SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
(AMENDMENT NO. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: SEPTEMBER 16, 1996
C. R. BARD, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
New Jersey 1-6926 22-1454160
(STATE OF COMMISSION FILE NUMBER IRS EMPLOYER
INCORPORATION) IDENTIFICATION NO.
730 Central Avenue, Murray Hill, New Jersey
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
07974
(ZIP CODE)
(908) 277-8000
(REGISTRANT'S TELEPHONE NUMBER)
<PAGE>
Item 7. Financial Statements and Exhibits
C. R. Bard, Inc. filed on September 27, 1996 a Current Report on
Form 8-K (the "September 27, 1996 Form 8-K") related to the
Company's acquisition of IMPRA, Inc. The following historical
financial statements of IMPRA, Inc. were inadvertently omitted
from the original filing of the September 27, 1996 8-K.
C. R. Bard, Inc. is hereby amending the September 27, 1996 8-K to
include such financial statements.
SIGNATURE
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.
C. R. BARD, INC.
(Registrant)
By: William C. Bopp /s/
William C. Bopp
Executive Vice President
and Chief Financial Officer
Dated: November 1, 1996
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<PAGE>
IMPRA, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED JUNE 30, 1996 and 1995:
Independent Auditors' Report ................... 2
Consolidated Balance Sheets .................... 3-4
Consolidated Statements of Income and
Retained Earnings ........................... 5
Consolidated Statements of Cash Flows .......... 6
Notes to Consolidated Financial Statements ..... 8
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<PAGE>
Deloitte &
Touche ILP Suite 1200 Telephone: (602)234-5100
2901 North Central Ave. Facsimile: (602)234-5186
Phoenix, AZ 85012-2799
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Impra, Inc. and Subsidiaries
Tempe, Arizona
We have audited the accompanying consolidated balance sheets of
Impra, Inc. and subsidiaries (the "Company") as of June 30, 1996
and 1995, and the related consolidated statements of income and
retained earnings and of cash flows for the years then ended.
These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits. We did not audit the financial statements of Impra Medica
SA, Impra Medica GmbH and Impra UK Ltd. (consolidated
subsidiaries), which statements reflect total assets constituting
28% and 25%, respectively, of consolidated total assets as of
June 30, 1996 and 1995, and total revenues constituting 32% and
33%, respectively, of consolidated total revenues for the years
then ended. Those statements were audited by other auditors whose
reports have been furnished to us, and our opinion, insofar as it
relates to the amounts included for Impra Medica SA, Impra Medica
GmbH and Impra UK Ltd., is based solely on the reports of such
other auditors.
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 and the reports of the other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the reports of the other
auditors, such consolidated financial statements present fairly,
in all material respects, the financial position of the Company
at June 30, 1996 and 1995, and the results of its operations and
its cash flows for the years then ended in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP /s/
August 27, 1996
DeloitteTouche
Tohmatsu
International
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<PAGE>
<TABLE>
IMPRA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND 1995
<CAPTION>
ASSETS (Notes 6 and 7) 1996 1995
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 6,853,619 $ 5,664,743
Restricted investments (Note 10) 3,216,459
Accounts receivable - net of
allowance of $15,000:
Trade 7,781,386 6,923,361
Other(Note 11) 187,507 68,362
Inventories - net (Note 3) 3,903,172 3,414,021
Notes receivable - related
parties (Note 11) 2,470,472
Deferred income taxes (Note 8) 513,400 965,000
Income taxes receivable 541,900
Other current assets 537,792 414,986
Total current assets 22,789,248 20,666,932
PROPERTY AND EQUIPMENT - Net
(Notes 4 and 10) 2,999,099 2,373,467
OTHER ASSETS:
Notes receivable - related parties
(Note 11) 532,000
Intangibles - net (Note 5) 573,178 463,377
Deferred income taxes (Note 8) 371,100 435,000
Other 201,261 146,840
Total other assets 1,145,539 1,577,217
TOTAL $26,933,886 $24,617,616
</TABLE>
See notes to consolidated financial statements. (Continued)
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<PAGE>
<TABLE>
IMPRA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND 1995
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 2,594,042 $ 1,650,148
Accrued expenses(Note 10) 4,035,349 2,946,515
Accrued commissions 1,098,909 761,379
Accrued pension liabilities
(Note 9) 894,624 796,684
Estimated patent settlement
(Note 10) 5,229,000
Current portion of long-tern debt
(Note 7) 2,830,345 281,688
Total current liabilities 11,453,269 11,665,414
LONG-TERM DEBT - Less current portion
(Note 7) 63,614 1,457,314
Total liabilities 11,516,883 13,122,728
COMMITMENTS AND CONTINGENCIES (Notes 2,3, 9 and 10)
STOCKHOLDERS' EQUITY (Notes 7 and 10):
Common stock, no par value - authorized
5,000,000 shares; issued 49,338 shares,
outstanding 30,258 shares 170,715 170,715
Retained earnings 17,278,443 13,208,326
Treasury stock - at cost, 19,080
shares repurchased (2,158,479) (2,158,479)
Foreign currency translation
adjustment 126,324 274,326
Total stockholders' equity 15,417,003 11,494,888
TOTAL $26,933,886 $24,617,616
<FN>
</TABLE>
See notes to consolidated financial statements. (Concluded)
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<PAGE>
<TABLE>
IMPRA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
YEARS ENDED JUNE 30, 1996 AND 1995
<CAPTION>
<S> <C> <C>
1996 1995
NET SALES $48,795,876 $41,239,748
COST OF GOODS SOLD 7,914,290 6,606,681
GROSS PROFIT 40,881,586 34,633,067
OPERATING EXPENSES (Notes 9, 10 and 11):
Occupancy 1,356,078 1,331,853
Selling 19,250,909 16,925,765
Administrative 10,520,628 8,413,437
Research and development 2,753,045 2,053,874
Total operating expenses 33,880,660 28,724,929
INCOME FROM OPERATIONS 7,000,926 5,908,138
OTHER INCOME (EXPENSE) (Notes 10 and 11):
Litigation - net 154,000
Loss on disposal of assets (829) (622,864)
Foreign currency transaction loss (233,964) 91,052
Interest expense (373,485) (259,281)
Interest income 332,654 316,144
Other (9,785) 62,571
Total other income (expense) (131,409) (412,378)
INCOME BEFORE INCOME TAXES 6,869,517 5,495,760
INCOME TAXES (Note 8) 2,799,400 2,266,000
NET INCOME 4,070,117 3,229,760
RETAINED EARNINGS, BEGINNING OF YEAR 13,208,326 9,978,566
RETAINED EARNINGS, END OF YEAR $17,278,443 $13,208,326
<FN>
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
<TABLE>
IMPRA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1996 AND 1995
<CAPTION>
<S> <C> <C>
OPERATING ACTIVITIES 1996 1995
Net income $4,070,117 $3,229,760
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 603,693 553,924
Deferred income taxes 515,500 (268,801)
Loss on disposal of assets 829 622,864
Loss on disposal of intangible
assets 158,736
Litigation - net (154,000)
Provision for excess and slow
moving inventories 227,175
Foreign currency translation
adjustment (148,002) 292,269
Changes in operating assets and
liabilities:
Restricted cash 3,216,459 (139,459)
Accounts receivable:
Trade (858,025) (1,033,408)
Other (119,145) 136,335
Inventories (716,326) (1,032,180)
Income taxes receivable (541,900)
Other current assets (122,806) (81,458)
Intangible assets (290,841) (186,600)
Other assets (54,421) (63,784)
Accounts payable 943,894 180,377
Accrued expenses 888,834 1,035,183
Accrued commissions 337,530 201,836
Accrued pension liabilities 97,940 186,883
Estimated litigation settlement (4,875,000)
Net cash provided by operating
activities 3,180,241 3,633,741
INVESTING ACTIVITIES:
Purchases of property and equipment (1,262,216) (910,822)
Advances to related parties (1,938,472) (335,000)
Payments from related parties 131,330
Proceeds from sale of assets 54,366 104,730
Net cash used in investing
activities (3,146,322) (1,009,762)
FINANCING ACTIVITIES:
Proceeds from long-term debt 2,305,771 443,965
Payments on long-term debt (1,150,814) (943,749)
Net cash provided by (used in)
financing activities 1,154,957 (499,784)
INCREASE IN CASH & CASH EQUIVALENTS 1,188,876 2,124,195
CASH & CASH EQUIVALENTS,
BEGINNING OF YEAR 5,664,743 3,540,548
CASH & CASH EQUIVALENTS,
END OF YEAR $6,853,619 $5,664,743
(Continued)
</TABLE>
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<PAGE>
<TABLE>
IMPRA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1996 AND 1995
<CAPTION>
1996 1995
<S> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 298,270 $ 234,193
Income taxes paid $1,759,547 $2,175,785
Note receivable - received from a
related party in connection with
sale of equipment (Note 11) $ 42,008
Capital expenditures financed through
obligations under capital leases $ 147,462
See notes to consolidated financial
statements. (Concluded)
<FN>
</TABLE>
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<PAGE>
IMPRA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business and Organization - IMPRA, Inc. and its subsidiaries,
IMPRA Foreign Sales Corp. ("FSC"), IMPRA Medica SA
(Switzerland), IMPRA Medica GmbH (Germany), IMPRA UK Ltd.
(United Kingdom), IMPRA SARL (France), and IMPRA Canada (the
"Company") manufacture, distribute, and sell medical devices
worldwide primarily to hospitals and medical device
distributors.
The significant accounting policies followed by the Company
are summarized as follows:
a. Principles of Consolidation - The accompanying
consolidated financial statements include the accounts of
IMPRA, Inc. and its wholly-owned subsidiaries. All
significant intercompany transactions and accounts have
been eliminated in consolidation.
b. Cash and Cash Equivalents - The Company considers all
highly-liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
c. Inventories are stated at the lower of cost (first-in,
first-out basis) or market.
d. Property and equipment are recorded at cost and
depreciation and amortization are provided using
straight-line and accelerated methods over estimated
useful lives as follows:
Description Years
Leasehold improvements 40
Machinery and equipment 3 to 10
Furniture and fixtures 3 to 10
Automobiles 3 to 5
e. Intangibles - Patents and trademarks are amortized using
the straight-line method generally over lives of 17
years. Goodwill is amortized using the straight-line
method over 10 years.
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<PAGE>
f. Foreign Currency Translation - The financial statements
of IMPRA, Inc.'s non-United States subsidiaries are
translated into United States dollars in accordance with
Statement of Financial Accounting Standards ("SFAS") No.
52, Foreign Currency Translation. Assets and liabilities
of these foreign subsidiaries representing cash, amounts
receivable, inventories or payables are translated into
United States dollars at current rates of exchange in
effect at year-end. Other accounts including property and
equipment and notes payable are translated at historical
exchange rates. Income and expense items are translated
at the average exchange rate for the year. The resulting
translation adjustments are recorded directly as a
separate component of stockholders' equity.
g. Revenue Recognition - The Company records revenue when
goods are shipped.
h. Income taxes are provided based on the provisions of SFAS
No. 109, Accounting for Income Taxes, which, among other
things, requires that the recognition of deferred income
taxes be measured by the provisions of enacted tax laws
in effect at the date of the financial statements.
I. Accounting Pronouncements - During 1995 the Financial
Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of". Management of the Company does not
believe implementation of SFAS No. 121 will have a
significant impact on the financial statements.
j. Use of Estimates - The preparation of financial
statements in conformity with generally accepted
accounting principles necessarily requires management to
make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results
could differ from these estimates.
k. Reclassifications - Certain reclassifications have been
made to the 1995 financial statements to conform to the
1996 presentation.
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<PAGE>
2. SUBSEQUENT EVENT
On August 5, 1996, the Company entered into an agreement to
sell all of the outstanding stock of the Company to C.R. Bard,
Inc. The transaction is subject to the Hart Scott Rodino Act.
Closing of the transaction is anticipated to occur in
September 1996. In conjunction with the closing, all of the
related party notes receivable (Note 11) are to be repaid to
the Company and all notes payable to and lines of credit with
banks (Notes 6 and 7) will be paid in full. As a result the
notes receivable and payable are classified as current in
these financial statements. In addition, the real property
leased by the Company from related parties (Note 11) will be
acquired by C.R. Bard, Inc. and therefore, all leases with
related parties will be terminated.
3. INVENTORIES
Inventories at June 30 consist of the following:
1996 1995
Raw materials $ 200,051 $ 218,885
Work-in-process 211,975 428,373
Finished goods 3,812,516 2,860,958
Allowance for excess and
slow moving inventories (321,370) (94,195)
Total inventories $3,903,172 $3,414,021
The Company distributes certain products through an exclusive
domestic agreement. The agreement expires in September 1996.
A renewal of the agreement has not been obtained. In the event
the agreement is not renewed the Company may have excess
inventories on hand. Under the terms of the existing agreement
the Company will be prohibited from selling such inventories.
Management estimates the potential loss could be up to
$800,000 if the Company is unable to sell the excess
inventories. Sales of this product totaled approximately $3.4
million and $2.3 million, respectively, for the years ended
June 30, 1996 and 1995.
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<PAGE>
4. PROPERTY AND EQUIPMENT
Property and equipment at June 30 consist of the following:
1996 1995
Leasehold improvements $1,667,666 $1,259,809
Machinery and equipment 2,365,209 1,974,790
Furniture and fixtures 1,336,844 1,027,811
Automobiles 440,287 408,291
Total 5,810,006 4,670,701
Less accumulated
depreciation (2,810,907) (2,297,234)
Property and equipment - net $2,999,099 $2,373,467
5. INTANGIBLES
Intangibles at June 30 consist of the following:
1996 1995
Patents $346,341 $323,412
Trademarks 90,514 78,812
Goodwill 105,531 105,531
Other 68,148
Total 610,534 507,755
Less accumulated
amortization (37,356) (44,378)
Intangibles - net $573,178 $463,377
6. CREDIT FACILITIES
The Company has a $ 1,000,000 line of credit which bears
interest at the bank's prime rate plus .5% (8.75% at June 30,
1996). The credit line expires on December 2, 1996.
The Company has a $500,000 term loan available for the
purchase of equipment. The agreement bears interest at the
bank's prime rate plus 1% (9.25% at June 30, 1996) and matures
on December 31, 1996.
The above credit facilities are guaranteed by the two majority
stockholders and are collateralized by substantially all of
the assets of the Company (Note 2).
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<PAGE>
Among other things, under the above credit facilities the
Company is required to maintain certain amounts of tangible
net worth and profitability and has restrictions on the amount
of capital expenditures. For the year ended June 30, 1996, the
Company was in compliance with all such loan covenants.
The Company has a 300,000 Swiss franc (approximately $239,000
at June 30, 1996) credit line which bears interest at 5.25%
and is unsecured.
There were no amounts outstanding under the above credit
facilities at June 30, 1996.
7. LONG-TERM DEBT
Long-term debt at June 30 consists of the following:
1996 1995
Note payable to bank, monthly
principal payments of $44,536
plus interest at the bank's
base rate plus 1% (9.25% at
June 30, 1996) due February 1,
1999 (Note 2) $1,425,160
Note payable to a former
stockholder, annual principal
and interest payments of
$265,000, interest at 11.5%,
due March 2002 1,105,090 $1,228,780
Note payable to bank, monthly
principal payments of $7,500
plus interest at the bank's
base rate plus 1% (9.25% at
June 30, 1995), due October 27,
1998 (Note 2) 189,675 279,675
Notes payable to bank, monthly
principal and interest payments
with interest at 8% and 8.75%,
due through January 1998
(Note 2) 52,803 99,037
Capital lease obligations,
interest at rates ranging from
12.5% to 14.5%, due through
March 2000 (Note 10) 121,231 131,510
Total 2,893,959 1,739,002
Less current portion 2,830,345 281,688
Long-term portion $ 63,614 $1,457,314
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<PAGE>
Annual maturities of long-term debt outstanding at June 30,
1996 after giving effect to the anticipated transaction with
C.R. Bard, Inc. (Note 2) are as follows:
1997 $2,830,345
1998 40,545
1999 23,069
Total $2,893,959
The above obligations are collateralized by substantially all
of the Company's assets and a stock pledge agreement.
On July 12, 1996, the note payable to former stockholder was
paid in full and the Company canceled all of the treasury
stock (Note 10).
Based upon available market information and borrowing rates
currently available to the Company for bank loans with similar
terms and average maturities, the fair value of long-term debt
approximates the carrying value.
8. INCOME TAXES
The provision for income taxes consists of the following for
the year ended June 30:
1996 1995
Current:
Federal $ 1,287,416 $ 1,737,891
Foreign 664,220 348,422
State 332,264 448,488
Total current 2,283,900 2,534,801
Deferred:
Federal 540,667 (213,662)
Foreign (164,694)
State 139,527 (55,139)
Total deferred 515,500 (268,801)
Total $ 2,799,400 $ 2,266,000
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<PAGE>
The provision for income taxes differs from the amount
computed at the statutory tax rate as follows:
1996 1995
Provision using statutory
tax rate $2,335,627 $1,868,558
State tax net of federal
income tax benefit 412,169 329,747
Meals and entertainment 235,414 87,547
Export sales tax exemption (115,090) (130,053)
Other (68,720) 110,201
Provision for income taxes $2,799,400 $2,266,000
Significant components of the Company's net deferred tax
assets are comprised of the following as of June 30:
1996 1995
Current Noncurrent Current Noncurrent
Deferred tax assets:
Capitalized
inventory costs $173,283 $ 133,897
Vacation accrual 110,562 88,863
Inventory allowance 93,360
Litigation 80,000 864,294
Pension adjustment $259,738 223,148
Capital loss
carry forward 79,000 79,000
Exchange gains and
losses 28,451 38,792
Other 45,144 194,862 51,154 211,852
Valuation allowance (79,000) (79,000)
Total 530,800 454,600 1,177,000 435,000
Deferred tax liabilities:
Patent costs (83,500)
Exchange gains
and losses (203,486)
Other (17,400) (8,514)
Total (17,400) (83,500) (212,000)
Net deferred tax
asset $513,400 $371,100 $ 965,000 $435,000
As of June 30, 1996, the Company has a capital loss carry
forward of $196,319 which will expire in 1998. The Company has
provided a valuation allowance against the capital loss carry
forward.
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<PAGE>
9. PENSION BENEFITS
The Company has a noncontributory defined benefit pension plan
(the "plan") covering substantially all domestic employees.
Domestic employees are covered on the first day of the plan
year in which they complete one year of service and attain age
21. Plan benefits are based on the employee's compensation and
tenure. As a result of the anticipated transaction with C.R.
Bard, Inc. (Note 2) the plan may be terminated and merged with
a similar benefit plan of C.R. Bard, Inc. in the future.
The following table sets forth the plan's funded status and
amounts recognized in the consolidated balance sheets at June
30, 1996 and 1995 based on measurement dates of June 30, 1996
and 1995.
Actuarial present value of
benefit obligations:
1996 1995
Accumulated benefit obligation,
including vested benefits of
$2,311,369 and $1,849,859 $3,634,985 $2,921,166
Projected benefit obligation
for service rendered to date $5,011,029 $4,014,575
Plan assets at fair value 3,928.518 3,003,687
Projected benefit obligation
in excess of plan assets 1,082,511 1,010,888
Unrecognized net loss from
past experience different from
that assumed and effects of
changes in assumptions 253,826 259,182
Unrecognized obligation
established July 1, 1989 being
recognized over 15 years 132,113 148,628
Domestic pension liability $ 696,572 $ 603,078
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<PAGE>
Net pension expense is comprised for the following
components:
1996 1995
Service cost - benefits earned
during the period $ 821,604 $ 666,366
Interest cost on projected
benefit obligation 314,019 251,972
Actual (return) loss on plan
assets (463,823) (308,628)
Net amortization and deferral 240,511 136,819
Domestic net periodic pension
expense $ 912,311 $ 746,529
The weighted-average discount rate, rate of increase in
future compensation levels, and expected rate used to
determine the costs and liabilities at June 30, 1996 and
1995 were as follows:
Pre-retirement discount rate 7.75%
Post-retirement discount rate 5.00
Rate of increase in future compensation 4.50
Long-term rate of return 7.75
The Company also has a profit sharing plan that was frozen
in January 1991. During 1996 and 1995, no contributions were
made to this plan.
In addition, IMPRA UK Ltd., IMPRA Medica GmbH, and IMPRA
Medica SA have governmentally sponsored pension plans. The
Company contributed approximately $209,000 in each of the
years ended June 30, 1996 and 1995.
10. COMMITMENTS AND CONTINGENCIES
The Company leases certain equipment under capital lease
agreements. The Company also leases the majority of its office
and manufacturing facilities from the officers and
stockholders of the Company under operating lease agreements.
Other operating leases are for equipment and the Company's
foreign offices. The leases expire at various dates through
2000 and include renewal options. Leased assets totaling $
105,854 (net of accumulated depreciation of $84,731) are
included in property and equipment as of June 30, 1996.
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<PAGE>
Minimum future lease commitments under these leases for the
years ending June 30 are as follows:
Capital Operating
Leases Leases
1997 $57,617 $466,763
1998 53,093 238,484
1999 37,463 27,605
2000 21,273
Total minimum future
lease payments 169,446 $732,852
Less amounts representing
interest (48,215)
Minimum future lease
payments - net $121,231
Rent expense under the operating leases totaled approximately
$640,000 and $668,000 for the years ended June 30, 1996 and
1995, respectively, of which $359,000 and$343,000 were to
related parties. In 1992, the Company purchased 19,080 shares
from a former stockholder and simultaneously entered into a
noncompete agreement with a former stockholder of the Company.
The agreement requires payments of $85,000 through March 2002,
which are expensed on an annual basis and no liability or
corresponding asset has been recorded in the financial
statements. Treasury stock of $2,158,479 was recorded.
The Company was a defendant in a lawsuit filed during 1991 by
one of its competitors alleging patent infringement. On
January 25, 1994, the court ruled that the Company's product
does infringe certain claims of the patent. The court further
ruled that the Company failed in its burden of proof to prove
that the patent is invalid. The Company has not sold any such
products since 1992. The court determined that damages
approximate $5,229,000. Accordingly, a liability was recorded
for the estimated settlement and is included in the financial
statements at June 30, 1995. The Company appealed the court
decision. In order to appeal, the Company was required to
pledge to the court a $5,229,000 letter of credit which was
collateralized by $3,216,459 in restricted investments and
substantially all assets of the Company and was guaranteed by
the two majority stockholders. In December 1995, the Company
settled the matter for $4,875,000 and reversed the remaining
accrual of $354,000 which is included in other income.
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<PAGE>
The Company is a defendant in two lawsuits filed in 1995 and
1996 by two former employees alleging wrongful termination on
the basis of age and race discrimination. Management has made
offers of settlement in these matters, and has recorded a
liability which is included in accrued expenses. Management
does not believe the resolution of these matters will have a
material adverse effect on the financial position, results of
operations or cash flows of the Company.
11. RELATED PARTY TRANSACTIONS
In addition to related party transactions and balances
described elsewhere, the Company had the following
receivables from related parties at June 30:
1996 1995
Note receivable from majority
stockholders, quarterly interest
payments of $25,732, interest at
5.53%, due December 1998,
collateralized by real property
(Note 2) $1,861,300
Unsecured note receivable from
Original Equipment Manufacturers,
interest at 6%, due July 1, 1998
(Note 2) 359,172 $282,000
Note receivable from stockholder,
interest payments of $ 15,000 due
annually on November 1, interest
at 5.53%, principal due November 1,
1997, collateralized by 500 shares
of Company stock (Note 2) 250,000 250,000
Total $2,470,472 $532,000
Original Equipment Manufacturers ("OEM"), is a company
wholly-owned by a stockholder of the Company. Interest income
recognized on the above notes during 1996 and 1995 totaled
$90,668 and $29,163, respectively.
Amounts due from employees totaled $76,083 and $56,685 at June
30, 1996 and 1995, respectively, and are included in other
accounts receivable.
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<PAGE>
During 1995, the Company wrote-off unamortized leasehold
improvements on a facility leased from a related party
totaling approximately $462,000. Because the Company
discontinued certain products, the leasehold improvements were
no longer necessary. In addition, the Company sold excess
equipment to a related party at a loss of approximately
$43,000.
In accordance with the terms of a July 1992 consulting
agreement, consulting fees totaling $216,000 were paid to a
stockholder ofthe Compary during 1995. No such fees were paid
during 1996.
* * * * * *
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