SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
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 1, 1999
DIANON Systems, Inc.
(Exact name of registrant as specified in its charter)
Delaware 000-19392 06-1128081
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(State or other (Commission File (IRS Employer
jurisdiction
of incorporation) Number) Identification No.)
200 Watson Boulevard, Stratford, Connecticut 06615
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 381-4000
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(Former name or former address, if changed since last report.)
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Item 2. Acquisition or Disposition of Assets.
On May 1, 1999 (the "Effective Date"), pursuant to an Asset Purchase
Agreement dated as of April 7, 1999 among DIANON Systems, Inc. (the "Company"),
Kyto Meridien Diagnostics, L.L.C. ("KMD"), Kyto Diagnostics, L.P., ("Kyto"),
Meridian Diagnostics Labs, Inc., A. Bruce Shapiro and Ralph M. Richart, M.D.
(the "Asset Purchase Agreement"), the Company acquired from KMD all of the
assets of KMD (except certain excluded assets) related to KMD's business of
owning and operating laboratories that provide anatomic, pathology, surgical
pathology and clinical laboratory testing services to patients, physicians,
hospitals, clinics, managed care organizations and other health care providers
(the "Business"). On the Effective Date, the Company also assumed certain
liabilities of KMD under certain equipment leases and other contracts related to
the Business together with certain employee related liabilities. The purchase
price consisted of (i) cash payments and transaction costs of $10,500,000 and
$200,000, respectively (ii) 300,000 shares of the Company's common voting stock
valued at $2,465,625 (iii) certain liabilities assumed and (iv) within 45 days
of the Closing Date, an amount equal to the Business's accounts receivable
balance (adjusted for non-current accounts) existing on the Closing Date. The
amount of the purchase price was determined through arms' length negotiations
between the Company and KMD. The Company used working capital and its line of
credit facility from First Union National Bank to fund the cash component of the
purchase price. The acquisition will be accounted for under the purchase method.
In connection with the transaction, the Company also entered into a
registration rights agreement with KMD pursuant to which the Company granted KMD
certain "piggyback" registration rights in respect of the shares of common stock
issued to KMD as part of the Purchase Price.
The Company has also entered into certain employment agreements with
certain employees of KMD. These agreements are attached hereto and incorporated
by reference.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
Included as an exhibit are the audited financial statements of KMD for the
year ended December 31, 1998.
(b) Pro forma financial information.
The following pro forma financial statements give effect for the purchase and
are presented for illustrative purposes only. These pro forma financial
statements are not necessarily indicative of the operating results and financial
position that might have been achieved had the purchase occurred as of an
earlier date, nor are they necessarily indicative of operating results and
financial position which may occur in the future.
A pro forma condensed balance sheet is provided as of December 31, 1998
giving effect to the purchase as though it had been consummated on that date. A
pro forma condensed statement
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of operations is provided for the year ended December 31, 1998 giving effect to
the purchase as though it had occurred at the beginning of the year.
The historical condensed statement of operations for the year ended December
31, 1998 is derived from the historical consolidated financial statements of
DIANON Systems, Inc. and should be read in conjunction with the 1998 Annual
Report on Form 10-K.
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DIANON Systems, Inc.
Pro Forma Condensed Balance Sheet
December 31, 1998
Pro Forma (unaudited)
---------------------------
Historical Acquisition
Actual of KMD Adjusted
------ ------ --------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $12,126,076 $(4,700,00(a) $
7,426,076
Accounts receivable, net of 14,403,878 14,403,878
allowances
Other current assets 3,036,342 123,000(a) 3,159,342
---------- ---------- -----------
Total current assets 29,566,296 (4,577,000) 24,989,296
PROPERTY AND EQUIPMENT, net 5,534,485 400,000(a) 5,934,485
INTANGIBLE ASSETS, net of 377,751 12,972,625(a) 13,350,376
accumulated amortization
OTHER NONCURRENT ASSETS 1,224,583 1,224,583
========== ========== ===========
TOTAL ASSETS $36,703,115 $8,795,625 $45,498,740
========== ========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
BANK LOANS - $6,000,000(a) $6,000,000
OTHER CURRENT LIABILITIES $5,239,376 330,000(b) 5,569,376
---------- ---------- -----------
Total current liabilities 5,239,376 6,330,000 11,569,376
LONG-TERM PORTION OF CAPITALIZED 80,675 80,675
LEASE OBLIGATIONS
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Total liabilities 5,320,051 6,330,000 11,650,051
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STOCKHOLDERS' EQUITY
Common stock, par value $.01 68,088 780 (a) 68,868
Additional paid-in capital 27,398,120 683,991 (a) 28,082,111
Retained earnings 5,697,710 5,697,710
Common stock held in treasury, at (1,780,854) 1,780,854 (a) -
cost ---------- ---------- -----------
Total stockholders' equity 31,383,064 2,465,625 33,848,689
---------- ---------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' $36,703,115 $8,795,625 $45,498,740
EQUITY ========== ========== ===========
See accompanying notes to pro forma financial statements
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DIANON Systems, Inc.
Pro Forma Condensed Statement of Operations
December 31, 1998
Pro Forma (unaudited)
----------------------------------------
Historical Acquisition
Actual of KMD Adjustments Adjusted
------ ------ ----------- --------
NET REVENUES $62,181,503 $14,631,433 $76,812,936
COST OF SALES 35,670,153 7,035,159 42,705,312
---------- ----------- ---------- ----------
GROSS PROFIT 26,511,350 7,596,274 34,107,624
SELLING, GENERAL AND ADMINISTRATIVE 21,464,737 6,318,288 $783,754 (c)28,566,779
EXPENSES
RESEARCH AND DEVELOPMENT EXPENSES 528,478 - - 528,478
---------- ----------- ---------- ----------
INCOME FROM OPERATIONS 4,518,135 1,277,986 (783,754) (c)5,012,367
INTEREST INCOME, NET 682,138 5,330 (595,000) (c) 92,468
---------- ----------- ---------- ----------
INCOME BEFORE PROVISION FOR INCOME 5,200,273 1,283,316 (1,378,754) 5,104,835
TAXES
PROVISION FOR INCOME TAXES 2,245,943 - (41,038) (c)2,204,905
---------- ----------- ---------- ----------
NET INCOME $2,954,330 $1,283,316 $(1,337,716) $2,899,930
========== =========== ========== ==========
EARNINGS PER SHARE
BASIC $0.44 $0.42
DILUTED $0.43 $0.40
WEIGHTED AVERAGE SHARES OUTSTANDING
BASIC 6,677,524 300,000 6,977,524
DILUTED 6,902,080 300,000 7,202,080
See accompanying notes to pro forma financial statements
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DIANON SYSTEMS, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
Note 1. BASIS OF PRESENTATION
The pro forma financial statements are presented for illustrative purposes
only, giving effect for the purchase of the operations of Kyto Meridien
Diagnostics, L.L.C. (KMD).
The pro forma condensed balance sheet as of December 31, 1998 includes the
impact of all transactions, whether of a recurring or nonrecurring nature, that
can be reasonably estimated and should be reflected as of that date.
Note 2. PRO FORMA ADJUSTMENTS
Pro forma adjustments include amounts as follows:
(a) The purchase of inventory, prepaid expenses, plant and equipment,
customer lists and other intangible assets through the payment of cash
portion of purchase price and issuance of 300,000 shares of common
stock, 222,019 of which were from treasury stock. The cash portion of
the purchase price, exclusive of transaction costs of $200,000, was
financed through the draw down of $6,000,000 from the company's line
of credit and the use of $4,500,000 of the company's cash.
(b) Accrual of employee related benefit costs.
(c) Amortization of intangible assets, loss of interest income and
interest expense on acquisition debt, all net of related tax effects.
Includes a provision for income taxes for acquired company which had
been organized as a partnership and as such, did not reflect any
provision for income taxes in its financial statements.
The pro forma financial statements do not reflect any savings or
efficiencies, if any, which will arise upon the integration of KMD's general and
administrative functions into DIANON.
(c) Exhibits.
10.1 Asset Purchase Agreement dated as of April 7, 1999 among DIANON
Systems, Inc., Kyto Meridien Diagnostics, L.L.C., Kyto Diagnostics, L.P.,
Meridian Diagnostics Labs, Inc., A. Bruce Shapiro and Ralph M. Richart, M.D.
10.2 Registration Rights Agreement dated as of May 1, 1999 between DIANON
Systems, Inc. and Kyto Meridien Diagnostics, L.L.C.
10.3 Consulting Agreement dated May 1, 1999 by and between DIANON Systems,
Inc. and A. Bruce Shapiro
10.4 Employment Agreement dated May 1, 1999 by and between DIANON Systems,
Inc. and Ralph M. Richart, M.D.
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10.5 Employment Agreement dated May 1, 1999 by and between DIANON Systems,
Inc. and Beth Phillips
10.6 Employment Agreement dated May 1, 1999 by and between DIANON Systems,
Inc. and Dana Shapiro
23 Auditors consent
99.1 Press Release
99.2 KMD financial statements for the year ending December 31, 1998
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 hereunto duly authorized.
DIANON Systems, Inc.
May 4, 1999 /s/ DAVID R. SCHREIBER
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Date David R. Schreiber
Senior Vice President, Finance and
Chief Financial Officer
(Principal Financial and Accounting Officer)
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