<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-1
CURRENT REPORT
Filed pursuant to Section 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
February 7, 1997 (November 26, 1996)
(Date of Report (Date of earliest event reported))
ADVANCED MEDICAL, INC.
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(Exact name of registrant as specified in charter)
Delaware
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(State or other jurisdiction of incorporation)
33-26398
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(Commission File Number)
13-3492624
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(IRS Employer Identification No.)
10221 Wateridge Circle
San Diego, CA 92121
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(Address of principal executive officers)
(619)458-7000
(Registrant's telephone number, including area code)
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This report on Form 8-K/A-1 supplements the report on Form 8-K (the
"Form 8-K") filed with the Securities and Exchange Commission on December 10,
1996 by Advanced Medical, Inc., a Delaware corporation ("Advanced Medical" or
the "Registrant") to file pro forma financial statements reflecting the
historical consolidated financial statements of the Registrant and IVAC
Holdings, Inc. ("IVAC Holdings" or collectively with its subsidiaries other
than River Medical, Inc. ("River"), the operations of which were discontinued
in June 1996 (the "River Divestiture"), "IVAC").
ITEM 7. FINANCIAL STATEMENTS & EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
The required financial statements were previously filed in the
Form 8-K.
1
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(b) PRO FORMA FINANCIAL INFORMATION
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
The following Pro Forma Condensed Consolidated Balance Sheet at
September 30, 1996 reflects the historical consolidated balance sheets of
Advanced Medical and IVAC Holdings, adjusted to give effect to the
Transactions, as if such transactions had occurred at September 30, 1996. The
IVAC Holdings historical balance sheet at September 30, 1996 includes
adjustments required to record the River Divestiture, including the
write-down of River's assets to their estimated fair value and the accrual of
discontinuation costs of $6.2 million.
As of the date of closing, the Company will account for the Merger as a
purchase and all required purchase accounting adjustments to record assets
and liabilities at their estimated fair values will be made based on the
actual purchase price and actual levels of the IVAC Holdings assets acquired
and liabilities assumed. Management is in the process of completing the
valuation analysis of the assets acquired and liabilities assumed.
Accordingly, the final allocation of the purchase price could be materially
different from that presented in the accompanying Pro Forma Condensed
Consolidated Balance Sheet. The purchase price of the Merger is subject to
adjustment based on certain factors such as the total IVAC Holdings cash and
debt balances at the Merger Closing. Any adjustment to the purchase price
will affect the amount allocated to intangible assets and will affect the
amortization of intangibles in subsequent periods.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
The following Pro Forma Condensed Consolidated Statements of Operations
for the year ended December 31, 1995 is based on the respective historical
consolidated statements of operations of Advanced Medical and IVAC Holdings,
adjusted to give effect to the Transactions and the River Divestiture, as if
such transactions had occurred on January 1, 1995.
The following Pro Forma Condensed Consolidated Statement of Operations
for the nine months ended September 30, 1996 is based on the historical
unaudited results of operations of Advanced Medical and IVAC Holdings,
adjusted to give effect to the Transactions and the River Divestiture, as if
such-transactions had occurred on January 1, 1996.
The Pro Forma Condensed Consolidated Statements of Operations do not
reflect certain cost savings and synergies that management has identified
related to vendor consolidation and the elimination of duplicative costs for
functional areas and facilities.
The unaudited pro forma financial statements are based on assumptions
the Company believes are reasonable. Such unaudited pro forma financial data
should be read in conjunction with the Consolidated Financial Statements of
Advanced Medical and the respective accompanying notes thereto included in the
previously reported Form 10-K and the Consolidated Financial Statements of
IVAC Holdings and the respective accompanying notes thereto included in the
previously reported Form 8-K.
The following pro forma financial data are not necessarily indicative of
the Company's results of operations that might have occurred had such
transactions been completed at the beginning of the periods specified, and do
not purport to represent what the Company's consolidated results of
operations might be for any future period.
2
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PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
At September 30, 1996
-----------------------------------------------------------------------------
Advanced IVAC Transactions Company
Medical Holdings Combined Adjustments Pro Forma
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................. $ 2,971 $ 10,447 $ 13,418 $ 195,750 (A) $ 515
192,000 (B)
(230,250)(C)
(205,498)(E)
40,000 (F)
(1,701)(G)
12,500 (H)
(7,704)(I)
(8,000)(J)
Restricted cash and investement
securities.............................. $ 2,289 2,289 2,289
Securities available for sale............. 3,592 3,592 3,592
Receivables, net.......................... 24,783 52,469 77,252 77,252
Inventory................................. 20,339 39,646 59,985 10,000 (C) 69,985
Prepaid expenses and other current assets. 5,090 2,490 7,580 8,000 (C) 19,271
3,691 (K)
-------- -------- -------- --------
Total current assets................... 59,064 105,052 164,116 172,904
Restriced cash.................................. 12,500 12,500 ( 12,500)(H) -
Net investment in sales-type
and direct financing leases
and long-term contract receivables........... 13,559 18,232 31,791 31,791
Property, plant and equipment, net.............. 14,212 44,966 59,178 59,178
Other non-current assets........................ 10,634 1,626 12,260 6,250 (A) 45,474
8,000 (B)
20,000 (C)
(1,036)(E)
Intangible assets, net.......................... 50,053 21,105 71,158 244,091 (C) 315,249
-------- -------- -------- --------
Total assets........................... $160,022 $190,981 $351,003 $624,596
-------- -------- -------- --------
-------- -------- -------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................... $ 8,465 $ 13,703 $ 22,168 $ 22,168
Accrued expenses and other liabilities.... 15,134 49,643 64,777 (11,000)(C) 67,802
4,274 (E)
1,701 (G)
8,000 (J)
(6,000)(L)
Short-term debt and current portion of
long-term debt.......................... 149 17,534 17,683 (1,250)(A) 3,933
15,000 (E)
-------- -------- -------- --------
Total current liabilities............. 23,748 80,880 104,628 93,903
- -
Long-term debt.................................. 95,441 142,955 238,396 (200,750)(A) 422,864
(200,000)(B)
(2,192)(D)
(5,250)(C)
186,224 (E)
37,500 (G)
Other non-current liabilities................... 2,454 2,737 5,191 5,191
-------- -------- -------- --------
Total Liabilities..................... 121,643 226,572 348,215 521,958
Manditorily redeemable equity securities........ 7,704 7,704 7,704 (I) -
-------- --------
Common Stock and capital in excess of par....... 61,657 33,855 95,512 33,855 (C) 139,157
(40,000)(F)
(37,500)(G)
Accumulated deficit............................. (31,680) (70,166) (101,846) (70,166)(C) (37,217)
2,192 (D)
1,036 (E)
(3,691)(K)
6,000 (L)
Other stockholders' equity...................... 698 720 1,418 720 (C) 698
-------- -------- -------- --------
Total stockholders' equity.................... 30,675 (35,591) (4,916) 102,638
-------- -------- -------- --------
Total liabilities and
stockholders' equity........................ $160,022 $190,981 $351,003 $624,596
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
See accompanying notes to Pro Forma Condensed Consolidated Balance Sheet.
3
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NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(A) Reflects receipt of gross proceeds of $202,000 from the initial
borrowing under the New Credit Factility, net of issuance costs of $6,250
which have been included in other non-current assets.
New Credit Facility consists of the following:
Term loan facilities............. $200,000
Revolving credit facility (1).... 2,000
--------
Total New Credit Facility... $202,000
Current portion.................. 1,250
--------
Long-term........................ $200,750
--------
--------
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(1) The actual amount borrowed under the
revolving credit facility at the Merger
Closing related to the Transactions was
$4,200.
(B) Reflects receipt of gross proceeds of $200,000 from the issuance of the
Notes, net of $6,000 of selling commissions and $2,000 of offering expenses
which have been reflected as debt issuance costs and included in other
non-current assets.
(C) Reflects the allocation of the total Merger cost:
<TABLE>
<CAPTION>
<S> <C>
Cash Merger Consideration...................................... $ 224,500
Estimated transaction fees in addition to debt issuance costs.. 5,750
------------
Total cash payments in connection with Merger........... 230,250
Elimination of book value of net assets acquired:
Common stock and capital in excess of par...................... (33,855)
Accumulated deficit............................................ 70,166
Cumulative translation adjustment and other.................... (720)
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Net stockholders' deficit................................ 35,591
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Excess of cost over book value....................... $ 265,841
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------------
Allocation of excess cost over book value:
Amount assigned to inventory................................... $ 10,000
Deferred tax assets - current.................................. 8,000
Deferred tax assets - non current.............................. 20,000
Severance, bonus and restructuring related to IVAC personnel
and facilities (see Note (L) below for IMED restructuring
charges).................................................... (11,000)
Premium payable in conection with the Debt Tender Offer and
Consent Solicitation......................................... (5,250)
Amount assigned to Intangible assets........................... 244,091
------------
Total.......................................................... $ 265,841
------------
------------
</TABLE>
(D) Reflects the 10% redemption premium related to the 15% subordinated
debentures of Advanced Medical.
(E) Reflects the retirement of the following long-term and current debt
obligations and related accrued interest:
<TABLE>
<CAPTION>
Accrued
Current debt: Debt Interest Total
<S> <C> <C> <C>
IVAC existing credit facility .................................. $ 15,000 $ 165 $ 15,165
-------- ------ --------
Long term debt:
Existing Senior Notes (including redemption premium
and consent fees of $5,250)...................................... 105,250 3,248 108,498
Junior Subordinated Notes of IVAC Holdings........................... 37,324 - 37,324
Advanced Medical 15% subordinated debentures including 10%
redemption premium(1)............................................. 24,116 685 24,801
IMED Existing Credit Facility(2)..................................... 19,534 176 19,710
-------- ------ --------
Total long-term debt................................................. 186,224 4,109 190,333
-------- ------ --------
Total current and long-term debt..................................... $201,224 $4,274 $205,498
-------- ------ --------
-------- ------ --------
</TABLE>
(1) The Pro Forma Condensed Consolidated Balance Sheet also includes the
write-off of unamortized debt issuance costs of $339.
(2) The Pro Forma Condensed Consolidated Balance Sheet also includes the
write-off of related unamortized debt issuance costs of $697.
(F) Reflects the sale of 13,333,333 shares of Advanced Medical common stock to
Decisions, Inc. for $40,000.
(G) Reflects the conversion of $37,500 of convertible notes payable to
Decisons, Inc. in exchange for 26,088,806 shares of Advanced Medical Common
stock and payment of accrued interest payable related to the convertible
notes.
(H) Reflects reclassification of resticed cash to unrestricted cash for use
in the Transactions.
(I) Reflects the redemption of all of Advanced Medical's 10% and 15% prefered
stock and accrued dividends.
(J) Reflects $8,000 payment to Eli Lilly and Company which was made by IVAC
Holdings prior to the consumation of the Merger and was paid from existing
cash balances and/or with borrowings under IVAC's existing credit facility.
(K) Reflects income tax benefit at an estimated statutory rate of 40%
related to the following: (i) IMED restructuring costs of $6,000, (ii)
Advanced Medical write-off of unamortized debt issuance costs and
redemption premium related to Advanced Medical 15% subordinated
debentures and (iii) write-off of unamortized debt issuance costs
related to IMED's Existing Credit Facility.
(L) Reflects $6,000 nonrecurring restructuring charge related to IMED
facilities and severance payments.
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PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Year ended December 31, 1995
--------------------------------------------------------------------------------
River
Advanced IVAC Divestiture Transactions Company
Medical Holdings Combined Adjustments (A) Adjustments Pro Forma
----------- ---------- --------- --------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Net sales................................. $ 112,551 $ 240,971 $ 353,522 $ (794) $ 352,728
Cost of sales............................. 63,219 157,869 221,088 (5,357) 215,731
---------- ---------- ---------- ----------
Gross margin.............................. 49,332 83,102 132,434 136,997
---------- ---------- ---------- ----------
Selling and marketing..................... 16,567 43,994 60,561 (3,006) 57,555
General and administrative................ 10,661 28,381 39,042 (3,478) 8,136(B) 43,700
Research and development.................. 7,386 12,083 19,469 (790) 18,679
Purchased research and development........ - 22,883 22,883 (12,755) 10,128
Restructuring............................. - 5,944 5,944 (103) 5,841
Other operating expense, net.............. - 1,497 1,497 1,497
---------- ---------- ---------- ----------
Total operating expenses.............. 34,614 114,782 149,396 137,400
---------- ---------- ---------- ----------
Income (loss) from operations......... 14,718 (31,680) (16,962) (403)
---------- ---------- ---------- ----------
Other income (expense):
Interest income (C)................... 2,525 3,506 6,031 6,031
Interest expense...................... (8,153) (27,969) (36,122) 163 (37,784)(D) (45,740)
28,003 (E)
Other, net............................ 313 - 313 313
---------- ---------- ---------- ----------
(5,315) (24,463) (29,778) (39,396)
---------- ---------- ---------- ----------
Income (loss) before income taxes and
minority interests and extraordinary item. 9,403 (56,143) (46,740) (39,799)
Provision for (benefit from) income taxes. (9,374) (378) (9,752) 3,831 (1,007)(G) (6,928)
---------- ---------- ---------- ----------
Income (loss) before minority interests
and extraordinary item ................... 18,777 (55,765) (36,988) (32,871)
Minority interests in consolidated
subsidiaries.............................. (6,500) (6,500) (6,500)
Income (loss) before extraordinary item
and dividends and accretion on ---------- ---------- ---------- ----------- --------- ----------
manditorily redeemable preferred stock(H). $ 12,277 $ (55,765) $ (43,488) $ 21,027 $ (16,910) $ (39,371)
---------- ---------- ---------- ----------- --------- ----------
---------- ---------- ---------- ----------- --------- ----------
</TABLE>
See accompanying notes to Pro Forma Condensed Consolidated Statements
of Operations.
5
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PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1996
--------------------------------------------------------------------------------
River
Advanced IVAC Divestiture Transactions Company
Medical Holdings Combined Adjustments (A) Adjustments Pro Forma
----------------------------------- --------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Net sales............................ $81,770 $ 170,155 $251,925 $ (373) $ 251,552
Cost of sales........................ 44,731 98,836 143,567 (2,787) 140,780
---------- ---------- ---------- ----------
Gross margin......................... 37,039 71,319 108,358 110,772
---------- ---------- ---------- ----------
Selling and marketing................ 13,167 28,872 42,039 (819) 41,220
General and administrative........... 8,453 17,479 25,932 (719) 6,102 (B) 31,315
Research and development............. 5,773 7,663 13,436 (199) 13,237
Restructuring........................ - 17,396 17,396 (17,396) -
---------- ---------- ---------- ----------
Total operating expenses......... 27,393 71,410 98,803 85,772
---------- ---------- ---------- ----------
Income (loss) from operations.... 9,646 (91) 9,555 25,000
---------- ---------- ---------- ----------
Other income (expense):
Interest income (C).............. 2,812 2,146 4,958 (800)(F) 4,158
Interest expense................. (6,707) (13,730) (20,437) 121 (28,417)(D) (31,046)
17,687 (E)
Other, net....................... 255 - 255 255
---------- ---------- ---------- ----------
(3,640) (11,584) (15,224) (26,633)
---------- ---------- ---------- ----------
Income (loss) before income taxes.... 6,006 (11,675) (5,669) (1,633)
Provision for income taxes........... 3,218 2,434 5,652 2,782 (6,234)(G) 2,200
---------- ---------- ---------- --------- --------- ----------
Income (loss) before dividends and
accretion on mandatorily redeemable
preferred stock...................... $ 2,788 $ (14,109) $(11,321) $ 18,886 $(11,398) $ (3,833)
---------- ---------- ---------- --------- --------- ----------
---------- ---------- ---------- --------- --------- ----------
</TABLE>
See accompanying notes to Pro Forma Condensed Consolidated Statements of
Operations.
6
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NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(A) In June 1996, IVAC decided to discontinue River's operations and to
divest River's assets. River's primary assets include patents,
technologies, trade secrets, inventories and manufacturing equipment.
As a result of the River Divestiture, pro forma adjustments have been made
to eliminate the historical operating results of River and the related
income tax impact to IVAC Holdings.
(B) Reflects amortization of increased intangible assets (primarily goodwill)
using an estimated useful life of 30 years. No adjustment to cost of sales
has been made in the Pro Forma Condensed Consolidated Statements of
Operations related to the purchase accounting adjustment made to
inventory as it will result in a non-recurring increase to cost of sales
when such inventory is sold.
(C) Interest income consists of lease/contract interest income and interest
income on actual cash balances.
(D) Reflects interest expense related to the borrowings under the New Credit
Facility and the Notes:
<TABLE>
<CAPTION>
Year Nine Months
Ended Ended
Dec. 31, 1995 Sept. 30, 1996
<S> <C> <C>
New Credit Factility (at an assumed weighted average interest rate of 8.7%)(1).. $ 16,547 $ 12,489
Amortization of issuance costs.................................................. 937 703
Notes (at an interest rate of 9.75%)............................................ 19,500 14,625
Amortization of issuance costs.................................................. 800 600
------------------------------------
$ 37,784 $ 28,417
------------------------------------
------------------------------------
</TABLE>
- -------------------
(1) For the year ended December 31, 1995 and eight months of the nine months
ended September 30, 1996, excludes interest expense related to $11,000 of
borrowings under the New Credit Facility used to repay borrowings under
the Existing Credit Facility incurred in connection with the repurchase
of certain European distribution rights on August 30, 1996.
(E) Reflects elimination of interest expense, including amortization of debt
issuance costs in connection with the Refinancing, the Debt Tender Offer
and Consent Solicitation, and the Junior Notes Repayment:
<TABLE>
<CAPTION>
Year Nine Months
Ended Ended
Dec. 31, 1995 Sept. 30, 1996
<S> <C> <C>
IMED Existing Credit Facility..................................... $ 1,166 $ 1,055
Advanced Medical 15% subordinated debentures (1).................. 3,616 2,548
$37,500 convertible notes payable................................. 1,378 2,068
IVAC existing credit facility(2).................................. 3,286 1,188
Existing Senior Notes............................................. 1,465 7,465
Junior subordinated notes of IVAC Holdings........................ 3,961 3,363
Bridge Notes of IVAC Medical Systems(3)........................... 13,131 -
------------------------------------
$ 28,003 $ 17,687
------------------------------------
------------------------------------
</TABLE>
(1) The Advanced Medical 15% debentures were issued in connection with two
debt exchange transactions during 1995 whereby approximately $43,800 of
Advanced Medical 7-1/4% convertible subordinated debentures were exchanged
for approximately $21,900 of the 15% subordinated debentures ("Debt Exchange").
As a result, the elimination of interest expense above includes the
elimination of the actual interest expense and debt issuance costs
amortization on $43,800 of the Advanced Medical 7-1/4% convertible debentures
up through the time of exchange to 15% debentures.
(2) In addition to interest on the $15,000 of indebtedness outstanding at
September 30, 1996 under IVAC's existing credit facility that was repaid
in the Refinancing, the elimination of interest expense related to IVAC
includes interest on $14,000 of bank debt which was repaid with the proceeds
received from the issuance of the Existing Senior Notes by IVAC Medical
Systems during November 1995.
(3) Bridge Notes of IVAC Medical Systems were repaid in full with the
proceeds from the issuance of the Existing Senior Notes in November 1995.
Accordingly, all interest expense and write-off and amortization of debt
issuance costs related to the bridge notes have been eliminated in the Pro
Forma Condensed Consolidated Statements of Operations for the year ended
December 31, 1995.
Pro forma interest expense does not reflect interest savings attributable to
the repayment of approximately $25,000 principal amount of IVAC debt in
November 1995 with the proceeds of the sale of IVAC's San Diego manufacturing
and office facility. Assuming the sale had occurred at January 1, 1995,
interest expense would have been reduced by $3,159 for the year ended
December 31, 1995.
(F) Reflects elimination of interest income earned on the proceeds from a
$25,000 convertible note payable to Decisions Inc. received by Advanced
Medical in December 1995.
(G) Reflects adjustment to income tax expense related to the Transactions. The
pro forma income tax expense represents the expected income taxes on the pro
forma pretax income (loss) which is primarily foreign taxes, offset in 1995 by
an income tax benefit of $10,528 recognized by Advanced Medical resulting
from a release of the Company's valuation allowance on its deferred income
tax assets.
(H) For the year ended December 31, 1995, Advanced Medical recorded, as an
extraordinary item, a gain on early retirement of debt, net of taxes of
$15,177 in connection with the Debt Exchange.
7
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(c) EXHIBITS
The required exhibits were previously filed in the Form 8-K.
8
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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 thereunto duly authorized.
ADVANCED MEDICAL, INC.
(Registrant)
Date: February 7, 1997 By: /s/ Joseph W. Kuhn
---------------------------------
Joseph W. Kuhn
Executive Vice President
