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) November 21, 1995
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APPLIED BIOSCIENCE INTERNATIONAL INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-15515 22-2734293
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
4350 N. Fairfax Drive
Arlington, VA 22203-1627
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(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code (703) 516-2490
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On November 21, 1995, Applied Bioscience International Inc. (the "Company") sold
its toxicology laboratories located in New Jersey and Suffolk, England to
Huntingdon International Holdings plc ("Huntingdon"). In connection with the
sale of the New Jersey toxicology laboratory, which was formerly operated as a
division of Pharmaco LSR International Inc., a wholly owned subsidiary of the
Company, Huntingdon acquired substantially all of the assets of such laboratory
and assumed substantially all related liabilities. In connection with the sale
of the toxicology laboratory located in Suffolk, England, which was formerly
operated within a separate wholly owned subsidiary of the Company, Pharmaco
LSR Ltd., Huntingdon acquired all of the capital stock of Pharmaco LSR Ltd.
The Company received as consideration cash proceeds of $32.5 million, plus an
additional $6.0 million for an equal amount of cash conveyed to Huntingdon as
part of the sale. The consideration also included the Company's acquisition of
Huntingdon's Phase I clinical center located in Leicestershire, England at
an agreed upon value of $4.5 million. The amount of the consideration was
determined as a result of arm's length negotiations between the Company and
Huntingdon. The Company anticipates recording an after-tax loss of
approximately $6.0 million on the disposition of the toxicology businesses.
As previously reported, the Company completed a sale-leaseback transaction
involving its real estate in Austin, Texas on November 13, 1995. Total gross
proceeds in the transaction were $12 million. The Company's pre-tax gain on
the sale of the facilities was approximately $2.1 million. The gain has been
deferred and will be recognized on a straight-line basis over the 15 year
lease term. Future minimum annual lease payments are $1.3 million.
The Company used the cash proceeds received from these transactions to repay
all of its long-term debt, which included the outstanding balances on the term
loan and revolving line of credit that were part of its principal credit
facility, as well as, the mortgages on the properties sold in the sale-leaseback
transaction. In connection with the pay down in debt, the Company renegotiated
the credit facility whereby, effective November 20, 1995, the Company continues
to maintain a $20 million revolving line of credit which will expire in May
1997. As of November 21, 1995, there were no outstanding borrowings under the
revolving line of credit.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro forma financial information
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
As of September 30, 1995
(in thousands, except share data)
September 30,
September 30, Adjustments 1995
1995 (Note 2) Pro Forma
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 6,114 $ (3,334) (a) $ 2,780
Accounts receivable, net 63,778 (5,600) (b) 58,178
Supply inventories 1,202 (962) (c) 240
Income tax receivable 1,122 - 1,122
Current deferred tax asset - 4,267 (d) 4,267
Prepaid expenses and other 5,637 (1,117) (e) 4,520
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Total current assets 77,853 (6,746) 71,107
PROPERTY AND EQUIPMENT, at cost less
accumulated depreciation and
amortization 81,056 (58,870) (f) 22,186
GOODWILL, less accumulated
amortization 9,855 (406) (g) 9,449
DEFERRED TAX ASSET - 1,504 (h) 1,504
OTHER ASSETS 7,258 (2,800) (i) 4,458
NON-CURRENT ASSETS of discontinued
operations, net 4,007 - 4,007
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TOTAL ASSETS $ 180,029 $ (67,318) $ 112,711
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term
debt $ 4,101 $ (3,826) (j) $ 275
Accounts payable 2,833 (420) (k) 2,413
Accrued liabilities 24,295 (181) (k) 24,114
Advance billings 19,718 (5,715) (k) 14,003
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Total current liabilities 50,947 (10,142) 40,805
LONG-TERM DEBT 42,815 (42,537) (j) 278
DEFERRED INCOME TAXES 11,500 (11,500) (h) -
DEFERRED RENT AND OTHER 1,121 2,073 (l) 3,194
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Total liabilities 106,383 (62,106) 44,277
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STOCKHOLDERS' EQUITY
Common stock, $.01 par value,
40,000,000 shares authorized,
29,684,000 shares issued and
outstanding 297 - 297
Paid-in capital 69,177 - 69,177
Retained earnings 13,097 (6,045) (m) 7,052
Treasury stock, at cost, 713,000
shares (4,335) - (4,335)
Unrealized loss on investments (1,964) - (1,964)
Cumulative translation adjustment (2,266) 833 (n) (1,433)
Deferred compensation (360) - (360)
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Total stockholders' equity 73,646 (5,212) 68,434
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 180,029 $ (67,318) $ 112,711
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UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
For the Nine Months Ended September 30, 1995
(in thousands, except per share amounts)
September 30,
September 30, Adjustments 1995
1995 (Note 2) Pro Forma
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Life sciences revenues, net of
subcontractor costs $102,575 $(29,989) (s) $72,586
Environmental sciences revenues,
net of subcontractor costs 37,331 - 37,331
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139,906 (29,989) 109,917
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Direct costs - Life sciences 72,377 (22,553) (t) 49,824
Direct costs - Environmental sciences 25,715 - 25,715
Selling, general and administrative
expenses 36,223 (8,480) (u) 27,743
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134,315 (31,033) 103,282
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Operating income 5,591 1,044 6,635
Interest - expense (2,541) 2,361 (r) (180)
- income 139 - 139
Other income 554 5 559
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Income from continuing operations
before provision for income taxes 3,743 3,410 7,153
Provision for income taxes 1,731 1,159 (v) 2,890
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Net income from continuing operations $ 2,012 $ 2,251 $ 4,263
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Weighted average number of common
shares outstanding 28,530 28,530
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Earnings per common share $ 0.07 $ 0.15
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UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
For the Year Ended December 31, 1994
(in thousands, except per share amounts)
September 30,
September 30, Adjustments 1995
1995 (Note 2) Pro Forma
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Life sciences revenues, net of
subcontractor costs $129,099 $(42,433) (o) $86,666
Environmental sciences revenues,
net of subcontractor costs 45,763 - 45,763
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174,862 (42,433) 132,429
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Direct costs - Life sciences 92,692 (31,238) (p) 61,454
Direct costs - Environmental sciences 30,095 - 30,095
Selling, general and administrative
expenses 44,642 (9,713) (q) 34,929
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167,429 (40,951) 126,478
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Operating income 7,433 (1,482) 5,951
Interest - expense (3,190) 2,972 (r) (218)
- income 508 - 508
Other income (13) (23) (36)
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Income from continuing operations
before provision for income taxes 4,738 1,467 6,205
Provision for income taxes 1,873 499 (v) 2,372
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Net income from continuing
operations $ 2,865 $ 968 $ 3,833
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Weighted average number of common
shares outstanding 28,129 28,129
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Earnings per common share $ 0.10 $ 0.14
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APPLIED BIOSCIENCE INTERNATIONAL INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
1. Basis of Presentation
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The pro forma financial information presented herein includes all the pertinent
information related to the assets and liabilities disposed of and all the
financial information required pursuant to Article 11 of Regulation S-X.
The Unaudited Pro Forma Condensed Financial Statements of the Company set forth
herein include the Pro Forma Condensed Balance Sheet as of September 30, 1995
and the Pro Forma Condensed Statements of Income for the nine-month period ended
September 30, 1995 and the year ended December 31, 1994. The Pro Forma Balance
Sheet gives effect to the sale of the toxicology business and the sale-leaseback
transaction assuming those transactions occurred on September 30, 1995. The
Pro Forma Condensed Statements of Income assume the transactions occurred on
January 1, 1994.
The Unaudited Pro Forma Condensed Financial Statements give effect to the
adjustments set forth in Note 2 and are not necessarily indicative of the
results of operations and financial position which would have been achieved had
the disposition of the toxicology business and the sale-leaseback transaction
been completed as of the beginning of the periods presented, nor are they
necessarily indicative of the results of future operations. The Unaudited Pro
Forma Condensed Financial Statements have been prepared by management and are
based on certain assumptions and estimates which are subject to change. The
Unaudited Pro Forma Condensed Financial Statements should be read in
conjunction with the historical financial statements of the Company.
Within the 12 months following the transaction, the Company anticipates that it
will incur nonrecurring charges in the range of $1.2 million to $2.0 million
($.8 million to $1.3 million on an after tax basis). These charges are related
to relocation costs associated with the consolidation of the Company's United
Kingdom operations into its Cambridge facilities, marketing costs associated
with changing the name of the remaining clinical businesses, recruiting fees
and increased information systems costs. The effect of these nonrecurring
charges was not included in the Unaudited Pro Forma Condensed Income Statements
presented herein.
2. Pro Forma Adjustments
(a) The cash and cash equivalents adjustment reflects cash proceeds of $44.5
million less cash of $47.6 million used to repay long-term debt and $.2
million which remained with the disposed business. See Note 2 (i).
(b) The $5.6 million adjustment to accounts receivable reflects the net
accounts receivable sold to Huntingdon.
(c) The adjustment to supply inventories reflects the inventory sold to
Huntingdon.
(d) The $4.3 million adjustment to current deferred tax asset represents the
tax benefit associated with the loss on the sale of the toxicology
business.
(e) The adjustment to prepaid expenses and other represents the transfer of
prepaid expenses to Huntingdon.
(f) The $58.9 million adjustment to property and equipment reflects the net
book value of $49.8 million of assets sold to Huntingdon and $9.1 million
related to the properties sold as a result of the sale-leaseback
transaction.
(g) The adjustment to goodwill represents the elimination of intangible
assets associated with the disposed assets.
(h) The adjustment to deferred taxes represents the relief of deferred tax
liabilities of $13.0 million eliminated through the sale of the toxicology
business and the reclassification of the resulting deferred tax asset
balance of $1.5 million which represents future tax benefits associated
with the retained businesses.
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(i) The adjustment to other assets reflects the disposition of $1.8 million of
capitalized software sold to Huntingdon and $1.0 million of unamortized
deferred financing costs expensed as a result of the repayment of long-term
debt.
(j) The adjustments to long-term debt reflect the repayment of the outstanding
balances of the Company's term loan, revolving line of credit, and
mortgages related to the properties sold in the sale-leaseback transaction.
See Note 2(a).
(k) The adjustments to accounts payable, advance billings and accrued
liabilities represent the sale of $9.7 million of such liabilities to
Huntingdon and the repayment of $.3 million of accrued interest.
Additionally, liabilities of $3.7 million were accrued in relation to
transaction costs and severance costs incurred and other costs to be
incurred as a result of a contractual obligation to change the name of the
Company's clinical services business. The severance benefit arrangements
relate to specifically identified employees to whom such benefits have been
communicated.
(l) The adjustment of $2.1 million to deferred rent and other reflects the gain
resulting from the sale-leaseback transaction to be realized over the term
of the lease.
(m) The adjustment to retained earnings reflects the estimated loss to be
recorded as a result of the disposition of the toxicology business net of
related income tax benefits.
(n) In accordance with Statement of Financial Accounting Standards No. 52,
"Foreign Currency Translation," the cumulative translation adjustment
related to the foreign operations is eliminated from the consolidated
financial statements of the Company and is included in the loss on
disposition of the business.
(o) The adjustment to net revenues represents the net revenues of the disposed
business for the year ended December 31, 1994 of $45.5 million and the
inclusion of the net revenues of the acquired Phase I clinical center for
the year ended September 30, 1994 of $3.1 million.
(p) The adjustment to direct costs represents the direct costs of the disposed
business for the year ended December 31, 1994 and the inclusion of the
direct costs of the acquired Phase I clinical center for the year ended
September 30, 1994.
(q) The $9.7 million adjustment to selling, general and administrative expenses
represents $10.3 million of such costs of the disposed business; the
inclusion of $.5 million of selling, general and administrative costs for
the acquired Phase I clinical center; the elimination of general and
administrative expenses of $.8 million relating primarily to reductions in
personnel costs and legal fees and the elimination of financing fee
amortization and the increase of $.9 million in rent expense net of $ .4
million of depreciation expense eliminated as a result of the
sale-leaseback transaction.
(r) The adjustment to interest expense reflects the reduction in interest
charges as a result of the repayment of long-term debt.
(s) The adjustment to net revenues represents the net revenues of the disposed
business for the nine months ended September 30, 1995 of $33.1 million and
the inclusion of the net revenues of the acquired Phase I clinical center
for the 12 months ended September 30, 1995 of $3.1 million.
(t) The adjustment to direct costs represents the direct costs of the disposed
business for the nine months ended September 30, 1995 and the inclusion of
the direct costs of the acquired Phase I clinical center for the 12 months
ended September 30, 1995.
(u) The $8.5 million adjustment to selling, general and administrative expenses
represents $8.7 million of such costs of the disposed business; the
inclusion of $.3 million of selling, general and administrative costs for
the acquired Phase I clinical center; the elimination of general and
administrative expenses of $.8 million relating primarily to reductions in
personnel costs and the elimination of financing fee amortization and the
increase of $.7 million in rent expense net of $ .3 million of
depreciation expense eliminated as a result of the sale-leaseback
transaction.
(v) The adjustment to the provision for income taxes has been calculated at the
current statutory rates.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (continued)
(c) Exhibits
2 Stock and Asset master Purchase Agreement by and among
Huntingdon International Holdings plc, Huntingdon Life
Sciences Inc., Applied Bioscience International Inc. and
Pharmaco LSR International Inc., dated as of November 1,
1995
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SIGNATURES
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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.
APPLIED BIOSCIENCE INTERNATIONAL INC.
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(Registrant)
By /s/ Stephen L. Waechter
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Senior Vice President,
Chief Financial Officer
By /s/ Jamie G. Donelan
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Controller
(Chief Accounting Officer)
Date: December 6, 1995
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