
The accompanying notes are an integral part of these Financial Statements
<PAGE> 10
RANK XEROX ET COMPAGNIE SNC
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
1. DESCRIPTION OF THE BUSINESS
Rank Xerox et Compagnie SNC (the "Company") operates a repair
facilities plant which provides value added services (labor) to its
customers for the refurbishment, upgrading or repair of primarily large
copier machines. The plant was built in Lille (France) in 1974. It is
located on 38 acres of land, including an office building and
production area of 37 000 m2. The Company employed 670 people as of
December 31, 1995.
The legal status of the Company is a "Societe en Nom Collectif" (SNC),
similar to a partnership. The owners are Rank Xerox - The Document
Company SA, a French "Societe Anonyme" (RXSA), a subsidiary of Rank
Xerox Limited, an English company (RXL), and Servitique SA, a
subsidiary of RXSA.
The Company is part of the "Single Ownership Interest" (SOI) plan
organized in Europe by RXL, the ultimate parent company of the Company
in Europe.
The Company operates the business on behalf of RXSA, through a business
rental contract (contrat de location-gerance). Under the terms of this
contract, the Company pays an annual fee to RXSA, in return for the use
of the land and building (owned by RXSA) and the license rights to
undertake all RXSA manufacturing operations.
As a result of the SOI plan and of the business contract, the Company's
operations are undertaken on the basis of two agreements dated November
1, 1993, the "Manufacturing Agreement" and the "Agreement for the
Provision of Management Services".
Under the terms of these two intercompany agreements:
i) RXL has requested the Company and the Company has agreed to
manufacture, assemble or otherwise process certain office equipment,
parts and accessories and provide RXL with certain services in
connection with such manufacturing, assembly or processing activities
in accordance with the provisions contained in the "Manufacturing
Agreement",
ii) RXL and the Company mutually agree annually the products and the
services to be provided by the Company,
iii) RXL pays the Company the following for the provision of such products
and services to RXL:
(a) such direct labor and production costs as have been necessarily
incurred by the Company; and
(b) such additional sums of monies as the parties have mutually
agreed annually,
<PAGE> 11
Rank Xerox et Compagnie SNC
Notes to Financial Statements
Years ended December 31, 1995 and 1994
Page 6
iv) Title to all material, work in progress and products is vested in RXL,
v) The Company shall not manufacture or provide any other services for any
company which, in RXL's opinion, is a competitor of RXSA,
vi) RXL has requested the Company and the Company has agreed to provide RXL
with management services in connection with the distribution of certain
RXL goods in accordance with the provisions contained in the "Agreement
for the Provision of Management Services",
vii) RXL reimburses the Company 105% of such costs necessarily incurred by
or on behalf of the Company in the provision of the services (as
defined in vi) above).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand and short term highly
liquid investments with original maturities of three months or less.
INVENTORIES
Inventories consisting of materials and work-in-progress are stated at
the lower of cost (purchase price plus related costs) or market value
on a first-in-first-out (FIFO) cost basis. Inventory held by the
Company on consignment from customers is excluded from the balance
sheet.
PLANT AND EQUIPMENT
Plant and equipment are stated at cost. Depreciation is provided using
the straight line method or the declining balance method, over the
estimated useful lives, as follows:
<TABLE>
<CAPTION>
Depreciation Useful life
method Years
------------------ -----------
<S> <C> <C>
Tooling and equipment Declining balance 5 to 7
Fixtures and Fittings Straight-line 10
Information Technology systems and
office equipment Declining balance 5 to 10
</TABLE>
Assets under capital lease are amortised over their estimated useful lives or
the term of the lease, whichever is shorter.
<PAGE> 12
Rank Xerox et Compagnie SNC
Notes to Financial Statements
Years ended December 31, 1995 and 1994
Page 7
Assets under construction are shown as construction in progress until
they are completed and enter into service.
INCOME TAXES
Taxable income or loss from operations is allocated among the
stockholders pursuant to the legal status of the Company as an SNC
(see Note 1) and is reported by the stockholders on their separate
income tax returns. Accordingly, the Company has no liability for
income taxes.
REVENUE RECOGNITION
Sales are recognized upon completion of the manufacturing process or of
the distribution services rendered, according to the agreements
described in Note 1 above. The manufacturing process is considered
complete at the time products are transferred to the Company's storage
area after packaging and quality control. The Company's functional
currency is the French franc.
FINANCIAL STATEMENT 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 and disclosures of contingent assets and liabilities as of
the date of the financial statements and the reported amounts of
revenues and expenses during the period. Actual results could differ
from those estimates.
LEGAL PROFIT SHARING PLAN
Under French laws and regulations, employees are entitled to a profit
sharing distribution, which is based on a standard legal formula. This
legal formula is designed in such a way that the Company will not have
to make any payments unless the Company's net taxable profits exceed
five percent of Stockholders' Equity on a French GAAP basis.
No profit sharing was paid for the years ended December 31, 1995
and 1994.
3. ADVANCES TO XEROX GROUP COMPANIES
Intercompany advances are made under the provisions of a Rank Xerox
Group (RXL and subsidiaries) cash pooling agreement and bear interest
at "T4M" (monetary market monthly average interest rate) plus a premium
of 0.25% if the pooling group is in a cash surplus position and 0.50%
if a cash deficit position exists.
<PAGE> 13
Rank Xerox et Compagnie SNC
Notes to Financial Statements
Years ended December 31, 1995 and 1994
Page 8
4. DUE FROM XEROX GROUP COMPANIES
<TABLE>
<CAPTION>
(FF in thousands)
December 31,
-----------------------
1995 1994
-----------------------
<S> <C> <C>
Rank Xerox Limited (RXL) 57 124 81 389
Other Xerox Group companies 12 490 2 408
------ ------
69 614 83 797
====== ======
</TABLE>
In accordance with the provisions of the agreements presented in Note 1
above, the RXL intercompany balance relates to added value services
provided to RXL during the production process.
5. INVENTORIES
<TABLE>
<CAPTION>
(FF in thousands)
December 31,
-----------------------
1995 1994
-----------------------
<S> <C> <C>
Materials 1 641 -
Work in progress (materials) 1 350 208
Work in progress (production cost) 2 434 2 324
----- -----
5 425 2 532
===== =====
</TABLE>
Materials reported in inventory by the Company relate entirely to third
party customer operations (ie customers outside the Xerox Group).
Materials used in repair and refurbishing operations performed for RXL,
the Company's most significant customer, are not owned by the Company
but are held on consignment for the benefit of RXL. Therefore, the
Company's inventory balances related to RXL include only value added
related to RXL materials which is accounted for in work in progress
(value added).
<PAGE> 14
Rank Xerox et Compagnie SNC
Notes to Financial Statements
Years ended December 31, 1995 and 1994
Page 9
6. PLANT AND EQUIPMENT, NET
<TABLE>
<CAPTION>
(FF in thousands)
December 31,
----------------------
1995 1994
----------------------
<S> <C> <C>
Tooling and equipment 70 202 65 575
Fixtures and fittings 28 973 26 045
Information technology systems and office
equipment 15 350 12 681
------- -------
114 525 104 301
Less: Accumulated depreciation and amortization (62 503) (44 040)
Plus : Construction in progress 2 422 10 537
------- -------
PLANT AND EQUIPMENT, NET 54 444 70 798
======= =======
Depreciation expense for the period 15 429 37 445
</TABLE>
7. LEASES
Included in plant and equipment in the accompanying balance sheets is
the following equipment under capital lease:
<TABLE>
<CAPTION>
(FF in thousands)
December 31,
--------------------
1995 1994
--------------------
<S> <C> <C>
Information technology systems at cost 9 102 -
Accumulated amortization (3 034) -
------ ------
Assets under capital lease, net 6 068 -
====== ======
</TABLE>
During 1995, certain information technology system assets with a book
value of FF 9 102 were sold to a third party as part of a
sale-leaseback transaction. Under the agreement, the Company received
FF 11 168 which resulted in a gain of FF 2 066 which has been deferred
and will be amortized to income over the 3 year life of the lease.
<PAGE> 15
Rank Xerox et Compagnie SNC
Notes to Financial Statements
Years ended December 31, 1995 and 1994
Page 10
Capital lease obligations are summarized below:
<TABLE>
<CAPTION>
(FF in thousands)
December 31,
-----------------
1995
-----------------
<S> <C>
Total capital lease obligation 7 809
Less current installments (3 710)
------
Long-term obligations under capital leases 4 099
======
</TABLE>
The Company also leases premises from RX SA under an operating lease
which was terminated in March 1996 as a result of the purchase of the
land and buildings concerned by the Company (See Note 15) on March 22,
1996. Rental expense for operating leases amounted to FF 9 331 and
FF 9 555 in 1995 and 1994, respectively.
Minimum lease payments under leases expiring subsequent to December 31,
1995 follow:
<TABLE>
<CAPTION>
(FF in thousands)
December 31,
-------------------------------------
Capital leases Operating leases
-------------------------------------
<S> <C> <C>
1996 4 324 2 481
1997 4 324 -
----- -----
Total 8 648 2 481
Less interest (839) -
----- -----
Minimum lease payments 7 809 2 481
===== =====
</TABLE>
<PAGE> 16
Rank Xerox et Compagnie SNC
Notes to Financial Statements
Years ended December 31, 1995 and 1994
Page 11
8. OTHER ASSETS
<TABLE>
<CAPTION>
(FF in thousands)
December 31,
-------------------
1995 1994
-------------------
<S> <C> <C>
Value Added Tax receivable 1 784 2 121
Guarantee deposit - 750
----- -----
1 784 2 871
===== =====
</TABLE>
Value Added Tax (VAT) receivable relates to a change in the French VAT
system which occurred in 1993 resulting in a tax credit corresponding
to one month's recoverable VAT, reimbursable by the tax authorities
over a period of up to twenty years and currently accruing interest at
below market rates.
As at December 31, 1994, the VAT credit amounted to FF 4 716 of which
FF 422 was reimbursed by tax authorities during 1995. The receivable
balance has been discounted to reflect a fair market rate of interest.
As of December 31, 1995 and 1994 respectively, the unamortized discount
amounted to FF 2 510 and FF 2 595.
<PAGE> 17
Rank Xerox et Compagnie SNC
Notes to Financial Statements
Years ended December 31, 1995 and 1994
Page 12
9. ACCRUED LIABILITIES AND OTHER CURRENT LIABILITIES
<TABLE>
<CAPTION>
(FF in thousands)
December 31,
---------------------
1995 1994
---------------------
<S> <C> <C>
Payroll, bonuses and employee benefits (a) 38 819 30 228
Post employment benefit reserve (current portion) 1 050 982
Value added and other business taxes 10 077 6 452
Other accrued current liabilities 141 72
------ ------
50 087 37 734
====== ======
</TABLE>
(a) PAYROLL, BONUSES AND EMPLOYEE BENEFITS
Includes primarily payroll, related taxes and compensated absences. In
addition, as a result of the anticipated sale of the Company to The
Cerplex Group, Inc, the Company's management decided to grant an
exceptional bonus of FF 7 000 to employees which was accrued as of
December 31, 1995.
10. OTHER LONG TERM LIABILITIES
<TABLE>
<CAPTION>
(FF in thousands)
December 31,
---------------------
1995 1994
---------------------
<S> <C> <C>
Retirement indemnity (a) 14 266 13 426
Postemployment benefit reserve (b) 6 834 6 405
------ ------
21 100 19 831
====== ======
</TABLE>
(a) RETIREMENT INDEMNITY RESERVE
In accordance with the "Collective Bargaining Agreement for the
Metallurgical Industry" or more favorable Company agreements, employees
who retire are entitled to a lump-sum payment (retirement indemnity)
based upon their length of service within the company. This benefit is
not vested for employees who leave the Company before they retire.
<PAGE> 18
Rank Xerox et Compagnie SNC
Notes to Financial Statements
Years ended December 31, 1995 and 1994
Page 13
Net retirement indemnity expense/(benefit) was comprised of the
following:
<TABLE>
<CAPTION>
(FF in thousands)
Year ended December 31,
-----------------------
1995 1994
-----------------------
<S> <C> <C>
Service cost 782 778
Interest cost 710 679
Assumed return on assets - -
----- -----
NET RETIREMENT INDEMNITY EXPENSE/(BENEFIT) 1 492 1 457
===== =====
</TABLE>
The key actuarial assumptions used in determining retirement indemnity
expense were as follows for the years ended December 31:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1995 1994
-----------------------
<S> <C> <C>
Discount rate 5.0% 5.0%
Weighted-average rate of compensation increase 2.5% 2.5%
Long-term rate of return on plan assets N/A N/A
</TABLE>
The funded status of the plan was as follows:
<TABLE>
<CAPTION>
(FF in thousands)
December 31,
----------------------
1995 1994
----------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested - -
Non-vested 10 295 9 653
Accumulated benefit obligation 10 295 9 653
Effect of projected future salary increases 3 971 3 773
Projected benefit obligation 14 266 13 426
Plan assets at market value - -
Plan assets in excess of projected benefit N/A N/A
obligation ------ ------
TOTAL RETIREMENT INDEMNITY LIABILITY 14 266 13 426
====== ======
</TABLE>
<PAGE> 19
Rank Xerox et Compagnie SNC
Notes to Financial Statements
Years ended December 31, 1995 and 1994
Page 14
In the context of the acquisition of the Company by Cerplex Inc, the
retirement indemnity liability and postemployment benefit liabilities
were funded with a third party in April 1996 for a total amount of
FF 23 777.
(B) POSTEMPLOYMENT BENEFIT RESERVE
In accordance with the "Collective Bargaining Agreement for the
Metallurgical industry", employees who are terminated are entitled to
receive a lump-sum severance benefit based on their length of service
with the Company. The postemployment benefit reserve has been
determined on the basis of the net present value of the estimated
future costs of severance benefits relating to past service periods of
the Company's employees.
11. PENSION OBLIGATIONS
PENSION COSTS
In accordance with French laws pension contributions are made to
defined contribution pension schemes managed by the state or state
related agencies. Pension costs are recorded each month and paid to
these agencies, on the basis of gross salaries paid to employees.
Accordingly, the Company is not subject to any additional liability
related to pension obligations except for retirement indemnities
described in Note 10.
12. COMMITMENTS AND CONTINGENCIES
Fiscal years 1995, 1994 and 1993 are currently under inspection by tax
and customs audits by the French Administration. Management is of the
opinion that the outcome of these audits will not have a material
adverse effect on the financial position, results of operations or cash
flows of the Company.
13. RELATED PARTY TRANSACTIONS
The activity of the Company results from the SOI plan described in
Note 1 above and is therefore almost totally performed with Xerox Group
companies.
<PAGE> 20
Rank Xerox et Compagnie SNC
Notes to Financial Statements
Years ended December 31, 1995 and 1994
Page 15
Purchase of components, raw materials and supplies are made on behalf
of RXL and are therefore not recorded in the financial statements of
the Company.
Sales of value added costs (salaries, royalties, lease terms, component
supply costs) are made to RXL.
Major intercompany transactions were as follows:
<TABLE>
<CAPTION>
(FF in thousands)
Year ended December 31,
------------------------
1995 1994
------------------------
<S> <C> <C>
Sales to RXL 271 161 267 578
Other sales 18 618 1 623
Interest income 5 612 4 120
</TABLE>
Intercompany receivable balances are described in Notes 3 and 4 above.
14. NON RECURRING ITEMS
For the year ending December 31, 1995 non-recurring items comprise an
exceptional bonus granted to all employees as a result of the
anticipated sale of the Company to the Cerplex Group, Inc. (See Note
9).
For the year ended December 31, 1994, non-recurring items comprise
restructuring costs, primarily termination costs, relating to the
implementation of the SOI plan described in Note 1.
15. SUBSEQUENT EVENTS
On May 24, 1996, the Company was sold to The Cerplex Group, Inc.
("Cerplex") a Delaware, USA incorporated Company. Cerplex is a leading
independent provider of electronics parts repair and logistics services
for a wide range of electronic equipment for the computer and
peripheral, telecommunications and office automation markets.
Immediately prior to the acquisition the legal form of the Company was
changed from a "societe en nom collectif" (SNC) to a limited liability
company "societe par actions simplifiee" (SAS) and its name was changed
to Cerplex SAS. The common stock of the Company was reduced from
FF 84 400 to FF 29 000 through compensation with the RXL account.
<PAGE> 21
Rank Xerox et Compagnie SNC
Notes to Financial Statements
Years ended December 31, 1995 and 1994
Page 16
As detailed in Note 7, the Company purchased the Lille premises and
Rank Xerox manufacturing rights from Rank Xerox SA on March 22, 1996.
Rank Xerox specific tooling was sold by the Company to RXL with effect
from January 1, 1996.
Simultaneous to the acquisition, Cerplex SAS entered into a new
four-year supply agreement with RXL ("Supply Agreement").
Under the terms of this agreement:
(i) Cerplex SAS is now guaranteed a minimum revenue stream from RXL (based
on the number of labor hours at standard production rates) which is
estimated to be approximately FF 272 million for the first year (twelve
month period beginning May 24, 1996). The second, third and fourth
years guarantee levels each have declining volumes of approximately
90%, 60% and 30% respectively, of the first year revenue stream, which
is based on a volume of 750 000 standard hours,
(ii) The hourly rate during each of the four year periods of the agreement
will be agreed in advance of such contract year; for the first contract
year the hourly rate will be 362.65 French francs and for the second
contract year, the hourly rate will be 2% below that of the first year.
(iii) Cerplex SAS shall be entirely responsible for the manufacture of
Products ordered by RXL and shall be entitled to all of the benefits,
and, except for variances induced by quarterly volume variations above
5%, shall bear all of the costs, if actual hours are different from
standard hours agreed to between the parties to manufacture the
Products,
(iv) All raw materials, parts and inventories (including work-in-process)
used to manufacture Products, and all finished Products and RXL spares
(collectively "Inventories") shall at all times be and remain the
property of RXL,
(v) All vendor tooling for the manufacture of Products shall be owned,
maintained and insured by RXL,
(vi) RXL agrees to advance to Cerplex SAS at all times during the term of
the agreement an amount equal to one month's advance payment for
guaranteed manufacturing services,
(vii) RXL will contribute (through the hourly rate used) to the
commercialization expenses incurred by Cerplex SAS related to
introduction of new activities, during the first contract year, and,
depending on the volume of new activity generated, in the second
contract year.
<PAGE> 22
Rank Xerox et Compagnie SNC
Notes to Financial Statements
Years ended December 31, 1995 and 1994
Page 17
As part of this contract, Cerplex SAS is committed to:
(i) not reduce the aggregate number of permanent employees during 15 months
after May 24, 1996,
(ii) not distribute any dividend, except if certain conditions are met,
during the four year period after May 24, 1996.
16. INTERIM FINANCIAL INFORMATION
The unaudited interim financial statements include all adjustments,
consisting only of normal recurring adjustments, which in the opinion
of management are necessary for a fair presentation of results for the
interim periods.
<PAGE> 23
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
RANK XEROX ET COMPAGNIE SNC
We have audited the accompanying balance sheets of Rank Xerox et Compagnie SNC
as of December 31, 1995 and 1994, and the related statements of income, of cash
flows and of changes in stockholders' equity for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements audited by us present fairly, in all
material respects, the financial position of Rank Xerox et Compagnie SNC at
December 31, 1995 and 1994, and the results of their operations and their cash
flows for the years then ended in conformity with generally accepted accounting
principles.
BEFEC - PRICE WATERHOUSE
Brian Towhill
Partner
Paris, France
July 31, 1996
<PAGE> 24
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following unaudited pro forma combined financial data presents the Pro
Forma Combined Balance Sheet at March 31, 1996, giving affect to the
acquisition of Cerplex S.A.S., a French company ("Cerplex SAS") and the
remaining 51% interest in Modcomp/Cerplex L.P. ("Modcomp/Cerplex") as if the
acquisitions were consummated on that date. Cerplex SAS is the legal successor
to Rank Xerox et Compagnie ("Rank Xerox SNC"), which was transformed
immediately prior to the acquisition from societe en nom collectif ( a type of
partnership) into a societe par actions simplifee (a form of limited liability
company), at which time its name was changed to Cerplex SAS. Also presented
is the Pro Forma Combined Statement of Operations for the three months ended
March 31, 1996, and the twelve months ended December 31, 1995, after giving
affect to the acquisitions as if they were consummated on January 1, 1995. The
pro forma data is based on the historical financial statements of Cerplex SAS
and Modcomp/Cerplex giving affect to the transaction under the assumptions and
adjustments outlined in the accompanying Notes to Unaudited Pro Forma Combined
Financial Data.
The unaudited pro forma data is provided for comparative purposes only. It
does not purport to be indicative of the results that actually would have
occurred if the acquisition had been consummated on the date indicated or which
may be obtained in the future. The pro forma combined financial data should be
read in connection with the notes thereto contained elsewhere herein, the
audited financial statements of Rank Xerox SNC with the notes thereto contained
elsewhere herein, the audited financial statements of Modcomp/Cerplex and notes
thereto filed as part of the Form 8-K dated April 8, 1996 herein incorporated
by reference, and the audited consolidated financial statements of the Company
and the related notes thereto incorporated herein by reference.
The historical financial statements of Rank Xerox SNC were prepared in local
currency and converted into U.S. dollars at the exchange rate at the balance
sheet date and average exchange rate for the reporting periods reflected in the
pro forma Combined Statements of Operations. As reflected in the historical
financial statements of Rank Xerox SNC, the first quarter reporting period ends
March 22, 1996. The pro forma combined financial data set forth herein
incorporates such reporting dates in the Company's reporting period ended March
31, 1996.
<PAGE> 25
THE CERPLEX GROUP, INC.
PRO FORMA COMBINED BALANCE SHEET
(Unaudited)
MARCH 31, 1996
(dollars in thousands)
<TABLE>
<CAPTION>
Pro Forma
Historical -----------------------------------------------------------
-------------------------------- Adjustments Adjustments
Modcomp/ Rank Xerox Increase Adjustment Increase Adjustment Combined
Cerplex Cerplex SNC (Decrease) Reference (Decrease) Reference Total
-------- -------- ----------- ----------- ---------- ----------- ---------- ---------
---Modcomp/Cerplex--- ---Rank Xerox SNC---
Acquisition Acquisition
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 5,422 $10,194 $ (6,209) a(i) $ (6,133) c(iii) $ 34,994
2,621 a(i) 31,473 c(ii)
(2,374) a(ii) --
Due from Xerox Group of companies $34,389 (2,916) c(i) --
(31,473) c(ii)
Accounts receivable, net 27,472 5,481 (600) a(iv) 32,353
Inventories 28,387 4,909 977 34,273
Net assets of discontinued
operations 2,920 2,920
Prepaid expenses and other 2,623 1,400 516 (469) a(ii) 4,230
160 a(iv)
-------- ------- ------- -------- -------- --------
Total current assets 66,824 21,984 35,882 (6,871) (9,049) 108,770
Property, plant and equipment, net 17,441 1,504 10,583 (1,438) a(iv) (10,583) c(i) 29,854
12,347 c(iii)
Investment in joint venture 8,005 (2,621) a(i) --
(5,384) a(iii)
Goodwill 6,361 993 (993) c(i) 6,361
Other long-term assets 2,793 359 3,152
-------- ------- ------- -------- -------- --------
Total assets $101,424 $23,488 $47,817 $(16,314) $ (8,278) $148,137
======== ======= ======= ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 20,898 $ 2,048 $12,555 $ 35,501
Accrued liabilities 11,158 5,126 19,384 35,668
Short-term borrowings 47,700 47,700
Current portion of long-term debt 253 756 1,009
Income taxes payable 2,349 2,349
-------- ------- ------- -------- -------- --------
Total current liabilities 82,358 7,174 32,695 -- -- 122,227
Long-term debt, less current portion 20,567 20,567
Other long-term liabilities 4,801 $ (4,171) c(i) 6,844
6,214 c(iii)
Stockholders' Equity:
Common stock, par value $.001; 13 5,760 (5,760) c(i) 13
Partner Equity 16,314 $ (6,209) (a)(i) --
(2,843) a(ii)
(5,384) a(iii)
(1,878) a(iv)
Additional paid-in capital 47,546 47,546
Notes receivable from stockholders (229) (229)
Unearned compensation (125) (125)
Retained earnings
(accumulated deficit) (48,599) 4,561 (4,561) c(i) (48,599)
Cumulative translation adjustments (107) (107)
-------- ------- ------- -------- -------- --------
Total stockholders' equity (1,501) 16,314 10,321 (16,314) (10,321) (1,501)
-------- ------- ------- -------- -------- --------
Total liabilities and stockholders'
equity $101,424 $23,488 $47,817 $(16,314) $ (8,278) $148,137
======== ======= ======= ======== ======== ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Data
<PAGE> 26
THE CERPLEX GROUP, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
(Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma
Historical -----------------------------------------------------------
-------------------------------- Adjustments Adjustments
Modcomp/ Rank Xerox Increase Adjustment Increase Adjustment Combined
Cerplex Cerplex SNC (Decrease) Reference (Decrease) Reference Total
-------- -------- ---------- ----------- ---------- ----------- ---------- --------
---Modcomp/Cerplex--- ---Rank Xerox SNC---
Acquisition Acquisition
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $40,846 $9,583 $15,273 $ (17) b(i) $ 1,853 d(i) $ 67,538
(495) d(ii)
Cost of Sales 33,915 7,153 13,715 (17) b(i) 112 d(iv) 54,383
------- ------ ------- ------- ------- --------
Gross Profit 6,931 2,430 1,558 -- 2,236 13,155
Selling, general and
administrative expenses 7,057 1,816 1,169 10,042
------- ------ ------- ------- ------- --------
Operating income (loss) (126) 614 389 -- 2,236 3,113
Equity in earnings from
joint venture 357 (357) b(ii) --
Interest expense, net 1,511 (114) (181) -- 1,216
------- ------ ------- ------- ------- --------
Income (loss) from continuing
operations before taxes (1,280) 728 570 (357) 2,236 1,897
Income taxes 293 -- 1,027 d(vi) 1,320
------- ------ ------- ------- ------- --------
Income (loss) from continuing
operations (1,573) 728 570 (357) 1,209 577
-------- ------ ------- ------- ------- --------
Discontinued operations, net of
income taxes:
Loss from operations -- --
Estimated loss from liquidation
of discontinued operations -- --
------- ------ ------- ------- ------- --------
Loss from discontinued
operations -- -- -- -- -- --
------- ------ ------- ------- ------- --------
Net income (loss) $(1,573) $ 728 $ 570 $ (357) $ 1,209 $ 577
======= ====== ======= ======= ======= ========
Income (loss) per share:
Continuing operations $ (0.12) $ 0.04
Discontinued operations -- --
------- --------
Net income (loss) per share $ (0.12) $ 0.04
======= ========
Weighted average common and
common equivalent shares 13,174 14,498
======= ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Data
<PAGE> 27
THE CERPLEX GROUP, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
(Unaudited)
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma
Historical -----------------------------------------------------------
-------------------------------- Adjustments Adjustments
Modcomp/ Rank Xerox Increase Adjustment Increase Adjustment Combined
Cerplex Cerplex SNC (Decrease) Reference (Decrease) Reference Total
-------- -------- ---------- ----------- ---------- ----------- ---------- --------
---Modcomp/Cerplex--- ---Rank Xerox SNC---
Acquisition Acquisition
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $144,328 $38,223 $59,873 $ (216) b(i) $ 34 d(i) $242,242
(1,893) d(ii)
Cost of Sales 127,817 23,407 55,442 (216) b(i) 455 d(iv) 202,720
(2,292) d(iii)
-------- ------- ------- ------- ------- --------
Gross Profit 16,511 14,816 4,431 -- 3,764 39,522
Selling, general and
administrative expenses 33,819 10,165 5,998 (1,420) d(v) 48,562
-------- ------- ------- ------- ------- --------
Operating income (loss) (17,308) 4,651 (1,567) -- 5,184 (9,040)
Equity in earnings from
joint venture 2,425 (2,426) b(ii) (1)
Interest expense, net 5,075 (299) (894) -- 3,882
-------- ------- ------- ------- ------- --------
Income (loss) from continuing
operations before taxes (19,958) 4,950 (673) (2,426) 5,184 (12,923)
Income taxes 2,089 -- 1,651 d(vi) 3,740
-------- ------- ------- ------- ------- --------
Income (loss) from continuing
operations (22,047) 4,950 (673) (2,426) 3,533 (16,663)
-------- ------- ------- ------- ------- --------
Discontinued operations, net of
income taxes:
Loss from operations (1,966) (1,966)
Estimated loss from liquidation
of discontinued operations (15,381) (15,381)
-------- ------- ------- ------- ------- --------
Loss from discontinued
operations (17,347) -- -- -- -- (17,347)
-------- ------- ------- ------- ------- --------
Net income (loss) $(39,394) $ 4,950 $ (673) $(2,426) $ 3,533 $(34,010)
======== ======= ======= ======= ======= ========
Net loss per share:
Continuing operations $ (1.68) $ (1.27)
Discontinued operations (1.33) (1.33)
-------- --------
Net loss per share $ (3.01) $ (2.60)
======== ========
Weighted average common and
common equivalent shares 13,091 13,091
======== ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Data
<PAGE> 28
THE CERPLEX GROUP, INC.
Notes to Unaudited Pro Forma Combined Financial Data
(dollars in thousands)
The pro forma combined balance sheet has been prepared to reflect the
acquisition by the Company of the remaining 51% interest in Modcomp/Cerplex and
the acquisition of Cerplex S.A.S., a French company ("Cerplex SAS"). The
acquisitions are reflected under the purchase method of accounting.
(a) The pro forma combined balance sheet has been adjusted to reflect the
acquisition transaction of Modcomp/Cerplex as follows:
(i) To record the cash distribution of 1994 and 1995 earnings to the
Partners paid in April 1996 less certain partner liabilities. The
Company's share of distributions was $2,621.
(ii) The Company used its share of the cash distribution to acquire the
stock of Modcomp Joint Venture, Inc. which subsequently acquired
the remaining interest in Modcomp/Cerplex from Modular Computer
Systems, Inc. pursuant to the Letter of Agreement dated April 5,
1996. The total purchase price was $2,843 of which $2,374 was paid
in cash and $469 was offset against certain partner receivables.
(iii) To eliminate the Company's investment in Modcomp/Cerplex against its
underlying partner equity in order to reflect the consolidation of
Modcomp/Cerplex previously accounted for under the equity method
of accounting.
(iv) To record a reduction in non-current assets related to the
estimated fair market value of the assets and liabilities of 51%
of Modcomp/Cerplex in excess of the purchase price as required by
APB #16, "Business Combinations."
(b) The pro forma combined statement of operations gives affect to following
pro forma adjustments to reflect the acquisition of Modcomp/Cerplex:
(i) To eliminate recognition of the management fee charged by Cerplex to
Modcomp/Cerplex in accordance with the Partnership Agreement to
reflect the consolidation of Modcomp/Cerplex assumed January 1,
1995.
(ii) To eliminate the Company's equity in earnings of Modcomp/Cerplex to
reflect the consolidation of Modcomp/Cerplex assumed January 1,
1995.
<PAGE> 29
THE CERPLEX GROUP, INC.
Notes to Unaudited Pro Forma Combined Financial Data
(dollars in thousands)
(c) The pro forma combined balance sheet has been adjusted to reflect the
acquisition by the Company of Rank Xerox SNC. The acquisition is reflected
under the purchase method of accounting for an aggregate estimated purchase
price of $6,133, including estimated acquisition related taxes,
registration fees, legal and accounting fees, and other out-of-pocket
costs of $1,280.
The pro forma combined balance sheet has been adjusted to reflect the above
acquisition transaction as follows:
(i) To adjust the pro forma combined balance sheet to eliminate the
assets and liabilities of Rank Xerox SNC not acquired by the
Company, historical cost property and equipment acquired, and to
eliminate the equity of Rank Xerox SNC.
(ii) To reflect the settlement of the Amounts due from the Xerox Group of
companies assuming the acquisition was completed at March 22, 1996.
Under the terms of the Stock Purchase Agreement dated May 24, 1996,
Rank Xerox Limited was committed to provide cash and current
accounts receivable sufficient in the aggregate to satisfy all
current and long-term liabilities of Rank Xerox SNC. Such cash is
restricted by contract to support the working capital and other
requirements of Cerplex SAS, and may not be used by Cerplex for
general corporate purposes.
(iii) To allocate the purchase price to property and equipment acquired
and liabilities assumed as part of the acquisition.
(d) The pro forma combined statement of operations gives affect to the
following pro forma adjustments to reflect the acquisition of Rank Xerox
SNC:
(i) To adjust the historical revenues of Cerplex SAS using the standard
production hours during the pro forma periods at the units rates
set forth in the Supply and Services Agreement, assuming such
contract was entered into at January 1, 1995.
(ii) To eliminate the rental charge from Rank Xerox-The Document
Company SA for use of the land and building.
<PAGE> 30
THE CERPLEX GROUP, INC.
Notes to Unaudited Pro Forma Combined Financial Data
(dollars in thousands)
(iii) To eliminate depreciation charge for tooling acquired by Rank
Xerox and provided to Rank Xerox SNC for use without charge under
the Supply and Services Contract.
(iv) To record depreciation expense related to the building, using a
twenty (20) year estimated useful life on a straight-line basis.
(v) To eliminate a non-recurring compensation charge by Cerplex SAS
related to an exceptional bonus paid prior to the acquisition.
(vi) To record a foreign tax provision based on the local statutory
rate of 36.6%.
(e) The pro forma combined financial data may not include all potential fair
value adjustments and opening balance sheet accruals which will be
identified within the twelve months succeeding the acquisition.
