UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A, Amendment No. 1
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
X EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
____ EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-3108
TRION, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 25-0922753
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 760, 101 McNeill Road, Sanford, North Carolina 27331-0760
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 919/775-2201
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of
August 1, 1995.
6,424,183 shares of Common Stock, par value $.50.
<PAGE>
PART II
Item 5. Other Information
The Registrant previously reported under this item its acquisition of Envirco
Corporation effective August 1, 1995. Item 5 of the Form 10-Q is hereby
amended to provide the following information, as required by Item 7(a) and
(b) of Form 8-K. In addition, a copy of the auditors consent is included as
Exhibit 23.1 hereto.
Audited Financial Statements of Envirco Corporation as required by Item 7(a)
of Form 8-K are included herewith as follows:
Report of independent certified public accountants
Balance Sheets at February 28, 1994 and 1995
Statements of Operations, two years ended February 28, 1995
Statements of Cash Flows, two years ended February 28, 1995
Statements of Stockholders' Equity, two years ended
February 28, 1995
Notes to Financial Statements
Independent Auditors' Report
The Board of Directors
ENVIRCO CORPORATION:
We have audited the accompanying balance sheets of ENVIRCO CORPORATION
as of February 28, 1995 and 1994, and the related statements of operations,
stockholders' equity, and cash flows 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 referred to above present fairly,
in all material respects, the financial position of ENVIRCO CORPORATION as
of February 28, 1995 and 1994, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
April 13, 1995
<PAGE>
<TABLE>
ENVIRCO CORPORATION
Balance Sheets
February 28, 1995 and 1994
<CAPTION>
1995 1994
Assets (Note 4)
<S> <C> <C>
Current assets:
Cash $ 350 $ 32,489
Receivables:
Trade accounts, less allowance
for doubtful receivables of
$102,014 in 1995 and $79,163
in 1994 2,348,608 1,383,379
Other 30,293 10,939
Total receivables 2,378,901 1,394,318
Inventories (note 2) 1,588,256 869,965
Prepaid expenses 229,925 133,633
Total current assets 4,197,432 2,430,405
Machinery and fixtures, at cost, net (note 3) 513,446 510,787
Other assets, at cost, net (note 3) 789,365 889,120
$5,500,243 $3,830,312
Liabilities and Stockholders'Equity
Current liabilities:
Cash overdraft $ 203,714 $ 217,482
Current installments of long-term debt (note 4) 257,310 40,000
Line of credit (note 5) 410,274 322,521
Accounts payable 903,969 381,576
Accrued payroll and commissions 336,276 118,008
Fringe benefits 131,067 138,592
Product warranty reserve 58,487 39,530
Income taxes payable 204,577 15,132
Other 108,772 45,726
Total current liabilities 2,614,446 1,318,567
Long-term debt, excluding current installments
(note 4) 1,278,576 1,620,000
Total liabilities 3,893,022 2,938,567
Stockholders equity (notes 1, 4 and 8):
Common stock with no par value.
Authorized 500,000 shares; issued
and outstanding 202,359 shares in
1995 and 198,469 shares in 1994 520,197 510,200
Retained earnings 1,087,024 381,545
Total stockholders' equity 1,607,221 891,745
$5,500,243 $3,830,312
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
ENVIRCO CORPORATION
Statements of Operations
Years ended February 28, 1995 and 1994
<CAPTION>
1995 1994
<S> <C> <C>
Net sales $12,260,555 $ 8,076,445
Cost of sales 8,042,043 5,265,601
Gross profit 4,218,512 2,810,844
Operating expenses:
Selling and marketing 1,463,859 991,400
Research and development 223,902 113,875
General and administrative 1,158,522 905,324
Operating income 1,372,229 800,245
Other income 608 39,747
Interest expense (201,358) (219,167)
Earnings before income tax expense 1,171,479 620,825
Income tax expense (note 9) 466,000 248,405
Net earnings $ 705,479 $ 372,420
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
ENVIRCO CORPORATION
Statements of Cash Flows
Years ended February 28, 1995 and 1994
<CAPTION>
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 705,479 $ 372,420
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 299,355 240,134
Changes in assets and liabilities:
Receivables (984,583) (285,642)
Inventories (718,291) 110,819
Prepaid expenses (96,292) (104,856)
Accounts payable 522,393 (90,720)
Accrued payroll and commissions 218,268 (33,998)
Fringe benefits (7,525) 2,271
Product warranty reserve 18,957 8,019
Income taxes payable 189,445 20,755
Other 63,046 (92,188)
Net cash provided by operating
activities 210,252 147,014
Cash flows from investing activities - purchase
of equipment and other assets (202,259) (113,244)
Cash flows from financing activities:
Increase (decrease) in cash overdraft (13,768) 217,482
Net advances (payments) under line of credit 87,753 (266,080)
Proceeds from long-term debt 1,489,543 -
Payments on long-term debt (1,613,657) (40,000)
Issuance of common stock 9,997 -
Net cash used in financing
activities (40,132) (88,598)
Net decrease in cash and temporary cash
investments (32,139) (54,828)
Cash and temporary cash investments at
beginning of year 32,489 87,317
Cash and temporary cash investments at end
of year $ 350 $ 32,489
Supplemental information:
Interest paid $ 205,098 $ 219,167
Income taxes paid 318,922 272,100
Supplemental schedule of noncash investing
and financing activities - other asset
acquired in exchange for stock $ - $ 10,200
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
ENVIRCO CORPORATION
Statements of Stockholders' Equity
Years ended February 28, 1995 and 1994
<CAPTION>
Common Common Total
stock stock stock-
number no par Retained holders'
of shares value earnings equity
<S> <C> <C> <C> <C>
Balance at February 28, 1993 194,500 $500,000 9,125 509,125
Common stock issued 3,969 10,200 - 10,200
Net earnings - - 372,420 372,420
Balance at February 28, 1994 198,469 510,200 381,545 891,745
Common stock issued 3,890 9,997 - 9,997
Net earnings - - 705,479 705,479
Balance at February 28, 1995 202,359 $520,197 1,087,024 1,607,221
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
ENVIRCO CORPORATION
Notes to Financial Statements
February 28, 1995 and 1994
(1) Summary of Significant Accounting Policies
(a) Business
The Company is primarily engaged in the development,
manufacture, distribution and sale of ultra-clean air
systems and components. The Company sells its products
throughout the United States and abroad.
(b) Inventories
Inventories are stated at the lower of cost (first-in,
first-out) or market.
(c) Depreciation and Amortization
Depreciation of machinery and fixtures is provided over
the estimated useful lives of the respective assets
using declining-balance methods. Other assets listed
below are amortized using the straight-line method over
their estimated useful lives:
Asset Useful lives
Machinery and fixtures 7 years
Patents and licenses 9 years
Trade marks and trade names 9 years
Commitment fees 3 years (life of loan)
Organizational costs 5 years
(d) Income Taxes
Income taxes are accounted for under Statement of
Financial Accounting Standards No. 109 "Accounting for
Income Taxes". Under this method, deferred income taxes
are recognized for the tax consequences of "temporary
differences" between the financial statement carrying
amounts and the tax bases of existing assets and
liabilities. The effect on deferred income taxes of a
change in tax rates is recognized in income in the
period that includes the enactment date.
(e) Revenue Recognition
The Company recognizes revenue on sales of its product
when the products are shipped from the plant.
(f) Product Warranty Reserve
The Company warrants its products against defects in
material and workmanship for one year. The Company has
accrued potential warranty claims based on prior years
claim experience. Such costs are accrued at the time
revenue is recognized based on a percentage of sales.
<PAGE>
(g) Reclassifications
Certain 1994 amounts have been reclassified to conform
with the 1995 presentation.
(2) Inventories
The components of inventory at February 28 follows:
1995 1994
Raw materials $ 1,163,567 $ 642,081
Work in process 177,497 53,145
Finished goods 247,192 174,739
$ 1,588,256 $ 869,965
(3) Machinery and Fixtures, and Other Assets
A summary of machinery and equipment at February 28 follows:
1995 1994
Machinery and equipment $ 681,066 $ 561,159
Furniture and fixtures 47,175 47,000
728,241 608,159
Accumulated depreciation 260,228 97,372
$ 468,013 $ 510,787
A summary of other assets at February 28 follows:
1995 1994
Patents and licenses $ 822,482 $ 811,438
Trade marks and trade
names 100,000 100,000
Commitment fees 21,112 53,500
Other 83,396 82,056
1,026,990 $1,046,994
Accumulated amortization 237,625 157,874
$ 789,365 $ 889,120
<PAGE>
(4) Long-term Debt
A summary of long-term debt at February 28 follows:
1995 1994
Note payable to financial institution, bearing
interest at 10 percent, installments of
principal and interest payments of $30,809
are due monthly, the entire principal balance
plus accrued interest shall be due
June 22, 1996 $1,296,343 -
Note payable to financial institution, for
equipment purchases bearing interest at
10 percent, outstanding principal balance of
each advance, including accrued interest, is
due monthly based on a 60 month amortization,
the balance plus accrued interest is due
June 22, 1996 39,543 -
Note payable to financial institution - 160,000
Subordinated debentures bearing interest at
11.5 percent - 1,300,000
Convertible subordinated debentures, bearing
interest at the greater of 9.5 percent or
Chase Manhattan Bank prime rate plus 2
percent (11 percent at February 28, 1995)
plus a interest premium of $25,000 at
maturity, interest due monthly with final
payment of principal and interest premium
due February 10, 1997
200,000 200,000
1,535,886 1,660,000
Less current installments 257,310 40,000
Long-term debt, excluding current
installments $1,278,576 $1,620,000
The notes payable to the financial institution is part of a
loan and security agreement with the financial institution
which provides for the above term loan, the equipment
purchase loan, and a revolving credit agreement (note 6).
Advances under the equipment purchase loan cannot exceed
$250,000. The loans are secured by substantially all of the
Company s assets, are personally guaranteed by the president
of the Company and are further secured by a $1,500,000 life
insurance policy on the president of the Company.
The Company issued stock purchase warrants in connection with
the 11.5 percent convertible subordinated debentures
(debentures). The warrants are convertible into a certain
percentage of the Company s common stock determined by
reference to the repayment date of the debentures. As a
result of the debenture repayment date of June 22, 1994, the
outstanding warrants are convertible into 24.5 percent
ownership of the Company on a fully diluted basis (with
limited exceptions) at an exercise price of $100. The
warrants expire on June 22, 2000.
<PAGE>
The convertible subordinated debentures are secured by
substantially all of the Company's assets. The debentures
are fully subordinated to the notes payable to the financial
institution. On February 9, 1997, the debentures and
interest premium are convertible into common stock of the
Company representing 7 percent equity in the Company on a
fully diluted basis.
Required principal payments are as follows:
Year ending February 28 Amount
1996 $ 257,310
1997 1,278,576
(5) Revolving Credit Agreement
At February 28, 1994 the Company had a Revolving Credit
Agreement with a financial institution, which provided a line
of credit which could not exceed $1,500,000.
During 1995, the Company refinanced the Revolving Credit
Agreement with another financial institution. The new
agreement provides for a line of credit not to exceed
$750,000 and is further limited to 80 percent of eligible
accounts receivable plus 40 percent of eligible inventory.
The interest rate is determined by the Corporate base rate
plus 2 percent (11 percent at February 28, 1995). The
agreement requires monthly interest payments and the
outstanding balance is due June 22, 1995. The Company had an
outstanding balance of $410,274 at February 28, 1995.
(6) Lease Commitments
The Company leases certain machinery, equipment and buildings
under noncancelable operating leases for which minimum lease
commitments are as follows at February 28, 1995:
Year ending February 28
1996 $ 201,101
1997 195,085
1998 199,097
1999 205,500
2000 284,404
Total lease expense for the year ended February 28, 1995 and
1994 was approximately $216,000 and $218,000, respectively.
(7) Employee Retirement Plan
The Company sponsors a 401(k) savings plan which covers
employees with one year of service. Eligible employees may
contribute up to 4 percent of their compensation to the plan.
Employee contributions are matched 25 percent by the Company.
The Company may also elect to contribute an additional 12.5
percent of participants contribution. The expense of this
plan was approximately $24,200 and $21,700 in 1995 and 1994,
respectively.
<PAGE>
(8) Stockholders' Equity
During 1994, the Company entered into a licensing agreement
with Johns Hopkins University. The agreement gives the
Company the right to sell a HEPA filtration system which was
jointly developed and patented by the Company and Johns
Hopkins. Under the agreement the Company paid $5,000 cash
and issued 3,969 shares of common stock (valued at $2.57 per
share). In addition, the agreement provides for royalty
payments based on various percentages of the product's sales.
Royalty expense under the agreement for the year ended
February 28, 1995 and 1994 was $7,317 and $3,096,
respectively.
During 1995, the President of the Company purchased 3,890
shares of common stock of the Company for $9,997.
During 1995, the Company granted an employee an option to
purchase up to 8,000 shares of the Company's common stock at
$0.10 per share. These options are exercisable in increments
of 2,000 shares over a 4 year period. During 1995, the
Company recorded an expense of $19,760 in connection with
these options.
(9) Income Taxes
Income tax expense at February 28, consists of the following:
1995 1994
Current:
Federal $ 429,838 $ 246,255
State 80,930 40,977
510,768 287,232
Deferred:
Federal (36,150) (31,309)
State (8,618) (7,518)
(44,768) (38,827)
$ 466,000 $ 248,405
The actual income tax expense for 1995 differs from the
"expected" tax expense for the year (computed by applying the
U.S. federal corporate tax rate of 34 percent to earnings
before income taxes) primarily as a result of state income taxes.
Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. The significant portions of
the Company's deferred tax assets and liabilities at
February 28 are presented below:
1995 1994
Deferred tax assets:
Allowance for doubtful accounts $ 43,474 $ 34,214
Warranty provision 21,430 14,878
Accrued vacation costs 34,951 33,934
Other 13,503 -
Total deferred tax assets 113,358 83,026
<PAGE>
Deferred tax liabilities:
Tax depreciation in excess of amounts
recorded for book purposes 11,115 893
Intangible assets 12,769 30,546
Other - 6,881
Total deferred tax liabilities 23,884 38,320
Net deferred tax asset $ 89,474 $ 44,706
Based on the Company's historical and current pretax earnings,
management believes it is more likely than not that the
Company will realize the benefit of the temporary
differences.
<PAGE>
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<PAGE>
Unaudited interim Financial Statements of Envirco Corporation as required by
Item 7(a) of Form 8-K are included herewith as follows:
Unaudited Balance Sheet at June 30, 1995
Unaudited Statement of Operation, four months ended June 30, 1995
Unaudited Statement of Cash Flows, four months ended June 30, 1995
Unaudited Statement of Stockholders' Equity, four months ended
June 30, 1995
Unaudited Notes to Interim Financial Statements
<PAGE>
<TABLE>
Envirco Corporation
Balance Sheet (Unaudited)
June 30, 1995
<S> <C>
Assets
Current assets:
Cash $ 350
Accounts receivables, less allowance for doubtful
accounts of $118,062 2,271,961
Inventories 1,850,924
Prepaid expenses and other assets 278,968
Total current assets 4,402,203
Property and equipment 812,168
Accumulated depreciation (305,398)
506,770
Long-term assets:
Patents and licenses, net of accumulated
amortization of $211,347 613,762
Trademarks and trade names, net of accumulated
amortization of $26,389 73,611
Commitment fees, net of accumulated
amortization of $58,372 19,488
Organization costs, net of accumulated
amortization of $40,327 43,069
Total assets $5,658,903
Liabilities and stockholders' equity
Current liabilities:
Cash overdraft $ 301,453
Line of credit 677,640
Accounts payable and accrued liabilities 1,292,584
Current portion of long-term debt 265,917
Total current liabilities 2,537,594
Long-term debt, less current portion 1,186,301
Commitments and contingencies
Stockholders' equity:
Common stock, no par value - authorized 500,000 shares,
issued and outstanding shares 202,359 520,197
Retained earnings 1,414,811
Total stockholders' equity 1,935,008
Total liabilities and stockholders' equity $5,658,903
<FN>
See accompanying unaudited notes.
</TABLE>
<PAGE>
<TABLE>
Envirco Corporation
Statement of Operation
For the period from March 1, 1995 to June 30, 1995 (Unaudited)
<S> <C>
Net sales $4,688,787
Other income 11,300
4,700,087
Cost and expenses:
Cost of products sold 3,172,200
Selling, administrative and engineering 923,500
Interest 71,600
Operating income 4,167,300
Income before income taxes 532,787
Income tax expense (205,000)
Net income $ 327,787
<FN>
See accompanying unaudited notes.
</TABLE>
<PAGE>
<TABLE>
Envirco Corporation
Statement of Cash Flows
For the period from March 1, 1995 to June 30, 1995 (Unaudited)
<S> <C>
Cash flows from operating activities:
Net income $327,787
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 87,232
Changes in assets and liabiities:
Receivables 106,940
Inventories (262,668)
Prepaid expenses and other assets (49,043)
Accounts payable and other liabilities (450,564)
Net cash used in operating activities (240,316)
Cash flows from investing activities:
Purchases of long-term assets (2,627)
Purchases of machinery and equipment (38,494)
Net cash used in investing activities (41,121)
Cash flows from financing activities:
Increase in cash overdraft 97,739
Net advances under line of credit 267,366
Payments on long-term debt (83,668)
Net cash provided by financing activities 281,437
Net decrease in cash and temporary cash investments -
Cash and temporary cash investments at beginning of
the period 350
Cash and temporary cash investments at end of the period $ 350
Supplemental information:
Interest paid $ 71,513
Income taxes paid $205,449
<FN>
See accompanying unaudited notes.
</TABLE>
<PAGE>
<TABLE>
Envirco Corporation
Statement of Stockholders' Equity
For the Period from March 1, 1995 to June 30, 1995 (Unaudited)
<CAPTION>
Common Stock Common Stock Retained Total
Number of No Par Value Earnings Stockholders'
Shares Equity
<S> <C> <C> <C> <C>
Balance at
February 28, 1995 202,359 $520,197 $1,087,024 $1,607,221
Net income - - 327,787 327,787
Balance at
June 30, 1995 202,359 $520,197 $1,414,811 $1,935,008
<FN>
See accompanying unaudited notes.
</TABLE>
<PAGE>
Envirco Corporation
Notes to Interim Financial Statements (Unaudited)
June 30, 1995
1. Summary of Significant Accounting Policies
Basis of Presentation
The interim financial data is unaudited; however, in the opinion of the
Company, the interim data includes all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of the results for
the interim period. Operating results for the period from March 1, 1995 to
June 30, 1995 are not necessarily indicative of the results that may be
expected for the fiscal year ended February 28, 1996. For further
information refer to the audited financial statements and notes for the
fiscal year ended February 28, 1995 included elsewhere in this document.
Description of Business
Envirco Corporation (the Company ) is primarily engaged in the design,
development, manufacture, distribution and sale of ultra-clean air filtration
systems and components. The Company sells its products throughout the United
States and abroad. Prior to February 1993, the business of the Company was
operated as a division of Donaldson Company, Inc. In February of 1993,
management of the division caused the Company, through a leverage buy-out, to
purchase the operating assets of the division from Donaldson Company, Inc.
for a total consideration of $2,781,693.
Advertising Costs
On March 1, 1995, the Company adopted the provisions of the AICPA Accounting
Standards Executive Committee s Statement of Position 93-7 Reporting on
Advertising Costs ( SOP 93-7 ). In accordance with SOP 93-7, the Company has
chosen to expense all advertising costs as incurred. The Company s adoption
of SOP 93-7 had no effect on net income or retained earnings.
<PAGE>
Envirco Corporation
Notes to Interim Financial Statements (Unaudited) (continued)
2. Subsequent Events
In July 1995, the Company entered into a purchase commitment with a vendor to
purchase approximately $875,000 of raw material inventory. The Company's
obligation under this commitment is limited to the extent that the vendor can
resale the inventory at the purchase commitment price. The Company expects
to fulfill this commitment within the next year.
In connection with the sale of the Company on August 1, 1995 to Trion Inc.
( Trion ), as described further below, the convertible subordinated
debentures in the amount of $200,000 and related accrued interest were
converted into 20,791 shares of the Company s Common Stock and then sold to
Trion. In addition, in connection with the acquisition, Trion paid off the
Company s notes payable to the financial institution, the equipment purchase
loan, and the line of credit.
On July 25, 1995, the Company amended the stock option agreement for 8,000
shares of the Company s common stock with an employee in order to accelerate
the vesting of 4,000 of the options to July 1995. On August 1, 1995, the
holder of the option exercised the option for 4,000 shares of the Company s
common stock and simultaneously sold the shares to Trion as described further
below. In accordance with the original option agreement, upon a change in
control, all remaining options were cancelled.
On August 1, 1995, Trion acquired all the issued and outstanding shares
(including the shares referred to in the second and third paragraphs above)
of the Company s common stock for $6,227,174 (net of the purchase price paid
to the holders of the warrants described below). The final purchase price
may be adjusted based on the Company s working capital and funded
indebtedness as of July 31, 1995 versus the respective amounts as of February
28, 1995, as provided by the Stock Purchase Agreement.
On August 1, 1995, the holder of the stock purchase warrants (which provided
the right to purchase, in the aggregate, 69,862.5 shares of the Company s
common stock), sold such warrants to Trion for $1,796,850.
In connection with the acquisition of the Company by Trion, certain key
employees entered into employment and non-compete agreements ranging from
five months to seven years. Approximately $380,000 will be paid to these key
employees as an incentive to enter into these agreements.
<PAGE>
Pro Forma Financial Information as required by Item 7(b) of Form 8-K is included
herewith as follows:
UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL DATA
The following unaudited pro forma combined condensed financial data has been
prepared by management of Trion, Inc. ("Trion") and is presented to show the
impact on Trion's historical financial position and results of operations of the
acquisition of the Envirco Corporation ("Envirco"). For purposes of preparing
this data Trion has included the Envirco historical statements of operation for
the year ended December 31, 1994 and six months ended June 30, 1995 as restated
for a calendar year end. The Envirco historical audited financial statements
for the fiscal year ended February 28, 1995 are included elsewhere in this Form
10Q/A, Amendment No. 1 to the Registrant's Quarterly Report on Form 10-Q for the
six month period ended June 30, 1995.
The following unaudited pro forma combined condensed balance sheet reflects the
acquisition of Envirco, which was completed August 1, 1995 and accounted for as
a purchase transaction, as if this transaction had occurred on June 30, 1995.
The following unaudited pro forma combined condensed statements of income for
the year ended December 31, 1994 and the six month period ended June 30, 1995
give effect to the acquisition of Envirco, accounted for as a purchase, as if
this combination had taken place as of January 1, 1994.
The unaudited pro forma combined condensed financial data are not necessarily
indicative of what the financial position or results of operations actually
would have been if the transaction had occurred on the applicable dates
indicated. Moreover, they are not intended to be indicative of future results
of operations or financial position. The unaudited pro forma combined
condensed financial statements should be read in conjunction with the
historical consolidated financial statements, including the notes thereto, of
Trion and Envirco.
<PAGE>
<TABLE>
UNAUDITED PRO FORMA COMBINED CONDENSED
BALANCE SHEET AS OF JUNE 30, 1995
(in thousands)
<CAPTION>
Pro Forma
Trion(1) Envirco(2) Adjustments Pro Forma
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $3,954 $0 ($2,955) (3) $999
($76) (4)
Trade accounts
receivable, net 8,269 2,272 0 10,541
Inventories 5,595 1,851 0 7,446
Prepaid expenses and other
current assets 1,502 279 0 1,781
Total current assets 19,320 4,402 (3,031) 20,691
Property, plant and equipment:
Land 78 0 0 78
Buildings 5,058 0 0 5,058
Machinery and equipment 10,933 812 (305) (5) 11,440
Allowance for depreciation (10,145) (305) 305 (5) (10,145)
5,924 507 0 6,431
Intangibles and other assets 0 750 6,701 (6) 7,451
Total assets $25,244 $5,659 $3,670 $34,573
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and
accrued expenses 3,751 1,293 432 (7) 5,476
Line of credit 0 979 (979) (8) 0
Current portion of
long-term debt 360 266 (266) (8) 360
Total current liabilities 4,111 2,538 (813) 5,836
Long-term liabilities:
Long term debt,
less current 2,840 1,186 (200) (9) 10,140
(986) (8)
6,800 (10)
500 (11)
Accrued management
restructuring expenses 219 0 0 219
Other accrued long term
liabilities 0 0 304 (4) 304
Deferred income taxes 278 0 0 278
3,337 1,186 6,418 10,941
Total liabilities 7,448 3,724 5,605 16,777
Shareholders' equity:
Common stock 3,212 520 (520) (12) 3,212
200 (9)
(200) (13)
Additional paid-in capital 1,421 0 1,421
Retained earnings 12,965 1,415 (1,415) (12) 12,965
Foreign currency translation
adjustment - unrealized 198 0 198
Total shareholders' equity 17,796 1,935 (1,935) 17,796
$25,244 $5,659 $3,670 $34,573
<FN>
See accompanying notes.
</TABLE>
<PAGE>
Notes to Unaudited Pro Forma Combined
Condensed Balance Sheet
(1) Represents the historical balance sheet of Trion as of June 30, 1995.
(2) Represents the historical balance sheet for Envirco as of June 30,
1995. The acquisition of Envirco has been accounted for as a purchase.
(3) Represents the cash portion of the total purchase price of $8,455,524
plus the cash portion of the payoff of Envirco's line of credit, cash
overdraft, and notes payable.
(4) On August 1, 1995, Trion entered into employment and non-compete
agreements with certain key officers of Envirco. As an incentive to
enter into these agreements, Trion agreed to pay these officers total
cash consideration of $380,000, of which $76,000 would be paid at
closing and the remaining $304,000 over the term of the respective
agreements.
(5) To adjust the basis of the acquired property and equipment of Envirco.
There were no other pro forma adjustments to the amounts reflected in
the historical financial statements of Envirco as management believes
that the historical net book value of Envirco fixed assets reflects
their estimated fair market value.
(6) To record the excess cost over the net assets acquired as goodwill in
the amount of approximately $5,889,000, along with $432,000 of
acquisition costs and $380,000 of non-compete and employment agreement
costs. See also Notes (3), (4), (5), (7), (8), (9), (10), and (11).
(7) To record as payable costs (as currently estimated by management to be
$432,000) directly associated with the acquisition of Envirco.
(8) To record the repayment by Trion of Envirco's line of credit, cash
overdraft account, and all notes payable on August 1, 1995.
(9) To record the conversion of the $200,000 convertible subordinated
debentures into 20,791 shares of Envirco's common stock prior to the
acquisition of Envirco by Trion.
(10) To record the borrowings obtained by Trion under its new credit
facility entered into in contemplation of the acquisition of Envirco.
(11) To record $500,000 of the purchase price as a long term note as amount
is held in escrow until October 1, 1997.
(12) To eliminate the historical shareholders' equity amounts of Envirco.
(13) To eliminate the amounts recorded to shareholders' equity as the result
of the conversion of the $200,000 convertible subordinated debentures.
<PAGE>
<TABLE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
SIX MONTH PERIOD ENDED JUNE 30, 1995
(in thousands, except per share data)
<CAPTION>
Pro Forma
Trion(1) Envirco(2) Adjustments Pro Forma
<S> <C> <C> <C> <C> <C>
Net sales $17,303 $6,806 $24,109
Other income 124 11 0 135
17,427 6,817 0 24,244
Cost and expenses:
Cost of products sold 10,889 4,688 0 15,577
Selling, administrative
and engineering 4,822 1,435 38 (3) 6,295
Interest 98 102 (102) (4) 368
255 (5)
15 (6)
Amortization 0 0 158 (7) 217
59 (8)
15,809 6,225 423 22,457
Income before income taxes 1,618 592 (423) 1,787
Income taxes 599 230 (99) (9) 730
Net income (loss) $1,019 $362 ($324) $1,057
Weighted average
shares outstanding 6,418 6,418
Net income per common share $0.16 $0.16
<FN>
See accompanying notes.
</TABLE>
<PAGE>
Notes to Unaudited Pro Forma Combined
Condensed Statement of Income
Six Month Period Ended June 30, 1995
(1) Represents the historical results of operations of Trion for the
six month period ended June 30, 1995. The results of operations
of Trion do not include the results of operations for Envirco as
the acquisition did not take place until August 1, 1995.
(2) Represents the historical results of operations of Envirco for
the six month period ended June 30, 1995. The acquisition of
Envirco has been accounted for as a purchase.
(3) Adjustment to interest income representing the decrease in the
outstanding cash balance as a result of the cash payment to the
shareholders of Envirco.
(4) Adjustment to eliminate interest expense on debt paid off at
acquisition.
(5) Adjustment to record additional interest expense that would have
been incurred had the debt incurred to finance the acquisition of
Envirco been outstanding as of January 1, 1994.
(6) Adjustment to record additional interest expense that would have
been incurred had the $500,000 note placed into escrow been
outstanding as of January 1, 1994.
(7) Adjustment to reflect amortization of goodwill representing the
additional amortization over a 20 year period arising from the
excess of cost over fair value of net assets of Envirco.
(8) Adjustment to reflect amortization of employment and non-compete
agreement incentives over the term of the respective agreements.
(9) Adjustment to reflect the tax effect of the pro forma adjustments
at the combined company's effective tax rate.
<PAGE>
<TABLE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994
(in thousands, except per share data)
<CAPTION>
Pro Forma
Trion(1) Envirco(2) Adjustments Pro Forma
<S> <C> <C> <C> <C> <C>
Net sales $34,077 $11,543 $45,620
Other income 105 31 0 136
34,182 11,574 0 45,756
Cost and expenses:
Cost of products sold 21,211 7,674 0 28,885
Selling, administrative
and engineering 10,009 2,457 76 (3) 12,542
Interest 171 207 (207) (4) 711
510 (5)
30 (6)
Amortization 0 0 316 (7) 434
118 (8)
31,391 10,338 843 42,572
Income before income taxes 2,791 1,236 (843) 3,184
Income taxes 1,012 489 (196) (9) 1,305
Net income (loss) $1,779 $747 ($647) $1,879
Weighted average
shares outstanding 6,381 6,381
Net income per common share $0.28 $0.29
<FN>
See accompanying notes.
</TABLE>
<PAGE>
Notes to Unaudited Pro Forma Combined Condensed Statement of Income
Year ended December 31, 1994
(1) Represents the historical results of operations of Trion for the
year ended December 31, 1994. The results of operations of Trion
do not include the results of operations for Envirco as the
acquisition did not take place until August 1, 1995.
(2) Represents the historical results of operations of Envirco for
the year ended December 31, 1994. The acquisition of Envirco has
been accounted for as a purchase.
(3) Adjustment to interest income representing the decrease in the
outstanding cash balance as a result of the cash payment to the
shareholders of Envirco.
(4) Adjustment to eliminate interest expense on debt paid off at
acquisition.
(5) Adjustment to record additional interest expense that would have
been incurred had the debt incurred to finance the acquisition of
Envirco been outstanding as of January 1, 1994.
(6) Adjustment to record additional interest expense that would have
been incurred had the $500,000 note placed into escrow been
outstanding as of January 1, 1994.
(7) Adjustment to reflect amortization of goodwill representing the
additional amortization over a 20 year period arising from the
excess of cost over fair value of net assets of Envirco.
(8) Adjustment to reflect amortization of employment and non-compete
agreement incentives over the term of the respective agreements.
(9) Adjustment to reflect the tax effect of the pro forma adjustments
at the combined company's effective tax rate.
<PAGE>
Item 6(a). Exhibits
Item 6(a) of the 10-Q is hereby amended and restated in its entirety:
2.1 Stock purchase agreement for the sale of the capital stock of Envirco
Corporation dated July 28, 1995.*
23.1 Consent of Independent Auditors.
27 Financial Data Schedule.
99.1 News release announcing acquisition of Envirco Corporation.*
* - Previously filed.
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.
TRION, INC.
(Registrant)
Date: October 2, 1995 /s/Steven L. Schneider
President and Chief Executive Officer
Date: October 2, 1995 /s/Calvin J. Monsma
Vice President and Chief Financial
Officer
<PAGE>
EXHIBIT 23.1
CONSENT OF KPMG PEAT MARWICK LLP
The Board of Directors
Envirco Corporation:
We consent to the inclusion of our report dated April 13, 1995, with respect
to the balance sheets of Envirco Corporation as of February 28, 1995 and 1994,
and the related statements of operations, shareholders' equity, and cash flows
for the two years then ended, which report appears in the Form 10-Q/A,
Amendment No. 1 to Trion, Inc.'s Quarterly Report on Form 10-Q for the six
month period ended June 30, 1995.
KPMG Peat Marwick LLP
Albuquerque, New Mexico
September 29, 1995
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 3,954,000
<SECURITIES> 0
<RECEIVABLES> 8,444,000
<ALLOWANCES> 175,000
<INVENTORY> 5,595,000
<CURRENT-ASSETS> 19,320,000
<PP&E> 16,069,000
<DEPRECIATION> 10,145,000
<TOTAL-ASSETS> 25,244,000
<CURRENT-LIABILITIES> 4,111,000
<BONDS> 3,200,000
<COMMON> 3,212,000
0
0
<OTHER-SE> 14,584,000
<TOTAL-LIABILITY-AND-EQUITY> 25,244,000
<SALES> 17,303,000
<TOTAL-REVENUES> 17,303,000
<CGS> 10,889,000
<TOTAL-COSTS> 15,711,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 38,000
<INTEREST-EXPENSE> 98,000
<INCOME-PRETAX> 1,618,000
<INCOME-TAX> 599,000
<INCOME-CONTINUING> 1,019,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,019,000
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
