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): OCTOBER 5, 2001
-----------------------------------------------------------------
SUNLINK HEALTH SYSTEMS, INC.
----------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO 1-12607 31-0621189
---- ------- ----------
(STATE OR OTHER JURISDICTION (COMMISSION (I.R.S. EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
900 CIRCLE 75 PARKWAY SUITE 1300, ATLANTA, GEORGIA 30339
--------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 770-933-7000
---------------------------------------------------------------
1
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On October 5, 2001, SunLink Health Systems, Inc. ("SunLink")
(formerly known as KRUG International Corp.) sold all the capital stock of its
wholly-owned, United Kingdom housewares subsidiary, Beldray Limited ("Beldray"),
to senior officers of Beldray who functioned as Beldray's management. Such
officers acquired the shares for nominal consideration only, such price being
established by negotiation between SunLink and such officers, in connection with
a U.K. court supervised arrangement under which Beldray refinanced its secured
debt and SunLink's U.K. subsidiaries were released as guarantors. SunLink's U.K.
subsidiaries remain contingently liable as guarantors of Beldray's obligations
under a lease covering a portion of the Beldray manufacturing location. SunLink
said it expects to report no additional gain or loss as a result of the
transaction. SunLink previously recorded a loss from discontinued operations
relating to the U.K. housewares business of $3,989,000 in the quarter ended June
30, 2001.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro forma financial information -
The required unaudited condensed and consolidated pro
forma financial statements of SunLink Health Systems,
Inc. and Subsidiaries, giving effect to the sale of
Beldray Limited as if the sale had occurred on June
30, 2001, as to the balance sheet, and on April 1,
2000, as to the income statements, are filed
herewith.
(c) Exhibits -
10.1 Agreement relating to the sale and purchase of the
whole of the issued share capital of Beldray Limited,
dated 30 August 2001, between Bradley International
Holdings Limited and Marshall Cooper and John Clegg.
10.2 Variation relating to the sale and purchase of the
whole of the issued share capital of Beldray Limited
dated 30 August, 2001, dated 3 October 2001, between
Bradley International Holdings Limited and Marshall
Cooper and John Clegg.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SunLink Health Systems, Inc.
Date: October 19, 2001
By: /s/ Mark J. Stockslager
--------------------------
Mark J. Stockslager
Principal Accounting Officer
2
SUNLINK HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
On October 5, 2001, SunLink sold its United Kingdom housewares
subsidiary, Beldray, to Beldray's management for nominal consideration in
connection with a U.K. court supervised arrangement.
The following unaudited condensed consolidated pro forma balance sheet
as of June 30, 2001 gives effect to the sale of Beldray as if the transaction
had been completed as of June 30, 2001.
The following unaudited condensed consolidated pro forma statements of
earnings for the year ended March 31, 2001 and the three months ended June 30,
2001 give effect to the sale of Beldray as if the transaction had been completed
as of April 1, 2000. No pro forma adjustment was required for the sale of
Beldray for the three months ended June 30, 2001 as its results were previously
reported in discontinued operations.
The unaudited condensed consolidated pro forma financial information
presented herein does not purport to represent what SunLink's consolidated
results of operations or financial position would have been had such
transactions occurred at the beginning of the periods presented or to project
SunLink's results of operations in any future period. The unaudited condensed
consolidated pro forma financial statements should be read in conjunction with
the audited consolidated financial statements of SunLink included in SunLink's
Annual Report on Form 10-K for the year ended March 31, 2001 and unaudited
condensed consolidated financial statements of SunLink in SunLink's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2001.
3
SunLink Health Systems, Inc. and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
June 30, 2001
(In thousands)
As Beldray As
Reported Sale Adjusted
-----------------------------------------
Current Assets:
Cash and cash equivalents $ 3,397 $ (414)(a) $ 2,983
Receivables - net 9,730 -- 9,730
Inventories 1,798 -- 1,798
Prepaid expenses and other 1,396 -- 1,396
-------- ------- --------
Total Current Assets 16,321 (414) 15,907
Property, Plant and Equipment, net 27,132 -- 27,132
Other Long-term Assets 246 -- 246
Net noncurrent assets of discontinued operations -- -- --
-------- ------- --------
Total Assets $ 43,699 $ (414) $ 43,285
======== ======= ========
Current Liabilities:
Accounts payable $ 3,046 $ -- $ 3,046
Third-party payor settlements 6,149 -- 6,149
Current maturities of long-term debt 4,000 4,000
Other current liabilities 5,903 -- 5,903
Net current liabilities of discontinued operations 1,549 (1,101)(a)(b) 448
-------- ------- --------
Total Current Liabilities 20,647 (1,101) 19,546
Long-term debt 16,406 -- 16,406
Noncurrent liability for general and professional liability risks 475 -- 475
Noncurrent reserve for Industrial Segment 864 -- 864
-------- ------- --------
Total Long-term Liabilities 17,745 -- 17,745
Shareholders' Equity:
Common shares 2,488 -- 2,488
Additional paid-in capital 3,604 -- 3,604
Retained earnings (deficit) (666) 687 (b) 21
Accumulated other comprehensive income (119) -- (119)
-------- ------- --------
Total Shareholders' Equity 5,307 687 5,994
-------- ------- --------
Total Liabilities and Shareholders' Equity $ 43,699 $ (414) $ 43,285
======== ======= ========
(a) Cash of $414 paid for legal and other professional service expenses
related to the sale. Adjustment also decreases net current liabilities
of discontinued operations.
(b) Elimination of reserve for estimated losses of $687 through estimated
sale date of September 2001. Reserve not needed for pro forma balance
sheet as sale date of June 30, 2001 is assumed. Adjustment also
decreases net current liabilities of discontinued operations.
4
SunLink Health Systems, Inc. and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF EARNINGS
(In thousands)
YEAR ENDED MARCH 31, 2001
-------------------------------------------
As Sale of As
Reported Beldray (a) Adjusted
-------------------------------------------
Revenues $ 41,674 $(28,036) $ 13,638
Cost of Goods Sold 25,937 (25,937) --
Selling and Administrative Expenses 15,893 (1,791) 14,102
Depreciation 849 (658) 191
-------- -------- --------
Operating Loss (1,005) 350 (655)
Other Income (Expense):
Interest expense (670) 360 (310)
Interest income 359 -- 359
-------- -------- --------
Loss From Continuing Operations
Before Income Taxes (1,316) 710 (606)
Income Tax Expense 50 225 275
-------- -------- --------
Loss From Continuing Operations $ (1,366) $ 485 $ (881)
======== ======== ========
Loss Per Share from Continuing
Operations:
Basic $ (0.27) $ (0.18)
======== ========
Diluted $ (0.27) $ (0.18)
======== ========
Weighted Average Common Shares
Outstanding:
Basic 4,976 4,976
======== ========
Diluted 4,976 4,976
======== ========
(a) Adjustment column reflects elimination of Beldray results of operations for
fiscal year ended March 31, 2001.
5
SunLink Health Systems, Inc. and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF EARNINGS
(In thousands)
THREE MONTHS ENDED JUNE 30, 2001
-------------------------------------------
As Sale of As
Reported Beldray (a) Adjusted
-------------------------------------------
Revenues $ 20,527 $ -- $ 20,527
Salaries, wages and benefits 9,928 -- 9,928
Provision for bad debts 2,627 -- 2,627
Supplies 2,320 -- 2,320
Rent and lease expense 518 -- 518
Purchased services 1,855 -- 1,855
Other 2,656 -- 2,656
Depreciation 300 -- 300
-------- --------- --------
Operating Loss 323 -- 323
Other Income (Expense):
Interest expense (667) -- (667)
Interest income 25 -- 25
-------- --------- --------
Loss From Continuing Operations
Before Income Taxes (319) -- (319)
Income Tax Expense -- -- --
-------- --------- --------
Loss From Continuing Operations $ (319) $ -- $ (319)
======== ========= ========
Loss Per Share from Continuing
Operations:
Basic $ (0.06) $ (0.06)
======== ========
Diluted $ (0.06) $ (0.06)
======== ========
Weighted Average Common Shares
Outstanding:
Basic 4,976 4,976
======== ========
Diluted 4,976 4,976
======== ========
(a) No pro forma adjustment was required for the sale of Beldray for the three
months ended June 30, 2001 as its results were previously reported in
discontinued operations.
6