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 (Earliest Event Reported): February 3, 1997
Exact name of Registrant
as specified in its charter: The Diana Corporation
State or Other Jurisdiction of Incorporation: Delaware
Commission File Number: 1-5486
I.R.S. Employer Identification Number: 36-2448698
Address of Principal Executive Office: 26025 Mureau Road
Calabasas, CA 91302
Registrant's Telephone Number, Including Area Code: (818) 878-7711
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On November 20, 1996, the Board of Directors of the Company
approved a restructuring plan to separate its central office voice
and data switching equipment business (the "Sattel Business") from
the following businesses:
Segment Company
Telecommunications equipment
distribution................ C&L Communications, Inc. (C&L)
Voice and data network
installation and service.... Valley Communications, Inc. (Valley)
Wholesale distribution of
meat and seafood............ Entree Corporation (Entree)
Atlanta Provision Company, Inc. (APC)
APC is a wholly-owned subsidiary of Entree and is Entree's
sole operating company. Valley is an 80%-owned subsidiary of C&L.
<PAGE>
The restructuring plan provided for a spin-off of the non-
Sattel businesses, through a special dividend to the Company's
shareholders. Consequently, the Company reported the results of
operations of the telecommunications equipment distribution
segment, the voice and data network installation and service
segment and the wholesale distribution of meat and seafood segment
separately as discontinued operations in the second quarter
financial statements. Subsequently, the Company received a
purchase offer for a majority of the assets of APC. On February 3,
1997, the Board of Directors of the Company approved the sale of a
majority of the assets of APC to Colorado Boxed Beef Company
("Colorado"). The sale closed on February 3, 1997.
Colorado purchased the following assets of APC for $13.5
million: receivables, inventories, machinery and equipment,
furniture and fixtures, and certain other current assets. Colorado
made a cash payment to APC of $6.9 million of which $712,000 is
restricted pursuant to the terms of the Asset Purchase Agreement.
Colorado also assumed accounts payable and accrued liabilities of
APC of $6.6 million. APC repaid $5.8 million to its lender to
extinguish all obligations under its revolving line of credit.
APC retained real estate with a net book value of $2.6
million at February 1, 1997. The real estate is collateral for two
mortgage notes that amount to $794,000. APC has entered into a one
year lease with Colorado. Each party can terminate the lease with
180 days written notice. The real estate will soon be listed for
sale.
The loss on disposal of discontinued operations for the
twelve weeks ended January 4, 1997 represents the Company's loss on
the sale of APC. This amount reflects a provision for certain
liabilities related to the sale and is net of an anticipated gain
on the sale of APC's real estate of $367,000. APC also incurred
expenses of $281,000 subsequent to January 4, 1997 resulting from
the early termination of the revolving line of credit established
on October 4, 1996. The Company will reflect an extraordinary
charge of $281,000 in the fourth quarter for these expenses.
As a result of the sale of APC's assets, the Company's Board
of Directors terminated the original restructuring plan for a spin-
off of the non-Sattel businesses. The Company has adopted a
revised restructuring plan to sell C&L and Valley. The revised
restructuring plan has been approved by the Board of Directors.
The Company anticipates the sale of these businesses will be
completed within one year. In the second quarter financial
statements, the Company recorded a charge of $3.5 million for the
estimated loss on disposal in connection with the original
restructuring plan. The Company believes that the reserve for loss
recorded at January 4, 1997 of $4,077,000 is sufficient to cover
all estimated expenses and net losses to be incurred with respect
to its revised restructuring plan.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma Financial Information:
The following unaudited pro forma condensed
consolidated financial information is filed with this
report:
Pro Forma Condensed Consolidated Balance Sheet
at January 4, 1997
Pro Forma Condensed Consolidated Statements of
Operations for the 52 Weeks Ended March 30,
1996 and the 40 Weeks Ended January 4, 1997
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 thereunto duly authorized.
THE DIANA CORPORATION
(Registrant)
Date: February 18, 1997 /s/ R. Scott Miswald
Vice President and Treasurer
<PAGE>
PRO FORMA FINANCIAL INFORMATION
THE DIANA CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AT JANUARY 4, 1997
UNAUDITED
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Pro Forma Pro
Historical Adjustments Forma
---------- ----------- -----
<S> <C> <C> <C>
ASSETS
Current assets
Cash $ 2,800 $ 431 $ 3,231
Receivables 8,341 8,341
Inventories 3,247 3,247
Net assets of discontinued
operations 2,379 590 2,969
Other current assets 1,546 1,546
------ ----- ------
Total current assets 18,313 1,021 19,334
Property and equipment, net 2,088 2,088
Intangible assets 3,805 3,805
Net assets of discontinued
operations 8,350 (1,021) 7,329
Other assets 3,187 3,187
------ ----- ------
$35,743 $ 0 $35,743
====== ===== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 3,997 $ 3,997
Accrued liabilities and
other current liabilities 1,449 1,449
Current portion of
long-term debt 141 141
------ ----- ------
Total current
liabilities 5,587 5,587
Long-term debt 1,817 1,817
Other liabilities 407 407
Commitments and contingencies
Shareholders' equity 27,932 27,932
------ ----- ------
$35,743 $ 0 $35,743
====== ===== ======
</TABLE>
See accompanying notes to pro forma condensed consolidated financial
information.
<PAGE>
PRO FORMA FINANCIAL INFORMATION
THE DIANA CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE 52 WEEKS ENDED MARCH 30, 1996
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Pro Forma Pro
Historical Adjustments Forma
---------- ----------- -----
<S> <C> <C> <C>
Net sales $267,602 $(267,229) $ 373
Cost of sales 256,920 (256,756) 164
------- -------- ------
Gross profit 10,682 (10,473) 209
Selling and administrative
expenses 12,385 (8,558) 3,827
Write-off of goodwill 852 (852) ---
------- -------- ------
Operating loss (2,555) (1,063) (3,618)
Interest expense (1,076) 970 (106)
Non-operating income 614 (149) 465
Provision for income taxes (87) 87 ---
Equity in earnings (loss) of
unconsolidated subsidiaries (370) 370 ---
Minority interest 109 478 587
------- -------- ------
Loss from continuing
operations $ (3,365) $ 693 $(2,672)
======= ======== ======
Earnings (loss) per
common share $ (.76) $ (.61)
====== ======
Weighted average number of
common shares outstanding 4,401 4,401
====== ======
</TABLE>
See accompanying notes to pro forma condensed consolidated financial
information.
<PAGE>
THE DIANA CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
Pro Forma Condensed Consolidated Balance Sheet:
The pro forma adjustment reflects the sale of the following assets of APC:
receivables, inventories, machinery and equipment, furniture and fixtures and
certain other current assets. It also reflects the assumption of accounts
payable and accrued liabilities of APC by the Buyer and the full repayment of
all obligations under the revolving line of credit. After these
transactions, APC had unrestricted cash of $431,000.
Pro Forma Statement of Operations:
The pro forma statement of operations for the 52 weeks March 30, 1996 ended
reflects a pro forma adjustment for the reclassification of the results of
operations of APC, C&L and Valley to discontinued operations. The remaining
operations consist of Diana's corporate office and Sattel.
The statement of operations for the forty weeks ended January 4, 1997
reflects the results of APC, C&L and Valley as discontinued operations. No
further pro forma adjustment are required with respect to the sale of APC.
