SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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): July 12, 1999
ISOLYSER COMPANY, INC.
(Exact Name of Registrant as Specified in Its Charter)
Georgia
(State or Other Jurisdiction of Incorporation)
0-24866 58-1746149
File Number) (I.R.S. Employer Identification No.)
4320 International Boulevard, Norcross, Georgia 30093
Address of Principal Executive Offices (Zip Code)
(770) 806-9898
(Registrant's Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 12, 1999, Isolyser Company, Inc. ("Isolyser") and its wholly
owned subsidiary, MedSurg Industries, Inc. ("MedSurg"), sold to Allegiance
Healthcare Corporation ("Allegiance") substantially all of their assets used
primarily in the business (the "Business") of assembling, packaging, marketing
and selling procedure kits and trays, and Isolyser granted to Allegiance a
worldwide exclusive license (the "License") to Isolyser's proprietary
technologies to make, use and sell products made from material (the "Material")
which can be dissolved and disposed of through sanitary sewer systems for
healthcare applications. Allegiance is not an "affiliate" of Isolyser within the
meanings of the Securities Act of 1933, as amended. The purchase price payable
for such assets and license consisted of approximately $31.3 million in cash,
the assumption by Allegiance of certain liabilities of Isolyser and MedSurg
relating to the Business, and Allegiance's agreement that Isolyser would be the
sole supplier during the term of the License of Material to Allegiance which
would at least include a certain minimum quantity of fabric to be purchased by
Allegiance from Isolyser. The purchase price was negotiated at arms' length.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired:
Not applicable.
(b) Pro Forma Financial Information:
The following unaudited pro forma financial information
included on pages PF-1 to PF-5 is filed as a part of this current report:
Item
- ----
Introduction .............................................................. PF-1
Unaudited Pro Forma Condensed
Consolidated Balance Sheet
as of June 30, 1999 .................................................. PF-2
Unaudited Pro Forma Condensed
Consolidated Statement of Operations
for the Year Ended December 31, 1998 ................................. PF-3
Unaudited Pro Forma Condensed
Consolidated Statement of Operations
for the Six Months Ended June 30, 1999 ............................... PF-4
(c) Exhibits:
2.1* Asset Purchase Agreement dated as of May 25, 1999, among
Allegiance, Isolyser and MedSurg
2.2* First Amendment to Asset Purchase Agreement dated as of July
12, 1999, among Allegiance, Isolyser and MedSurg
2.3* Supply and License Agreement dated as of July 12, 1999,
between Isolyser and Allegiance
2.4* Contract Manufacturing Agreement dated as of July 12, 1999,
among Allegiance, Isolyser and MedSurg
2.5* Escrow Agreement dated as of July 12, 1999 among Allegiance,
First National Bank of Chicago and Isolyser
99.1*Press Release captioned "Isolyser Announces Completion of
Its Sale of MedSurg Industries and License of OREX
Technology to Allegiance" dated July 13, 1999
- -----------------------
* Previously filed as a part of the Current Report on Form 8-K filed with
the SEC on July 27, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has caused this report to be duly signed on its behalf by the
undersigned hereunto duly authorized.
ISOLYSER COMPANY, INC.
By: s/ Peter A. Schmitt
Peter A. Schmitt, Executive Vice President
and Chief Financial Officer
Dated: September 13, 1999
PF-4
Pro Forma Unaudited Condensed Consolidated Financial Statements
The following unaudited pro forma condensed consolidated balance sheet of
the Company as of June 30, 1999 gives effect to the disposition by the Company
of all of the capital stock of White Knight Healthcare, Inc. (the "White Knight
Divestiture"), formerly a wholly-owned subsidiary of the Company, as if the
White Knight Divestiture had occurred on June 30, 1999. The following unaudited
pro forma condensed consolidated statements of operations of the Company for the
year ended December 31, 1998, and the six months ended June 30, 1999, give
effect to the White Knight Divestiture and the divestiture of substantially all
of the assets of the Company and its wholly-owned subsidiary, MedSurg
Industries, Inc., used primarily in the business of manufacturing and selling
custom procedure trays (collectively, the "Divestitures") as if such
Divestitures had occurred on January 1, 1998. The unaudited pro forma condensed
consolidated statement of operations for the year ended December 31, 1998,
includes the operating results of the Company's White Knight Industrial,
SafeWaste, Arden, Abbeville, Charlotte and Struble & Moffit businesses only to
their respective dates of divestiture by the Company during 1998. The pro forma
financial information should be read in conjunction with the historical
consolidated financial statements of the Company and the related notes thereto
appearing in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998 and quarterly report on Form 10-Q for the period ended June
30, 1999 previously filed with the Securities and Exchange Commission. Certain
prior period amounts set forth in the pro forma combined financial information
has been adjusted for comparative purposes. The pro forma financial information
is not necessarily indicative of the results that would have been reported had
such divestitures occurred at the dates specified, nor is it necessarily
indicative of future results.
ISOLYSER COMPANY, INC.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
June 30, 1999
(in thousands)
Pro Forma
Adjustments for
ASSETS Actual Disposition Pro Forma
-------------------- ------------------- -------------------
Current assets
Cash and cash equivalents $ 4,341 $ 14,781 (1) $ 19,122
Accounts receivable, net 14,613 3,150 17,763
Inventories, net 22,588 - 22,588
Prepaid expenses and other assets 1,506 - 1,506
Net Assets held for sale 16,149 -
-------------------- ------------------- -------------------
Total current assets 59,197 1,782 60,979
-------------------- ------------------- -------------------
Property, plant and equipment 21,319 - 21,319
Less accumulated depreciation (12,457) - (12,457)
-------------------- ------------------- -------------------
Property, plant, and equipment, net 8,862 - 8,862
-------------------- ------------------- -------------------
Intangibles and other assets, net 27,410 - 27,410
-------------------- ------------------- -------------------
$ 95,469 $ 1,782 $ 97,251
==================== =================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current installments of long term debt $ 941 $ - $ 941
Accounts payable 3,023 - 3,023
Deferred licensing fee - 10,500 (4) 10,500
Bank overdraft 485 - 485
Accrued expenses 3,584 4,130 (5) 7,714
-------------------- ------------------- -------------------
Total current liabilities 8,033 14,630 22,663
-------------------- ------------------- -------------------
Long term debt, excluding current installments 17,134 (13,369) (6) 3,765
Other liabilities - - -
-------------------- ------------------- -------------------
Total liabilities 25,167 1,261 26,428
-------------------- ------------------- -------------------
Shareholders' equity
Common stock 40 - 40
Additional paid in capital 204,359 - 204,359
Accumulated Deficit (133,363) 521 (7) (132,842)
Cumulative translation adjustment (60) - (60)
Unearned shares restricted to employee stock
ownership plan (240) - (240)
-------------------- ------------------- -------------------
70,736 521 71,257
Treasury shares, at cost (434) - (434)
-------------------- ------------------- -------------------
Total shareholders' equity 70,302 521 70,823
-------------------- ------------------- -------------------
$ 95,469 $ 1,782 $ 97,251
==================== =================== ===================
See accompanying notes.
ISOLYSER COMPANY, INC.
Unaudited Condensed Consolidated Statement of Operations
(in thousands, except per share data)
ACTUAL PRO FORMA PRO FORMA
YEAR ENDED ADJUSTMENTS FOR YEAR ENDED
DECEMBER 31, 1998 DISPOSITION (8) DECEMBER 31, 1998
------------------------- -------------------- -----------------------
Net sales $ 147,643 $ 89,603 $ 58,040
Cost of goods sold 109,936 71,602 38,334
------------------------- -------------------- -----------------------
Gross profit 37,707 18,001 19,706
Operating expenses:
Selling, general and
administrative 40,507 19,798 20,709
Research and development 3,582 - 3,582
Impairment loss 7,445 1,400 6,045
Amortization of intangibles 2,052 773 1,279
------------------------- -------------------- -----------------------
Total operating expenses 53,586 21,971 31,615
------------------------- -------------------- -----------------------
Loss from operations (15,879) (3,970) (11,909)
Interest income 274 82 192
Interest expense (3,507) (3,108)(9) (399)
Income from joint venture 11 - 11
------------------------- -------------------- -----------------------
Loss before income tax provision,
and extraordinary item (19,101) (6,996) (12,105)
Income tax provision 540 49 491
------------------------- -------------------- -----------------------
Loss before extraordinary item $ (19,641) $ (7,045) $ (12,596)
------------------------- -------------------- -----------------------
EXTRAORDINARY ITEM Gain from $ 1,404 $ - $ 1,404
extinguishment of debt, net of tax $0
------------------------- -------------------- -----------------------
Net loss $ (18,237) $ (7,045) $ (11,192)
------------------------- -------------------- -----------------------
Other comprehensive income
Foreign currency translation gain $ 29 $ - $ 29
------------------------- -------------------- -----------------------
Comprehensive loss $ (18,208) $ (7,045) $ (11,163)
========================= ==================== =======================
Net loss per common share- Basic and
Diluted:
Loss before extraordinary item $ (0.49) $ (0.18) $ (0.32)
Extraordinary item 0.03 - 0.03
------------------------- -------------------- -----------------------
Net loss $ (0.46) $ (0.18) $ (0.28)
========================= ==================== =======================
Weighted average number of common
shares outstanding- basic and
diluted 39,655 39,655 39,655
========================= ==================== =======================
See accompanying notes.
ISOLYSER COMPANY, INC.
Unaudited Condensed Consolidated Statement of Operations
(in thousands, except per share data)
ACTUAL PRO FORMA PRO FORMA
SIX MONTHS ENDED ADJUSTMENTS FOR SIX MONTHS ENDED
JUNE 30, 1999 DISPOSITION (8) JUNE 30, 1999
---------------------- ------------------- ----------------------
Net sales $ 67,020 $ 39,277 $ 27,743
Cost of goods sold
43,223 30,999 12,224
---------------------- ------------------- ----------------------
Gross profit 23,797 8,278 15,519
Operating expenses:
Selling, general and administration 18,133 7,607 10,526
Research and development 1,043 - 1,043
Impairment loss 1,590 1,590 -
Amortization of intangibles 897 297 600
---------------------- ------------------- ----------------------
Total operating expenses 21,663 9,494 12,169
---------------------- ------------------- ----------------------
Loss from operations 2,134 (1,216) 3,350
Interest income 82 42 40
Interest expense (1,212) (1,171)(9) (41)
---------------------- ------------------- ----------------------
Income before income tax expense 1,004 (2,345) 3,349
Income tax provision 387 13 374
---------------------- ------------------- ----------------------
Net income $ 617 $ (2,358) $ 2,975
---------------------- ------------------- ----------------------
Other comprehensive income
Foreign currency translation gain $ 15 $ - $ 15
---------------------- ------------------- ----------------------
Comprehensive income $ 632 $ (2,358) $ 2,990
====================== =================== ======================
Net income per common share:
Basic $ 0.02 $ (0.06) $ 0.07
====================== =================== ======================
Diluted $ 0.02 $ (0.06) $ 0.07
====================== =================== ======================
Weighted average number of common shares
outstanding
Basic 40,040 40,040 40,040
====================== =================== ======================
Diluted 40,555 40,555 40,555
====================== =================== ======================
See accompanying notes.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Excess cash available after repayment of outstanding borrowings under the
Company's credit agreement.
2. To record the escrow receivable from the disposition of the net assets of
MedSurg Industries, Inc.
3. To eliminate net assets of MedSurg Industries, Inc. acquired by Allegiance
Healthcare Corporation.
4. To record the estimated deferred license revenue in connection with the
disposition of MedSurg Industries, Inc. and a license and supply agreement
entered into with Allegiance Healthcare Corporation.
5. To record restructuring and other charges associated with the disposition
of MedSurg Industries, Inc. These charges include compensation and
severance expenses of $3,080,000, state tax of $750,000 and other charges
of $300,000. Such charges were not considered in the pro forma condensed
income statements.
6. Assumes a portion of the net proceeds from the disposition of MedSurg
Industries, Inc. were used to repay outstanding borrowing under the
Company's credit agreement.
7. Estimated gain from the disposition of MedSurg Industries, Inc. after
taking into account restructuring and other charges as noted in 5. above.
8. To eliminate operating results of the disposed assets. The unaudited pro
forma condensed consolidated statement of operations for the year ended
December 31, 1998, includes the operating results of the Company's White
Knight Industrial, SafeWaste, Arden, Abbeville, Charlotte and Struble &
Moffit businesses only to their respective dates of divestiture by the
Company during 1998.
9. Reflects a reduction of interest expense as a result of the repayment of
outstanding borrowings under the Company's credit agreement.