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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 2
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JULY 9, 1997
SYNBIOTICS CORPORATION
(Exact name of registrant as specified in its charter)
COMMISSION FILE NUMBER 0-11303
CALIFORNIA 95-3737816
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
11011 VIA FRONTERA
SAN DIEGO, CALIFORNIA 92127
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (619) 451-3771
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<PAGE>
AMENDMENT TO CURRENT REPORT
The Registrant's Current Report on Form 8-K, filed on July 24, 1997, and amended
on September 22, 1997, to report the Registrant's acquisition on July 9, 1997 of
the veterinary diagnostic business of Rhone Merieux S.A.S. is amended to provide
revised financial statements and revised pro forma financial information
required by Item 7 of the report. There are no other changes to the report as
filed.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
a) Financial statements of business acquired:
------------------------------------------
Report of Independent Accountants 2
Statement of Assets Acquired (Consisting of Fixed Assets and
Inventories) as of December 31, 1996 3
Statement of Revenues and Direct Operating Expenses for the years
ended December 31, 1995 and 1996 4
Notes to Statement of Assets Acquired (Consisting of Fixed Assets
and Inventories) and Statement of Revenues and Direct Operating
Expenses 5
Statement of Assets Acquired (Unaudited) as of June 30, 1997 7
Statement of Revenues and Direct Operating Expenses (Unaudited)
for the six months ended June 30, 1997 8
Notes to Unaudited Statement of Assets Acquired and Unaudited
Statement of Revenues and Direct Operating Expenses 9
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<PAGE>
Madame Dominique TAKIZAWA
RHONE MERIEUX SA
29, avenue Tony Garnier
69007 - LYON
RHONE MERIEUX SA DIAGNOSTIC BUSINESS
REPORT OF INDEPENDENT ACCOUNTANTS
We have audited the accompanying statement of assets acquired (consisting of
fixed assets and inventories) as of December 31, 1996 and the statement of
revenues and direct operating expenses (the "statements") of the diagnostic
business of Rhone Merieux S.A. (the "Company") for each of the two years in the
period ended December 31, 1996. These statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
statements based on our audits.
We conducted our audits in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the statement of assets acquired
(consisting of fixed assets and inventories) and the statement of revenues and
direct operating expenses are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
these statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall presentation of these statements. We believe that our audits provide a
reasonable basis for our opinion.
The accompanying statements reflect the assets acquired (consisting of fixed
assets and inventories) of the diagnostic business of the Company, and the
revenues and direct operating expenses directly attributable to the diagnostic
business of the Company and include, as described in Note 3, an allocation of
expenses attributable to the business which have never been historically
segregated by the Company in its accounting records. For purposes of preparing
these statements, allocations have been made using bases of allocation that the
Company's management believes reasonable for reflecting the actual costs
necessary for operating the diagnostic business. These accompanying statements
are not intended to be a complete presentation of the assets or revenues and
expenses of the Company's diagnostic business.
In our opinion, the statement of assets acquired (consisting of fixed assets and
inventories) as of December 31, 1996 and statement of revenues and direct
operating expenses present fairly, in all material respects, the assets
acquired, as described in Note 3, as of December 31, 1996 and the revenues and
direct operating expenses, as described in Note 3, for each of the two years in
the period ended December 31, 1996 of the Company's diagnostic business, in
conformity with generally accepted accounting principles as recognized in the
Unites States of America.
Lyons, February 14, 1997
Coopers & Lybrand Audit
Bernard R. Rascle
Partner
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RHONE MERIEUX S.A. DIAGNOSTIC BUSINESS
STATEMENT OF ASSETS REQUIRED (CONSISTING OF FIXED ASSETS AND INVENTORIES)
(AMOUNTS IN U.S. DOLLARS)
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<TABLE>
<CAPTION>
DECEMBER 31,
1996
----
<S> <C>
Inventories $2,885,000
Property, plant and equipment, net 194,000
----------
Total assets $3,079,000
==========
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
RHONE MERIEUX S.A. DIAGNOSTIC BUSINESS
STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
(AMOUNTS IN U.S. DOLLARS)
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<TABLE>
<CAPTION>
------------------------
YEAR ENDED DECEMBER 31,
1996 1995
---- ----
<S> <C> <C>
Revenues $11,445,000 $12,011,000
----------- -----------
Direct operating expenses:
Cost of sales 4,495,000 5,133,000
Research and development 1,350,000 1,465,000
Selling and marketing 3,214,000 3,182,000
----------- -----------
9,059,000 9,780,000
----------- -----------
Excess of revenues over direct operating expenses $ 2,386,000 $ 2,231,000
=========== ===========
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
RHONE MERIEUX S.A. DIAGNOSTIC BUSINESS
NOTES TO STATEMENT OF ASSETS ACQUIRED (CONSISTING OF FIXED ASSETS AND
INVENTORIES) AND STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
(AMOUNTS IN U.S. DOLLARS)
- --------------------------------------------------------------------------------
NOTE 1 - BUSINESS AND ASSET PURCHASE AGREEMENT:
The Rhone Merieux S.A. diagnostic business (the "Business") is a veterinary
diagnostic product line which is manufactured (however, certain small animal
diagnostic products are manufactured under contract by a third party), sold and
distributed by Rhone Merieux S.A. (the "Company"). Effective July 9, 1997, the
Company sold the Business to Synbiotics Corporation pursuant to purchase
agreements dated May 14, 1997 and amended July 9, 1997. The assets acquired
included inventory, property, plant and equipment and the rights to manufacture,
sell and distribute the product line.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
INVENTORIES
Inventories are stated at the lower of cost (first in, first out method) or
market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using the
straight-line and declining balance methods over the estimated useful lives of
the related assets.
NOTE 3 - BASIS OF PRESENTATION:
The accompanying statement of assets acquired (consisting of fixed assets and
inventories) and statement of revenues and direct operating expenses (the
"Statements") have been prepared in accordance with U.S. generally accepted
accounting principles and were derived from the historical accounting records of
the Company. The functional currency of the Company is the French franc, and the
Statements have been converted to U.S. dollars in the following manner: assets
at the year end exchange rates; revenues and direct operating expenses at the
monthly average exchange rates. Complete financial statements were not prepared
as the Company did not maintain the Business as a separate business unit and has
not segregated indirect operating cost information or related assets and
liabilities (other than inventory and property, plant and equipment) for this
product line in its accounting records. It is not practical to attempt to
reconstruct and separate the indirect operating costs and other related assets
and liabilities applicable to this product line.
The Statements include the assets of the Company which are directly related to
the Business and which have been historically segregated by the Company in its
accounting records. The Statements do not include cash, accounts receivable,
prepaid or other assets, accounts payable, accrued expenses, borrowings or any
other assets or liabilities.
The Statements include the revenues and direct operating expenses directly
attributable to the manufacture, sale and distribution of the product line
comprising the Business, and also include an allocation of expenses directly
attributable to the manufacture, sale and distribution of the product line
comprising the Business which have not been
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<PAGE>
RHONE MERIEUX S.A. DIAGNOSTIC BUSINESS
NOTES TO STATEMENT OF ASSETS ACQUIRED (CONSISTING OF FIXED ASSETS AND
INVENTORIES) AND STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
(AMOUNTS IN U.S. DOLLARS)
- --------------------------------------------------------------------------------
historically segregated by the Company in its accounting records. The Statements
do not include general and administrative costs, interest expense, income taxes
or any other indirect expenses.
The allocated expenses include the following elements:
i) Selling overheads of $2,795,000 and $2,834,000 for 1996 and 1995,
respectively, are included in selling and marketing expenses and were allocated
based on sales volume;
ii) Fixed costs relating to the Company manufacturing sections used by the
Business of $794,000 and $950,000 for 1996 and 1995, respectively, are included
in cost of sales and were allocated on the basis of added value (the ratio of
added value attributable to the Business to the total added value of the Company
was applied to these manufacturing section costs - added value is defined as the
difference between the selling price of the diagnostic product line less
purchases from third parties);
iii) Research and development expenses of $209,000 and $232,000 for 1996 and
1995, respectively, were allocated on the basis of headcount.
Management believes that the above expense allocations are reasonable methods of
allocation for the purpose of these Statements; however, there can be no
assurances that such allocations will be indicative of future results of
operations.
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<PAGE>
RHONE MERIEUX S.A.S. DIAGNOSTIC BUSINESS
STATEMENT OF ASSETS ACQUIRED (UNAUDITED)
(AMOUNTS IN U.S. DOLLARS)
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<TABLE>
<CAPTION>
JUNE 30,
1997
----
<S> <C>
Accounts receivable $ 917,000
Inventories 2,062,000
Property, plant and equipment, net 236,000
------------
Total assets $ 3,215,000
============
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
RHONE MERIEUX S.A.S. DIAGNOSTIC BUSINESS
STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES (UNAUDITED)
(AMOUNTS IN U.S. DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
1997
----
<S> <C>
Revenues $ 5,760,000
-----------
Direct operating expenses:
Cost of sales 2,027,000
Research and development 518,000
Selling and marketing 587,000
-----------
3,132,000
-----------
Excess of revenues over direct operating expenses $ 2,628,000
===========
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
RHONE MERIEUX S.A.S. DIAGNOSTIC BUSINESS
NOTES TO UNAUDITED STATEMENT OF ASSETS ACQUIRED AND UNAUDITED STATEMENT OF
REVENUES AND DIRECT OPERATING EXPENSES
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NOTE 1 - BUSINESS AND ASSET PURCHASE AGREEMENT:
The Rhone Merieux S.A.S. diagnostic business (the "Business") is a veterinary
diagnostic product line which is manufactured (however, certain small animal
diagnostic products are manufactured under contract by a third party), sold and
distributed by Rhone Merieux S.A.S. and R.M. - Diagnostics S.A.S., a wholly-
owned subsidiary of Rhone Merieux S.A.S., (collectively the "Company").
Effective July 9, 1997, the Company sold the Business to Synbiotics Corporation
pursuant to purchase agreements dated May 14, 1997 and amended July 9, 1997. The
assets acquired included accounts receivable, inventory, fixed assets and the
rights to manufacture, sell and distribute the product line.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
INVENTORIES
Inventories are stated at the lower of cost (first in, first out method) or
market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using the
straight-line and declining balance methods over the estimated useful lives of
the related assets.
NOTE 3 - BASIS OF PRESENTATION:
The accompanying unaudited statement of assets acquired and unaudited statement
of revenues and direct operating expenses (the "Statements") have been prepared
in accordance with U.S. generally accepted accounting principles and were
derived from historical accounting records of the Company. The interim data
includes all adjustments, consisting only of normal recurring adjustments,
necessary for the fair presentation of the results for the interim period. The
functional currency of the Company is the French franc, and the Statements have
been converted to U.S. dollars in the following manner: assets at the interim
period end exchange rates; revenues and direct operating expenses at the monthly
average exchange rates. Complete financial statements were not prepared as the
Company did not maintain the Business as a separate business unit and has not
segregated indirect operating cost information or related assets and liabilities
(other than accounts receivable, inventory and property, plant and equipment)
for this product line in its accounting records. It is not practical to attempt
to reconstruct and separate the indirect operating costs and other related
assets and liabilities applicable to this product line.
The Statements include the assets of the Company which are directly related to
the Business. The Statements do not include cash, prepaid or other assets,
accounts payable, accrued expenses, borrowings or any other assets or
liabilities. The accounts receivable represent amounts owed to R.M. -Diagnostics
S.A.S. for inventory sold to Rhone Merieux S.A.S. who is acting as R.M. -
Diagnostics S.A.S.'s distributor.
The Statements include the revenues and direct operating expenses directly
attributable to the manufacture, sale and distribution of the product line
comprising the Business, and also include an allocation of expenses directly
attributable to the manufacture, sale and distribution of the product line
comprising the Business which have not been historically segregated by the
Company in its accounting records. The Statements do not include general and
administrative costs, interest expense, income taxes or any other indirect
expenses.
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b) Pro forma financial information
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The following unaudited pro forma condensed balance sheet as of June
30, 1997 and the unaudited pro forma condensed statements of
operations for the year ended December 31, 1996 and the six months
ended June 30, 1997 give effect to the acquisition of the worldwide
veterinary diagnostic business of Rhone Merieux S.A.S. (the "Rhone
Merieux Diagnostic Business") as of June 30, 1997 for the condensed
balance sheet and as of January 1, 1996 for the condensed statements
of operations. The pro forma condensed financial statements are based
on historical financial statements of Synbiotics Corporation and Rhone
Merieux Diagnostic Business, giving effect to the acquisition applying
the purchase method of accounting and the assumptions and adjustments
as discussed in the accompanying notes to the pro forma condensed
financial statements. The unaudited pro forma condensed financial
statements do not include any consolidation savings which Synbiotics
Corporation may expect to achieve from the merger of Synbiotics
Corporation and Rhone Merieux Diagnostic Business as any such savings
are not estimable at this time.
These pro forma condensed financial statements have been prepared by
the management of Synbiotics Corporation based upon the audited
statement of operations of Synbiotics Corporation for the year ended
December 31, 1996, the unaudited condensed balance sheet as of June
30, 1997 and the related unaudited condensed statement of operations
for the six months then ended of Synbiotics Corporation, the unaudited
statement of assets acquired of Rhone Merieux Diagnostic Business as
of June 30, 1997, the audited statement of revenues and direct
operating expenses for the year ended December 31, 1996 and the
unaudited statement of revenues and direct operating expenses for the
six months ended June 30, 1997 of Rhone Merieux Diagnostic Business.
The unaudited pro forma condensed financial statements should be read
in conjunction with the historical financial statements and notes
thereto and narrative sections included elsewhere herein. The pro
forma condensed financial statements are not necessarily indicative of
what actual results of operations would have been for the periods had
the transaction occurred on the dates indicated and do not purport to
indicate future financial position nor the results of future
operations.
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SYNBIOTICS CORPORATION
PRO FORMA CONDENSED BALANCE SHEET (UNAUDITED)
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<TABLE>
<CAPTION>
JUNE 30, 1997
-----------------------------------------------------------
RHONE MERIEUX
SYNBIOTICS DIAGNOSTIC PRO FORMA PRO FORMA
CORPORATION BUSINESS ADJUSTMENTS COMBINED
------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 3,652,000 $ $ $ 3,652,000
Securities available for sale 2,181,000 2,181,000
Accounts receivable 3,123,000 917,000 4,040,000
Inventories 4,212,000 2,062,000 6,274,000
Deferred tax assets 421,000 421,000
Other current assets 825,000 825,000
------------- ------------- ------------
Total current assets 14,414,000 2,979,000 17,393,000
Property and equipment, net 641,000 236,000 877,000
Goodwill 5,358,000 11,245,000 (1) 16,603,000
Deferred tax assets 6,142,000 6,142,000
Other assets 1,592,000 1,592,000
------------- ------------- ------------
$ 28,147,000 $ 3,215,000 $ 42,607,000
============= ============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 1,761,000 $ $ 1,761,000
Current portion of long-term debt 1,000,000 (1) 1,000,000
------------- ------------- ------------
Total current liabilities 1,761,000 2,761,000
------------- ------------- ------------
Long-term debt 9,541,000 (1) 9,541,000
------------- ------------- ------------
Mandatorily redeemable common stock 2,747,000 (1) 2,747,000
------------- ------------- ------------
Non-mandatorily redeemable common
stock and other shareholders' equity:
Common stock 35,432,000 169,000 (1) 35,601,000
Common stock warrants 1,003,000 (1) 1,003,000
Accumulated deficit (9,046,000) (9,046,000)
------------- ------------- ------------
Total non-mandatorily redeemable
common stock and other
shareholders' equity 26,386,000 27,558,000
------------- ------------- ------------
$ 28,147,000 $ $ 42,607,000
============= ============= ============
</TABLE>
See accompanying notes to pro forma condensed financial statements.
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<PAGE>
SYNBIOTICS CORPORATION
PRO FORMA CONDENSED STATEMENT OF OPERATIONS (UNAUDITED)
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<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
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RHONE MERIEUX
SYNBIOTICS DIAGNOSTIC PRO FORMA PRO FORMA
CORPORATION BUSINESS ADJUSTMENTS COMBINED
------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Net sales $ 17,217,000 $ 11,445,000 $(1,760,000) (2) $ 26,902,000
Cost of sales 9,572,000 4,495,000 14,067,000
------------- ------------- -------------
Gross profit 7,645,000 6,950,000 12,835,000
------------- ------------- -------------
Operating expenses:
Research and development 994,000 1,350,000 2,344,000
Selling and marketing 4,183,000 3,214,000 7,397,000
General and administrative 2,057,000 750,000 (3) 2,807,000
------------- ------------- -------------
7,234,000 4,564,000 12,548,000
------------- ------------- -------------
Income from operations 411,000 2,386,000 287,000
Interest income (expense), net 204,000 (1,053,000) (4) (849,000)
Gain on sale of securities available for sale 1,159,000 1,159,000
Other income 410,000 410,000
------------- ------------- -------------
Income before income taxes 2,184,000 2,386,000 1,007,000
Income tax expense (benefit) (7,094,000) (537,000) (5) (7,631,000)
------------- ------------- -------------
Net income $ 9,278,000 $ 2,386,000 $ 8,638,000
============= ============= =============
Net income per share $ 1.47 $ n/a $ 1.18
============= ============= =============
Weighted average shares outstanding 6,308,000 n/a 999,000 (6) 7,307,000
============= ============= =============
</TABLE>
See accompanying notes to pro forma condensed financial statements.
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SYNBIOTICS CORPORATION
PRO FORMA CONDENSED STATEMENT OF OPERATIONS (UNAUDITED)
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<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1997
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RHONE MERIEUX
SYNBIOTICS DIAGNOSTIC PRO FORMA PRO FORMA
CORPORATION BUSINESS ADJUSTMENTS COMBINED
------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Net sales $ 11,781,000 $ 5,760,000 $ (864,000) (2) $ 16,677,000
Cost of sales 6,259,000 2,027,000 8,286,000
------------- ------------- -------------
Gross profit 5,522,000 3,733,000 8,391,000
Operating expenses:
Research and development 613,000 518,000 1,131,000
Selling and marketing 2,324,000 587,000 2,911,000
General and administrative 1,364,000 375,000 (3) 1,739,000
------------- ------------- -------------
4,301,000 1,105,000 5,781,000
------------- ------------- -------------
Income from operations 1,221,000 2,628,000 2,610,000
Interest income (expense), net 106,000 (630,000) (4) (524,000)
Other income 154,000 154,000
------------- ------------- -------------
Income before income taxes 1,481,000 2,628,000 2,240,000
Provision for income taxes 637,000 246,000 (5) 883,000
------------- ------------- -------------
Net income $ 844,000 $ 2,628,000 $ 1,357,000
============= ============= =============
Net income per share $ .11 $ n/a $ .16
============= ============= =============
Weighted average shares outstanding 7,499,000 n/a 999,000 (6) 8,498,000
============= ============= =============
</TABLE>
See accompanying notes to pro forma condensed financial statements.
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SYNBIOTICS CORPORATION
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
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NOTE (1)
Adjustment to record the acquisition of Rhone Merieux Diagnostic Business.
Consideration paid comprises $10,541,000 of debt obtained from Banque Paribas,
net of issuance costs and $2,747,000 of Synbiotics Corporation mandatorily
redeemable common stock (759,000 shares issued at $4.1875 per share), net of
issuance costs. In addition, Synbiotics issued to Banque Paribas a warrant to
purchase 240,000 of Synbiotics Corporation common stock for $.01 per share.
NOTE (2)
Adjustment to reduce Rhone Merieux Diagnostic Business net sales to reflect
distributor mark downs. Prior to the acquisition, the products were sold
direct, whereas subsequent to the acquisition the products will be sold
primarily through distributors.
NOTE (3)
Adjustment to record amortization of the goodwill acquired from Rhone Merieux
Diagnostic Business based on a 15 year amortization period.
NOTE (4)
Adjustment to record interest expense related to the debt obtained from Banque
Paribas. $5,000,000 of the debt bears interest at prime plus .75% (effectively
9.25%) and the remaining $5,000,000 of the debt bears interest at prime plus
1.25% (effectively 9.75%). If the interest rate were to increase by 1/8%, the
pro forma interest expense would increase by $13,000 and $6,000 for the year
ended December 31, 1996 and the six months ended June 30, 1997, respectively.
If the interest rate were to decrease by 1/8%, the pro forma interest expense
would decrease by $13,000 and $6,000 for the year ended December 31, 1996 and
the six months ended June 30, 1997, respectively.
NOTE (5)
Adjustment to record foreign income tax provision (at 40%) related to the
incremental taxable income from Rhone Merieux Diagnostic Business, and to reduce
the U.S. tax provision for the tax effect of additional deductible amounts
related to goodwill amortization and interest expense.
NOTE (6)
Adjustment to reflect increase in weighted average shares outstanding due to the
issuance of Synbiotics Corporation mandatorily redeemable common stock and
common stock warrants (Note (1)).
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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.
SYNBIOTICS CORPORATION
Date: April 2, 1999 /s/ Michael K. Green
--------------------------------
Michael K. Green
Vice President of Finance and Chief
Financial Officer
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