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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 19, 1998
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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):
FEBRUARY 12, 1998
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SUNRISE MEDICAL INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 0-12744 95-3836867
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification Number)
2382 FARADAY AVENUE
CARLSBAD, CALIFORNIA 92008
(Address of Principal Executive Offices) (Zip Code)
(760) 930-1500
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS
On February 12, 1998, Sunrise Medical Inc. (the "Company"), SSTI
Acquisition, Inc., a wholly-owned subsidiary of the Company ("Sub"), and
Sentient Systems Technology, Inc. ("Sentient") entered into an Agreement and
Plan of Merger (the "Merger Agreement"), pursuant to which Sub will merge with
and into Sentient, and Sentient will become a wholly-owned subsidiary of the
Company (the "Merger"). Pursuant to the Merger Agreement, in connection with
the Merger, the Company will issue approximately 2.7 million shares of its
Common Stock, subject to adjustment in the event of fluctuations in stock price
prior to the closing date. The closing is expected to occur no later than April
30, 1998, subject to the satisfaction or waiver by the parties of certain
conditions, including the receipt of governmental approvals, the approval of the
Sentient shareholders, and other conditions of closing.
On February 13, 1998, the Company issued a press release announcing
the execution of the Merger Agreement. The press release is filed as an exhibit
hereto and is incorporated by reference herein.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits.
99.1 Press Release, dated February 13, 1998, issued by Sunrise Medical Inc.
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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.
SUNRISE MEDICAL INC.
By: /s/ S. Jaye
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Name: Steven A. Jaye
Title: Senior Vice President, General
Counsel and Secretary
Dated: February 18, 1998
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EXHIBIT 99.1
FOR IMMEDIATE RELEASE FEBRUARY 13, 1998
CONTACTS: Ted N. Tarbet (Financial) or Susan Noonan
Marcia P. Vaughan (Media) Noonan/Russo Communications
(760) 930-1500 (212) 696-4455 ext. 203
http//:www.sunrisemedical.com
SUNRISE MEDICAL ANNOUNCES ACQUISITION OF
SENTIENT SYSTEMS TECHNOLOGY, INC
CARLSBAD, CALIF. - Sunrise Medical Inc. (NYSE:SMD) today announced it
has signed an agreement to acquire Sentient Systems Technology, Inc. of
Pittsburgh, Pennsylvania, one of the world's leading manufacturers of
augmentative communication devices for people affected by speech disabilities.
Sunrise will issue common stock currently valued at $40 million in exchange for
all of the outstanding shares of Sentient in a transaction to be accounted for
under the pooling of interests method. The merger is expected to be completed
by April 30, 1998, subject to the receipt of governmental approvals, the
approval of the Sentient shareholders, and other customary conditions of
closing.
Sentient's sales were $14 million in its fiscal year ending September
30, 1997 and net income was $1.5 million, both of which are expected to grow
substantially in the current fiscal year. Sentient has been consistently cash
positive and is expected to have $2.4 million of cash on hand and no long-term
debt as of the closing. The acquisition is expected to depress earnings per
share slightly in Sunrise Medical's fourth quarter due to the one-time
transaction costs, but should be accretive to annual earnings per share
thereafter. Sunrise will issue approximately 2.7 million shares in connection
with this merger, subject to adjustment in the event of a material fluctuation
in stock price between now and the closing date.
Sentient Systems Technology develops and manufactures state-of-the-art
hardware and software products that benefit a wide range of individuals with
communication disabilities, including those suffering from physical and mental
disorders such as cerebral palsy, multiple
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PAGE TWO
SUNRISE MEDICAL ANNOUNCES ACQUISITION OF SENTIENT SYSTEMS TECHNOLOGY
sclerosis, ALS, stroke, traumatic brain injury and autism. Sentient's
proprietary voice augmentation technology, with its leading edge "predictive
language" capability, allows individuals with speech disorders to compose
sentences and communicate through a voice synthesizer faster and more easily
than competitive devices. At the core of Sentient's technology is advanced,
natural language processing software that utilizes constantly changing display
panels to speed sentence formation. Sentient markets its products through its
own 35-person salesforce directly to speech language pathologists and
occupational therapists, many of whom work in the same rehabilitation centers
where custom wheelchairs are specified.
Sentient introduced its first commercial speech device in 1991, the
DynaVox-Registered Trademark-, designed as a computer-based communication aid
for persons unable to speak. Today, its product line includes a family of
stand-alone devices, packaged in rugged but streamlined cases, that utilize a
color LCD display with touch panel, a high quality speech synthesizer, a long
life rechargeable battery, and Sentient designed proprietary electronics and
software. The DynaVox2-Registered Trademark- is designed primarily for
wheelchair users and comes with adaptive hardware for mounting on products like
Sunrise's Quickie 2 manual and Quickie P200 power wheelchairs. The
DynaMyte-Registered Trademark-, for ambulatory users, provides the same
sophisticated software but is packaged in a lightweight portable case. Both
units can be operated with a variety of input devices, such as touch screen,
mouse or head-activated switches. Sentient products incorporate wireless
infrared technologies that provide the user with environmental controls--the
ability to operate televisions, personal computers, telephones, lighting,
thermostats, or door locks. Sentient also sells separately packaged DynaVox
software that can be loaded on a personal computer.
The market potential for augmentative communication devices is
significant and largely untapped. Speech and language disorders affect 14
million Americans, while cognitive disorders affect still more. Target
end-users of these products include the approximately 830,000 persons with
neuromuscular disorders, many of whom are children, and those with speech
deficits among the 2.5 million people who have suffered from a stroke or head
injury. A major share of Sentient's products today are sold to school districts
and special education facilities for use by
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PAGE THREE
SUNRISE MEDICAL ANNOUNCES ACQUISITION OF SENTIENT SYSTEMS TECHNOLOGY
children. In June 1997 the U.S. Congress passed the Individual Disabilities
Education Act (IDEA), which covers approximately 1 million speech or language
impaired students. The law mandates federal funding to ensure the inclusion of
these children within mainstream public schools and requires that assistive
technology be considered in preparing an Individual Education Plan for each
covered pupil. Currently Medicare does not reimburse the elderly for a
prosthetic speech device, although it will pay for lower and upper limb
prostheses.
Sentient is currently owned by a group of shareholders that includes
company founders Tilden Bennett, 60, Sentient president, and Gary Kiliany, 36,
vice president and director of product development, along with several
Pittsburgh-area venture capital funds. The two principals have signed
three-year employment agreements and will stay on in the same positions under
Sunrise ownership. Sentient will operate as a free standing division of Sunrise,
remaining in Pittsburgh, and Bennett will report to chairman and president
Richard H. Chandler. Sentient shareholders were advised in the transaction by
Triangle Capital.
Commenting on the transaction, Chandler said, "Sentient's breakthrough
voice augmentation technology is at the cutting edge in harnessing
microprocessor power to meet the challenges facing people with speech
disabilities. We are enthused about the untapped market potential for their
products and are particularly excited about their introduction of a Spanish
language version in April 1998 as a first step toward global expansion. With
Sentient's high technology products and rapid growth rate, this business will be
an important addition to Sunrise Medical's portfolio of rehabilitation products
providing assistive technology for the disabled."
Tilden Bennett, Sentient president, commented, "This merger is an
exciting opportunity for Sentient Systems because of Sunrise Medical's financial
strength, global marketing capabilities, and strategic vision to accelerate the
growth of our business in the 21st century. Another benefit is that so many
users of Sentient's innovative speech devices are also wheelchair users,
offering an opportunity for coordinated new product designs. Our management
team is pleased that Sentient will remain in Pittsburgh and is likely to
increase its current employment levels after the merger is completed."
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PAGE FOUR
SUNRISE MEDICAL ANNOUNCES ACQUISITION OF SENTIENT SYSTEMS TECHNOLOGY
Sunrise Medical designs, manufactures and markets medical products
used in homecare and extended care settings that address the recovery,
rehabilitation and respiratory needs of the patient.
Sentient Systems Technology, founded in 1983, manufactures high
technology products that enable people with speech disabilities to communicate.
Based in Pittsburgh, the company has 75 employees.
# # #
THE COMPANY HAS MADE FORWARD-LOOKING STATEMENTS IN THIS RELEASE, INCLUDING: (I)
THE FUTURE SALES AND PROFITS OF SENTIENT; (II) SENTIENT'S CASH BALANCE AND LONG
TERM DEBT AT CLOSING; (III) THE IMPACT OF THE SENTIENT ACQUISITION ON THE FUTURE
EARNINGS PER SHARE OF SUNRISE; (IV) THE SIZE AND NATURE OF THE CURRENT AND
FUTURE MARKET FOR SENTIENT'S PRODUCTS; (V) THE APRIL INTRODUCTION OF THE SPANISH
LANGUAGE VERSION OF THE PRODUCT; AND (VI) THE INCREASE OF SENTIENT EMPLOYMENT IN
THE PITTSBURGH AREA. THESE STATEMENTS ARE ONLY PREDICTIONS. ACTUAL EVENTS OR
RESULTS MAY DIFFER MATERIALLY AS A RESULT OF RISKS AND UNCERTAINTIES FACING THE
COMPANY INCLUDING: (I) THE IMPACT OF COMPETITIVE PRODUCTS AND ACTIVITIES; (II)
INCREASED INDUSTRY PRICING PRESSURES; (III) DISRUPTIONS CAUSED BY THE COMPANY'S
CONSOLIDATIONS, REORGANIZATIONS AND RE-ENGINEERING EFFORTS; (IV) THE RISING COST
OF RAW MATERIALS; (V) PRODUCT DEVELOPMENT, COMMERCIALIZATION AND MARKET
ACCEPTANCE RISKS; (VI) REDUCTIONS IN GOVERNMENT FUNDING FOR PRODUCTS SOLD BY THE
COMPANY; (VII) UNFAVORABLE GOVERNMENTAL REGULATORY ACTIONS (SUCH AS BY THE FDA
IN THE U.S.); (VIII) RISKS AND UNCERTAINTIES ASSOCIATED WITH THE COMPANY'S
INTERNATIONAL ACTIVITIES; AND (IX) OTHER FACTORS REFERENCED IN SECURITIES AND
EXCHANGE COMMISSION FILINGS OF THE COMPANY. THE COMPANY DISCLAIMS ANY OBLIGATION
TO UPDATE ANY SUCH FACTORS OR TO ANNOUNCE PUBLICLY THE RESULT OF ANY REVISION TO
ANY OF THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS RELEASE, OR TO MAKE
CORRECTIONS TO REFLECT FUTURE EVENTS OR DEVELOPMENTS.
