SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(AMENDMENT NO. 1)
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 10, 1996
DENTSPLY International Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-16211 39-1434669
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
570 West College Avenue, P. O. Box 872, York, PA 17405-0872
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 717-845-7511
Page 1 of 18 pages.
Item 7 - Financial Statements, Pro Forma Financial Information and
Exhibits
(a) Financial Statements of Business Acquired
TULSA DENTAL PRODUCTS, L.L.C.
Financial Statements
December 31, 1995
(With Independent Auditor's Report Thereon)
Independent Auditors' Report
The Board of Directors
Tulsa Dental Products, L.L.C.:
We have audited the accompanying balance sheet of Tulsa Dental Products, L.L.C.
as of December 31, 1995, and the related statements of income and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Tulsa Dental Products, L.L.C.
as of December 31, 1995 and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Philadelphia, Pennsylvania
March 15, 1996
2
TULSA DENTAL PRODUCTS, L.L.C.
Balance Sheet
December 31, 1995
(Dollar amounts in thousands)
Assets
- ------
Current assets:
Accounts receivable, net $ 1,955
Inventories, net 2,484
Notes receivable 110
Prepaid expenses and other current assets 71
--------
Total current assets 4,620
Property, plant and equipment, net 1,331
Identifiable intangible assets, net 308
--------
Total assets $ 6,259
========
Liabilities and Members' Deficit
- --------------------------------
Current liabilities:
Notes payable and line of credit $ 6,129
Accounts payable 1,144
Accrued liabilities 2,014
--------
Total current liabilities 9,287
Members' deficit (3,028)
--------
Total liabilities and members' deficit $ 6,259
========
See accompanying notes to financial statements.
3
TULSA DENTAL PRODUCTS, L.L.C.
Statement of Income
For the Year Ended December 31, 1995
(Dollar amounts in thousands)
Net sales $ 22,685
Cost of products sold 10,752
--------
Gross profit 11,933
Selling, general and administrative expenses 9,846
--------
Income from operations 2,087
Other costs and expenses:
Interest expense 504
Other expense, net 1,409
--------
Total other expenses 1,913
--------
Net income 174
Distributions to members (473)
Members' deficit, January 1, 1995 (note 1) (2,729)
--------
Members' deficit, December 31, 1995 $ (3,028)
========
See accompanying notes to financial statements.
4
TULSA DENTAL PRODUCTS, L.L.C.
Statement of Cash Flows
For the Year Ended December 31, 1995
(Dollar amounts in thousands)
Cash flows from operating activities:
Net income $ 174
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 395
Loss on disposal of property, plant and equipment 78
Changes in operating assets and liabilities:
Accounts receivable, net (702)
Inventories (477)
Prepaid expenses and other current assets 3
Accounts payable 72
Accrued liabilities 887
--------
Net cash provided by operating activities 430
--------
Cash flows from investing activities:
Proceeds from sale of property, plant and
equipment, net 148
Capital expenditures (538)
Expenditures for identifiable intangible assets (50)
--------
Net cash used in investing activities (440)
--------
Cash flows from financing activities:
Proceeds from long-term borrowings, net of
deferred financing costs 2,500
Payments on long-term borrowings (3,352)
Increase in short-term borrowings 1,116
Decrease in payable to shareholder of member (307)
Distributions to members (473)
--------
Net cash used in financing activities (516)
--------
Net decrease in cash and cash equivalents (526)
Cash and cash equivalents at beginning at year 526
--------
Cash and cash equivalents at end of year $ -
========
See accompanying notes to financial statments.
5
TULSA DENTAL PRODUCTS, L.L.C.
Notes to Consolidated Financial Statements
For the Year Ended December 31, 1995
(Dollar amounts in thousands)
1. Summary of Significant Accounting Policies
Basis of Presentation
- ---------------------
Effective January 1, 1995, Tulsa Dental Products, L.L.C. (the
"Company") was formed pursuant to an agreement and Plan of Merger
(the "Merger") by and between Tulsa Dental Products, Inc. (TDP),
Quality Dental Products, Inc. (QDP), and Endo-Dent Manufacturing,
Inc. (EDM) in a transaction accounted for by combining the
historical bases of the assets, liabilities and equity accounts of
the Companies.
Prior to the Merger, TDP, the general partner of Tulsa Dental Products
Limited Partnership (TDPLP), purchased the limited partners' interests in TDPLP
for $2.5 million. TDP had sole control over the operations and assets of TDPLP.
Description of Business
- -----------------------
The primary business of the Company is to manufacture and distribute
endodontic instruments and supplies, for the domestic and international dental
communities. The Company holds certain licenses and patents on its primary
products and has various licensing and contractual agreements which are an
integral part of the Company's operations. Under certain licenses and
agreements, the Company pays royalties on sales of identified products.
Statement of Cash Flows
- -----------------------
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Accounts Receivable
- -------------------
The Company sells endodontic instruments and supplies primarily to the end
user, as well as through domestic and international distributors. Revenue is
recognized when products are shipped. For customers on credit terms, the company
performs ongoing credit evaluation of those customers' financial condition and
generally does not require collateral from them. Accounts receivable is stated
net of an allowance for doubtful accounts of $20 at December 31,1995.
Inventories
- -----------
Inventories are stated at the lower of cost or market. The cost of
inventories was determined by the average cost method.
6
TULSA DENTAL PRODUCTS, L.L.C.
Notes to Consolidated Financial Statements, continued
(Dollar amounts in thousands)
Property, Plant and Equipment
- -----------------------------
Property, plant and equipment are stated at cost, net of accumulated
depreciation. Except for leasehold improvements, depreciation for financial
reporting purposes is computed by the straight-line method over estimated useful
lives ranging from 3 to 15 years. The cost of leasehold improvements is
amortized over the shorter of the estimated useful life or the term of the
lease.
Identifiable Intangible Assets
- ------------------------------
Identifiable intangible assets include trademarks and licensing agreements
and organization costs which are amortized on a straight-line basis over their
estimated useful lives, ranging from 5 to 30 years. Identifiable intangible
assets are stated net of accumulated amortization of $157 at December 31, 1995.
Identifiable intangible assets are reviewed for impairment whenever events or
circumstances provide evidence that suggest that the carrying amount of the
asset may not be recoverable.
Research and Development Costs
- ------------------------------
Research and development costs are charged to expense as incurred and are
included in selling, general and administrative expenses. Research and
development costs amounted to approximately $123 in 1995.
Advertising
- -----------
The Company expenses the costs of advertising as incurred and such costs
are included in selling, general and administrative expenses. Advertising
expense amounted to approximately $584 in 1995.
Fair Value of Financial Instruments
- -----------------------------------
The book value of financial instruments approximates fair value due to the
short term nature of these instruments.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and
7
TULSA DENTAL PRODUCTS, L.L.C.
Notes to Consolidated Financial Statements, continued
(Dollar amounts in thousands)
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Income Taxes
- ------------
As a limited liability company, the Company is not subject to income taxes
directly because the net income or loss is taxed directly to the member owners.
The pro forma provision for federal income taxes would approximate $58 if the
Company was subject to income taxes.
2. Merger
In connection with the Merger discussed in note 1, the Company recorded
charges, primarily to eliminate duplicate facilities and excess capacity, of
approximately $347 thousand during 1995. The Merger costs also included expenses
incurred to consummate the transaction including employee compensation and
benefits, relocation expenses, professional fees, and costs associated with the
assignment of certain patents and licenses. No significant adjustments were
necessary to make accounting methods consistent for the new entity.
3. Inventories
Inventories consist of the following at December 31, 1995:
Finished goods $ 1,780
Work-in-process 57
Raw materials and supplies 714
--------
2,551
Less reserve for obsolescence 67
--------
$ 2,484
========
4. Property, Plant and Equipment
Property, plant and equipment consists of the following at
December 31, 1995:
Assets, at cost:
Leasehold improvements $ 484
Machinery and equipment 2,244
--------
2,728
Less accumulated depreciation 1,397
--------
$ 1,331
========
8
TULSA DENTAL PRODUCTS, L.L.C.
Notes to Consolidated Financial Statements, continued
(Dollar amounts in thousands)
5. Accrued Liabilities
Accrued liabilities consist of the following at December 31, 1995:
Accrued settlement (note 11) $ 1,075
Employment contract 475
Royalties 192
Payroll and employee benefits 131
Sales taxes 38
Other 103
--------
$ 2,014
========
The employment contract related to prior services provided by a previous
employee. Royalties include $151 payable to a member shareholder.
6. Financing Arrangements
Unsecured promissory note payable to
financial institution, interest at prime
plus 1% (9.75% at December 31, 1995) $ 2,858
Unsecured promissory note payable to
financial institution, interest at prime
plus 1% (9.75% at December 31, 1995) 1,430
Unsecured revolving line of credit, maximum
credit available of $2,000, interest at
prime (8.75% at December 31, 1995) 1,841
--------
Total outstanding debt $ 6,129
========
Outstanding debt is subject to certain covenants as to the operations and
financial condition of the Company. As of December 31, 1995, the Company was not
in compliance with all such covenants. However, each debt instrument became
immediately due and payable when the Company sold certain assets and liabilities
as discussed in note 12. As a result, the Company has classified all of its debt
as current at December 31, 1995. All debt was paid in full on January 10, 1996,
the date of the sale.
7. Members' Deficit
The Company operates as a limited liability company organized in the State
of Oklahoma, pursuant to Section 721 of the Internal Revenue Code, until
December 31, 2050 unless sooner terminated. Members' deficit consists of one
hundred units and is allocated 58%, 40%, and 2% among TDP, QDP, and EDM,
respectively, as members pursuant to their capital contributions. Each member's
liability
9
TULSA DENTAL PRODUCTS, L.L.C.
Notes to Consolidated Financial Statements, continued
(Dollar amounts in thousands)
is limited to their respective balance in the members' deficit account.
8. Benefit Plans
The Company has two defined contribution plans, one for the distribution
division and one for the manufacturing division, that cover substantially all
full-time employees that meet certain age and length of service requirements.
Employees can contribute up to the IRS limit of pretax income each year. The
Company may also make discretionary contributions to the plans and has
historically done so. Each division has different vesting schedules.
Distribution and manufacturing employees are fully vested after five and two
years, respectively. The 1995 defined contribution expense was $32.
9. Related Party Transactions
The Company has significant related party transactions, primarily with
owners of the member companies, previous owners of the member companies and
TDPLP, and others.
Included in 1995 expenses are royalties to an owner of a member company of
$1,217, licensing fees to owners of the member companies of $1,500, royalties to
a previous owner of a member company of $170, lease payments for property owned
by an investment of owners of a member company of $40, and lease payments for
property owned by an investment of a previous owner of a member company of $35.
10. Business and Credit Concentrations
The Company operates in only one industry segment, endodontic instruments
and supplies, primarily in the United States, with revenue from one customer of
$3,043, representing 10% or more of total sales. Approximately 40% of the
Company's total sales are generated in four states - Connecticut, Delaware,
Georgia and Tennessee.
The Company currently buys certain materials and supplies essential to its
manufacturing and distribution from a limited number of suppliers. Management
believes that other suppliers could provide similar items on comparable terms. A
change in suppliers, however, could cause a delay in manufacturing and
distribution resulting in a possible loss of sales, which would affect operating
results adversely.
11. Commitments and Contingencies
The Company leases certain office, warehouse, and manufacturing
facilities and certain equipment under
10
TULSA DENTAL PRODUCTS, L.L.C.
Notes to Consolidated Financial Statements, continued
(Dollar amounts in thousands)
noncancellable operating leases. Certain leases require the Company to pay
insurance, property taxes, and other expenses for the leased property. Total
rental expense for all operating leases was $180 in 1995.
Noncancellable rental commitments (excluding taxes, insurance, and other
expenses) amount to $143 in 1996, $143 in 1997, $141 in 1998, $99 in 1999, and
$17 in 2000. These commitments are net of sublease rentals of $13 in 1996
through 1999 and $11 in 2000.
The Company has employment agreements with two management employees. These
agreements generally provide for salary continuation for a specified period of
time under certain situations, adjusted annually. If the employees under
contract were to be terminated by the Company without cause as defined in the
agreements, the Company's liability would be approximately $740 at December 31,
1995.
The Company was the defendant in a patent infringement lawsuit that was
settled in January 1996 for $1,075. Accordingly, the Company has included this
amount in accrued liabilities as of December 31, 1995.
The Company has entered into a distribution agreement dated September 1994
for exclusive rights to sell certain Company products in certain foreign
countries, including most of Europe. The agreement also establishes prices based
on volume purchases. In order to retain its exclusive right, the distributor
must pay the Company $500 within two years. As of December 31, 1995, the
distributor has not paid this amount and the Company has not accrued this amount
as a receivable. The Company has the right to terminate the agreement provided
the Company pays a termination payment as defined in the agreement. The Company
does not anticipate terminating this agreement.
12. Subsequent Event - Sale to DENTSPLY
Effective January 10, 1996, the member owners of the Company entered into
an Asset Purchase and Sale Agreement with DENTSPLY International Inc., to sell
substantially all of the Company's assets for approximately $75,000. The
remaining assets of the Company are minimal and the Company has no significant
ongoing activities.
11
Part (b) Pro Forma Financial Information
In January 1996, DENTSPLY International Inc. ("DENTSPLY") purchased
substantially all of the assets of Tulsa Dental Products, L.L.C. ("Tulsa"). The
accompanying Pro Forma Condensed Consolidated Balance Sheet as of December
31,1995 gives effect to the purchase of Tulsa by DENTSPLY (the "Transaction")
assuming that the Transaction was consummated on December 31, 1995. The related
Pro Forma Condensed Consolidated Statement of Income and Pro Forma Condensed
Consolidated Statement of Cash Flows for the year ended December 31, 1995 have
been prepared assuming that the Transaction was consummated on January 1, 1995.
The Pro Forma Financial Information has been based upon certain assumptions and
preliminary estimates which are subject to change.
The historical financial information for Tulsa has been restated in
accordance with the adjustments outlined in part (b) of this Form 8-K/A in order
to remove from the balance sheet those assets and liabilities which were not
purchased by DENTSPLY.
The Pro Forma Financial Information should be read in conjunction with the
historical financial statements of DENTSPLY and Tulsa. This information does not
purport to be indicative of the results that would have occurred if the
Transaction had been consummated on the dates indicated, nor of the results that
may be obtained in the future.
12
DENTSPLY INTERNATIONAL INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
----As Reported---- Excluded -Pro Forma Adjustments- Consolidated
DENTSPLY Tulsa Items Debit Credit Pro Forma
-------- -------- -------- -------- -------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 3,974 $ - $ $ $ $ 3,974
Accounts and notes receivable-trade, net 93,315 1,955 (477)(c) 94,793
Inventories 125,704 2,484 135 (200)(b+d) 128,123
Deferred tax 12,836 - 12,836
Prepaid expenses and other current assets 10,527 181 (116)(i) 10,592
Net assets of discontinued operations 5,870 - 5,870
------------------- --------
Total Current Assets 252,226 4,620 256,188
Property, plant and equipment, net 140,101 1,331 141,432
Other noncurrent assets, net 16,989 - 1,000 (b) 17,989
Identifiable intangible assets, net 39,282 308 17,692 (b) 57,282
Costs in excess of fair value of net
assets acquired, net 149,127 - 75,200 (23,001)(a+b)
2,185 (e) 203,511
-------------------------------- --------
Total Assets $597,725 $ 6,259 $ (116) $676,402
================================ ========
13
----As Reported---- Excluded -Pro Forma Adjustments- Consolidated
DENTSPLY Tulsa Items Debit Credit Pro Forma
-------- -------- -------- -------- -------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 78,356 $ 3,158 $ (1,389)(ii) $ (477) $ 200 (c+a) $
2,185 (e) 82,033
Income taxes payable 26,477 - - 26,477
Current portion of deferred income taxes 11,201 - - 11,201
Notes payable and current portion
of long-term debt 7,616 6,129 (6,129)(iii) 7,616
------------------- --------
Total Current Liabilities 123,650 9,287 127,327
Long-term debt 68,675 - 75,000 (a) 143,675
Deferred income taxes 38,942 - 38,942
Other liabilities 47,104 - 47,104
------------------- --------
Total Liabilities 278,371 9,287 357,048
Minority interests in consolidated subsidiary 3,432 - 3,432
------------------- --------
Stockholders' equity:
Common stock, $.01 par value; 100,000,000
shares authorized; 27,079,669 shares issued
December 31, 1995 271 - 271
Capital in excess of par value 149,999 - 149,999
Members' deficit - (3,028) 7,402 (iv) (4,374) (b) -
Retained earnings 179,231 - 179,231
Cumulative translation adjustment 3,234 - 3,234
Employee stock ownership plan reserve (12,536) - (12,536)
Treasury stock, at cost, 128,000 shares
at December 31, 1995 (4,277) - (4,277)
------------------- --------
Total Stockholders' Equity 315,922 (3,028) 315,922
-------------------------------- --------
Total Liabilities and Stockholders' Equity $597,725 $ 6,259 $ (116) $676,402
================================ ========
See accompanying notes to unaudited pro forma condensed consolidated financial
information.
14
DENTSPLY INTERNATIONAL INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share amounts)
----As Reported---- Excluded -Pro Forma Adjustments- Consolidated
DENTSPLY Tulsa Items Debit Credit Pro Forma
-------- -------- -------- -------- -------- ------------
Net sales $572,028 $ 22,685 $ $ (3,043) (f) $591,670
Cost of products sold 291,176 10,752 (1,217)(v) 135 (g)
(3,043)(f)
77 (h)
1,120 (i) 299,000
------------------- --------
Gross profit 280,852 11,933 292,670
Selling, general and
administrative expenses 180,117 9,846 2,275 (i)
(1,603)(vi) 190 (j) 190,825
------------------- --------
Operating income 100,735 2,087 101,845
Interest expense 9,144 504 (504)(vii) 4,867 (k) 14,011
Interest income (1,265) (5) 5 (viii) (1,265)
Other (income) expense, net 2,839 1,414 (1,422)(ix) 2,831
------------------- --------
Income before income taxes 90,017 174 86,268
Provision for income taxes 36,054 - (1,500)(l) 34,554
------------------- --------
Net income $ 53,963 174 51,714
=================== ========
Earnings per common share $2.00 $1.91
Dividends per common share $.3075 $.3075
Weighted average common
shares outstanding 27,012 27,012
See accompanying notes to unaudited pro forma condensed consolidated financial
information.
15
DENTSPLY INTERNATIONAL INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
(Dollar amounts in thousands)
Notes relating to the Unaudited Pro Forma Condensed Consolidated Balance
Sheet:
- ------------------------------------------------------------------------
Excluded items:
(i) Notes receivable and employee advances not assumed by DENTSPLY.
(ii) Moyco settlement $1,075; royalty payable to previous owner $151;
sales and payroll taxes payable $60; accrued rent and property taxes on
leased facilities not assumed by DENTSPLY $103.
(iii) Tulsa debt not assumed by DENTSPLY (iv) Offset of above entries to
members' deficit.
Pro Forma Adjustments:
(a) Initial purchase transaction.
(b) Allocation of purchase price to the assigned fair values of the
assets and liabilities of Tulsa.
(c) Elimination of intercompany accounts receivable and accounts
payable.
(d) Elimination of intercompany profit in inventory.
(e) Accrued liability for termination of distribution agreement by
DENTSPLY $1,050; obligation to Boston University $135; obligation to
American Endodontic Association $1,000.
Notes relating to the Unaudited Pro Forma Condensed Consolidated
Statement of Income:
- ----------------------------------------------------------------
Excluded items:
(v) Royalty expense paid to previous owner.
(vi) Licensing fees paid to previous management/owner $1,500; rent and
property taxes on leased facilities not assumed by DENTSPLY $103.
(vii) Interest on Tulsa debt not assumed by DENTSPLY.
(viii) Interest income on employee receivables not assumed by DENTSPLY.
(ix) Moyco settlement $1,075; loss on closure of facility $347.
Pro Forma Adjustments:
(f) Elimination of intercompany sales and cost of products sold.
(g) Additional cost of products sold resulting from the allocation of
the purchase price to the fair value of Tulsa inventory.
(h) Elimination of intercompany profit in inventory.
(i) Additional depreciation and amortization resulting from the
allocation of the purchase price to the fair value of Tulsa intangible
assets, non-compete, and goodwill.
(j) Compensation payable to previous management/owner after purchase by
DENTSPLY.
(k) Additional interest expense on debt incurred by DENTSPLY to effect
the Transaction.
(l) Income tax on Tulsa net income less excluded items plus pro forma
adjustments at 40%.
16
(c) Exhibits
--------
Number Description
------ -----------
2.1 Asset Purchase and Sale Agreement, dated January
10, 1996 between Tulsa Dental Products, L.L.C. and
DENTSPLY International Inc. (Previously filed.)
17
Signatures
- ----------
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DENTSPLY INTERNATIONAL INC.
March 25, 1996 /s/ J. Patrick Clark
- ------------------------- ---------------------------------
Date J. Patrick Clark
Vice President, Secretary and
General Counsel
18
