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: March 21, 1996
DEL GLOBAL TECHNOLOGIES CORP.
(Exact name of registrant as specified in its charter)
1-10512
(Commission File Number)
13-1784308
(IRS Employer Identification Number)
New York
(State of Incorporation)
1 Commerce Park, Valhalla, New York 10595
(Address of principal executive offices)
914-686-3600
(Registrant's Telephone Number, including area code)
DEL ELECTRONICS CORP.
(Former name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets.
The Registrant and a wholly-owned subsidiary of the Registrant,
Gendex-Del Medical Imaging Corp., a Delaware corporation ("Gendex-Del"),
acquired certain selected assets of the Gendex Medical Division of Dentsply
International Inc., a Delaware corporation ("Dentsply"), in accordance with the
terms and conditions of an asset purchase agreement (the "Asset Purchase
Agreement"), dated as of March 6, 1996, by and among the Registrant, Gendex-Del
and Dentsply.
The consideration received by Dentsply at the Closing on March 6, 1996
in connection with the Asset Purchase Agreement, the amount of which was arrived
at after arms length negotiation among unrelated parties, consisted of: (i)
$5,700,000 in cash and (ii) $1,800,000 payable pursuant to the terms and
conditions of a non-negotiable subordinated promissory note with a term of seven
years. The parties agreed that in the event the EBIT of Gendex-Del exceeds
$2,000,000 in either of the first two (2) twelve month periods immediately
following the Closing, Gendex-Del will pay Dentsply, as contingent
consideration, the additional sum of $1,000,000.
The source of funds for the acquisition of the Gendex Medical Division
of Dentsply by the Registrant was a drawdown from its revolving credit facility
with The Chase Manhattan Bank, N.A. (the "Bank"). In connection with such
acquisition the Registrant entered into an amended and restated credit agreement
with the Bank and granted the Bank a warrant to purchase 17,000 shares of the
Registrant's common stock at an exercise price of $7.00 per share.
In connection with the acquisition, Gendex-Del entered into a supply
agreement ("Supply Agreement") with Dentsply for certain components and parts
used in the manufacture of medical x-ray equipment and systems. Dentsply also
entered into a non-compete agreement with the Registrant and Gendex-Del.
At the Closing, Dentsply assigned its lease to Gendex-Del (the "Lease")
of the premises previously occupied by Dentsply at 11550 West King Street,
Franklin Park, Illinois for a term expiring on January 31, 1998 to Gendex-Del.
The fixed minimum rental payments due under the Lease are approximately $15,200
per month plus all utilities and increases in real estate taxes. Gendex-Del has
an option to renew the Lease for successive periods of two and three years,
respectively, at a rental of approximately $16,000 and $17,000 per month,
respectively.
The Registrant has unconditionally guaranteed the obligations of
Gendex-Del under the Asset Purchase Agreement and the Lease.
The business conducted by the Gendex Medical Division of Dentsply is
the design, manufacture, repair, marketing, distribution and sale of medical
imaging devices and related components, including equipment for veterinary and
chiropractic uses. The Registrant intends to continue to use the plant and
equipment in substantially the same manner as they were used prior to the
acquisition.
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Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
1. Independent Auditors' Report
2. Statement of Net Assets to be Acquired - December 31, 1995
3. Statements of Revenues and Expenses For the Years Ended
December 31, 1995 and 1994
4. Notes to Financial Statements For the Years Ended December 31,
1995 and 1994
(b) Pro Forma Financial Information. It is impracticable to provide the
required pro forma financial information of the Gendex Medical Division
of Dentsply at the present date. The required pro forma financial
information shall be filed no later than May 17, 1996.
(c) Exhibits.
Exhibit Number Description
2.1 Certificate of Amendment of
Certificate of Incorporation
2.2 Asset Purchase Agreement
2.3 Non-Compete Agreement
2.4 Lease, as amended
2.5 Supply Agreement
2.6 Amended and Restated Credit
Agreement
4.1 Additional Warrant Agreement and Warrant
The undersigned Registrant hereby agrees to furnish supplementally to
the Commission a copy of any omitted schedule to the Asset Purchase Agreement
upon request.
2
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.
DEL GLOBAL TECHNOLOGIES CORP.
By: /s/Leonard A. Trugman
_____________________________
Dated: March 20, 1996 Leonard A. Trugman, President,
Chairman and Chief Executive Officer
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Gendex Medical Division
of
DENTSPLY International Inc.
Financial Statements
For the years ended December 31, 1995 and 1994
(With Independent Auditors' Report Thereon)
Independent Auditors' Report
The Board of Directors and Stockholders
DENTSPLY International Inc.
We have audited the accompanying statement of net assets to be acquired as of
December 31, 1995 and the statements of revenues and expenses for the years
ended December 31, 1995 and 1994 of the Gendex Medical Division of DENTSPLY
International Inc. (DENTSPLY). These financial statements are the responsibility
of DENTSPLY'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.
As discussed in notes 1(a) and 7 to the financial statements, DENTSPLY
International Inc. has entered into an Agreement in Principle to sell all
inventory, fixed assets and certain intangible assets of the Gendex Medical
Division to a third party on or about February 28, 1996.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets to be acquired as of December 31, 1995 and
revenues and expenses for the years ended December 31, 1995 and 1994 of Gendex
Medical Division, in conformity with generally accepted accounting principles.
/s/KPMG Peat Marwick LLP
Chicago, Illinois
February 9, 1996
Gendex Medical Division
of
DENTSPLY International Inc.
Statement of Net Assets to be Acquired
December 31, 1995
Inventories (Note 2) $6,129,493
Fixed assets, net (Note 3) 650,675
Intangible assets, less accumulated amortization 1,701,961
----------
$8,482,129
==========
See accompanying notes to financial statements.
Gendex Medical Division
of
DENTSPLY International Inc.
Statements of Revenues and Expenses
For the years ended December 31, 1995 and 1994
1995 1994
------------ ------------
Net sales ...................................... $ 18,895,991 $ 20,664,178
Cost of goods sold (Note 5) .................... 16,364,819 17,521,209
------------ ------------
Gross profit .......................... 2,531,172 3,142,969
Selling, general, and administrative expenses
(Note 4 and 5) 2,627,916 2,812,812
------------ ------------
Operating profit (loss) ............... (96,744) 330,157
Other income (expense) ......................... 13,110 (51,835)
------------ ------------
Net excess (deficiency) of revenues
over expenses .................... $ (83,634) $ 278,322
============ ============
See accompanying notes to financial statements.
Gendex Medical Division
of
DENTSPLY International Inc.
Notes to Financial Statements
For the years ended December 31, 1995 and 1994
(1) Summary of Significant Accounting Policies
(a) Organization
The Gendex Medical Division (Gendex Medical) of DENTSPLY
International Inc. (DENTSPLY) designs, develops, manufactures and markets x-ray
systems and related components for the medical x-ray market.
Gendex Medical entered the medical x-ray market in August 1987
with the introduction of a unique high-frequency generator and an integrated
table/tubestand. In April 1989, Universal/Allied Imaging, Inc., a manufacturer
of a full line of single phase conventional radiographic equipment and
components such as tables, film holders and tube mounts, was acquired. The
acquisition of Universal/Allied Imaging substantially expanded Gendex Medical's
medical product line and enabled it to offer its medical dealers a compliment of
tables, tubestands, film holders and generators, including its high frequency
generators. In January 1993, Gendex Medical acquired a mammography x-ray system
from the Soredex division of Orion Corporation, thereby gaining an entrant in
this attractive, growing portion of the medical x-ray market.
As more fully described in note 7, DENTSPLY International Inc.
has entered into an Agreement in Principle to sell all inventory, fixed assets
and certain intangible assets of Gendex Medical to a third party on or about
February 28, 1996.
(b) Basis of Presentation
The Gendex Medical Division's financial results have
historically been reported in a combined manner with the results of the Gendex
Dental Division's Chicago, Grand Avenue location. For purposes of this
presentation, the accompanying financial statements present only those net
assets of Gendex Medical anticipated to be acquired by a third party as of
December 31, 1995. The statements of revenues and expenses of the division for
the years ended December 31, 1995 and 1994 include only the operating results of
the Gendex Medical Division presented on a stand-alone basis, excluding the
impact, if any, on DENTSPLY International Inc.'s consolidated income tax
provision.
(c) Inventories
Inventories are valued at the lower of cost or market using
the first-in, first-out (FIFO) method.
Gendex Medical Division
of
DENTSPLY International Inc.
Notes to Financial Statements
(d) Fixed Assets
Fixed assets are recorded at cost. Depreciation is calculated
on the straight-line method over the estimated useful lives of the assets which
range from four to fifteen years. Leasehold improvements are amortized on the
straight-line method over the shorter of the lease term or estimated useful life
of the assets.
(e) Intangible Assets
Intangible assets, which consist primarily of trademarks,
tradenames, patents and product design rights, are being amortized over the
estimated useful lives of the respective assets (which range from 12 to 40
years) using the straight-line method. The cumulative amount of amortization at
December 31, 1995 is $553,807. Amortization expense for the years ended December
31, 1995 and 1994 is $153,321 and $168,087. Management of Gendex Medical
periodically evaluates the carrying value of intangible assets to determine that
no decline in carrying value has occurred. Upon determination of a decline in
value, an appropriate amount would be charged to operations.
(f) Revenue Recognition
Revenue is recognized when title passes upon shipment of the
product.
(2) Inventories
Classification of inventories are as follows as of December 31, 1995:
Finished goods $2,187,988
Work-in-process 1,688,903
Raw materials 2,252,602
----------
$6,129,493
==========
Gendex Medical Division
of
DENTSPLY International Inc.
Notes to Financial Statements
(3) Fixed Assets
A summary of fixed assets follows as of December 31, 1995:
Leasehold improvements $ 512,347
Machinery and equipment 532,740
Furniture and fixtures 25,013
Tools, dies and molds 100,048
Data handling equipment 107,255
Computer software 6,928
----------
1,284,331
Less accumulated depreciation and amortization 633,656
----------
$ 650,675
==========
Depreciation and amortization expense for the years ended December 31,
1995 and 1994 is $226,226 and $165,073
(4) Selling, General and Administrative Expenses
Selling expenses include all costs associated with selling and
marketing activities including sales commission, advertising and travel. General
and Administrative expenses are primarily an allocation of accounting, human
resource and data processing costs which are shared among various regional
DENTSPLY affiliated locations.
A breakdown of these costs for the years ended December 31, are as
follows:
1995 1994
---- ----
Selling and Marketing Expenses $2,188,095 $2,265,699
General and Administrative Expenses 436,047 525,897
Research and Development Expenses 3,774 21,216
---------- ----------
$2,627,916 $2,812,812
========== ==========
(5) Related Party Transactions
Other DENTSPLY affiliated divisions located in Chicago and Des Plaines,
Illinois produce fabricated components for Gendex Medical. Most of these
components could be readily sourced from local third party vendors. The cost
charged to the Gendex Medical Division for fabricated components approximates
the cost to manufacture. The total cost of components produced for Gendex
Medical by these affiliated divisions in 1995 and 1994 was $4,801,268 and
$6,724,868, respectively.
Gendex Medical Division
of
DENTSPLY International Inc.
Notes to Financial Statements
Additionally, administrative services such as accounting, computer and
human resources, are performed for Gendex Medical by the DENTSPLY affiliated
division in Des Plaines, Illinois, while legal, tax and other business
administrative services are provided by the DENTSPLY Corporate office in York,
Pennsylvania, the costs of such services are deemed to be not significant. The
cost for administrative services provided by the local DENTSPLY affiliates is a
direct allocation of actual cost with no charge for Corporate services.
(6) Leases
Gendex Medical is obligated under operating leases, principally for its
office and manufacturing facility. Total rental expense for operating leases for
the years ended December 31, 1995 and 1994 was $214,157 and $203,413,
respectively.
(7) Pending Sale of Gendex Medical
On December 15, 1995, DENTSPLY International Inc. entered into an
Agreement in Principle to sell all inventories, fixed assets and certain
intangible assets of the Gendex Medical Division to a third party for
approximately $7,500,000. In accordance with the Agreement in Principle, such
assets existing at the closing date will be transferred to the third party. All
receivables at closing will remain with the Seller. Substantially all contracts
and leases of Gendex Medical will be assigned to the third party. Such terms of
the agreement may be subject to revision upon final negotiation of the
transaction.