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UNITED STATES
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 (Date of earliest event reported): January 5, 2001
CHRONIMED INC.
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(Exact name of registrant as specified in its charter)
MINNESOTA
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(State or other jurisdiction of incorporation)
0-19952 41-1515691
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(Commission File No.) (IRS Employer Identification No.)
10900 Red Circle Drive, Minnetonka, Minnesota 55343
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(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
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(952/979-3600)
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Item 2. Acquistion or Disposition of Assets
On January 5, 2001, Chronimed Inc. completed the sale of its Diagnostic Products
subsidiary, MEDgenesis, to Medisys PLC (London: MDY.L) of Woodbridge, Suffolk,
England for $39.975 million. The sale was completed in accordance with the Asset
Purchase Agreement dated December 1, 2000, as amended by Amendment to Asset
Purchase Agreement. The Asset Purchase Agreement and Amendment are filed with
this report as Exhibits 2.1 and 2.2, respectively.
The transferred assets consisted principally of production equipment, leasehold
improvements and other tangible property used in the Diagnostic Products
business, intangible property including goodwill and royalties, trade accounts
receivable, and inventory. The $39.975 million received from the sale was
comprised of $30.475 million in cash and $9.500 million in Medisys PLC common
stock. The sale price is subject to certain adjustments based on the closing
date balance sheet under the provisions of the Asset Purchase Agreement. The
sales price was determined through arms-length negotiations between Chronimed
and Medisys. Chronimed also received a fairness opinion on the transaction from
an investment banker.
There are no material relationships between Medisys and Chronimed or between
Medisys and any directors, officers, or associates of any directors or officers
of Chronimed.
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
The Chronimed unaudited pro forma financial statements included below
reflect adjustments to the Company's historical financial statements
that give effect to the $39.975 million sale of Chronimed's Diagnostic
Products subsidiary, MEDgenesis, to Medisys PLC.
The Pro Forma (unaudited) Consolidated Balance Sheet as of September 29,
2000 presents financial information of the Company as if the sale
occurred on September 29, 2000. The Pro Forma Balance Sheet combines the
unaudited Balance Sheet as of September 29, 2000 previously presented in
the quarterly report on Form 10-Q with the adjustments that give effect
to the sales transaction.
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The Pro Forma (unaudited) Consolidated Statements of Income for the
quarter ended September 29, 2000 and for the fiscal year ended June 30,
2000 present the Company's results of operations as if the sales
transaction occurred at the beginning of the period presented. The Pro
Forma Statement of Income for the period ended September 29, 2000
combines the unaudited Statement of Income, as previously presented in
the quarterly report on Form 10-Q for first quarter fiscal 2001, with
the adjustments that give effect to the sales transaction. The Pro Forma
Statement of Income for the period ended June 30, 2000 combines the
audited Statement of Income as previously presented in the annual report
on Form 10-K for fiscal year 2000, with the adjustments that give effect
to the sales transaction. The historical statements classified the
Diagnostic Products business as discontinued operations. Accordingly, no
pro forma adjustments are necessary on the face of the Pro Forma
Statements of Income. Assumptions regarding the investment of sale
proceeds and related interest income are included in the notes to the
Unaudited Pro Forma Consolidated Statements of Income.
The pro forma adjustments are based on available information and
assumptions deemed reasonable by management. In the opinion of
management, all adjustments considered necessary for fair presentation
have been included. The following pro forma statements should be read
with the accompanying notes. They should also be read with the
historical financial statements and related notes included in the Annual
Report on Form 10-K for the fiscal year ended June 30, 2000, and the
Quarterly Report on Form 10-Q for the three months ended September 29,
2000.
These pro forma statements are not necessarily indicative of the results
that actually would have occurred if the sale had been in effect as of
and for the periods presented or what may be achieved in the future.
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CHRONIMED INC.
PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
SEPTEMBER 29, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
Pro Forma
Chronimed Inc. Adjustments Pro Forma
-------------- ----------- ----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 187 $ 30,475(1) $ 30,662
Available-for-sale securities - 9,500(2) 9,500
Accounts receivable, net 45,890 - 45,890
Income taxes receivable 238 - 238
Inventory 6,149 - 6,149
Other current assets 874 - 874
Deferred taxes 1,311 - 1,311
--------- --------- ---------
Total current assets 54,649 39,975 94,624
Property and equipment:
Property and equipment 14,077 - 14,077
Allowance for depreciation (7,632) - (7,632)
--------- --------- ---------
6,445 - 6,445
Goodwill, net 8,620 8,620
Net assets of discontinued operations 10,554 (10,554)(3) -
Deferred taxes 508 - 508
Other assets 130 - 130
--------- --------- ---------
Total assets $ 80,906 $ 29,421 $ 110,327
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,483 - 10,483
Accrued expenses 1,788 13,810(4) 15,598
--------- --------- ---------
Total current liabilities 12,271 13,810 26,081
Shareholders' equity:
Preferred Stock - -
Common Stock, issued and outstanding shares--
12,147 121 121
Additional paid-in capital 52,839 52,839
Retained earnings 15,596 15,690 (5) 31,286
--------- --------- ---------
68,556 15,690 84,246
Accumulated other comprehensive income --
Unrealized gain on available-for-sale securities of
discontinued operations 79 (79)(3) -
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Total shareholders' equity 68,635 15,611 84,246
--------- --------- ---------
Total liabilities and shareholders' equity $ 80,906 $ 29,421 $ 110,327
========= ========= =========
</TABLE>
See accompanying notes to consolidated pro forma financial statements.
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Notes to Unaudited Pro Forma Consolidated Balance Sheet
The following pro forma adjustments have been made to the unaudited pro forma
balance sheet as of September 29, 2000:
(1) Reflects cash proceeds received from the sale of the Diagnostic Products
subsidiary.
(2) Reflects Medisys stock received from sale held as available for sale
securities.
(3) Reflects sale of the Diagnostic Products subsidiary assets to Medisys.
(4) Represents estimated income tax liability on the gain on sale and accrued
transaction and other related costs.
(5) Represents the estimated gain, net of tax, and retained earnings impact
from the sale. The following shows the calculation of the estimated gain
from the sales transaction:
(in thousands)
Purchase price proceeds $ 39,975
Less estimated transaction and other related costs (3,350)
Less estimated net book value of assets (10,475)
Estimated gain before income taxes 26,150
Less estimated income taxes (10,460)
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Estimated gain $ 15,690
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CHRONIMED INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
QUARTER ENDED SEPTEMBER 29, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
Pro Forma
Chronimed Inc. Adjustments Pro Forma
-------------- ----------- ---------
<S> <C> <C> <C>
Revenues $ 64,419 $ - $ 64,419
Cost of revenues 54,696 - 54,696
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Gross profit 9,723 - 9,723
Operating expenses
Selling and marketing 1,105 - 1,105
General and administrative 7,207 - 7,207
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Total operating expenses 8,312 - 8,312
Income from continuing operations 1,411 - 1,411
Interest income, net 2 - 2
Other income 21 - 21
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Income from continuing operations before income taxes 1,434 - 1,434
Income tax (expense) (573) - (573)
--------- ------- ---------
Net income from continuing operations $ 861 - $ 861
Net income per share
Basic income per share from continuing operations $ 0.07 $ 0.07
Basic weighted-average shares 12,147 12,147
Diluted income per share from continuing operations $ 0.07 $ 0.07
Diluted weighted-average shares 12,149 12,149
</TABLE>
See accompanying notes to consolidated pro forma financial statements.
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CHRONIMED INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
YEAR ENDED JUNE 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
Pro Forma
Chronimed Inc. Adjustments Pro Forma
-------------- ----------- ---------
<S> <C> <C> <C>
Revenues $ 225,887 $ - $ 225,887
Cost of revenues 185,606 - 185,606
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Gross profit 40,281 - 40,281
Operating expenses
Selling and marketing 4,455 - 4,455
General and administrative 31,851 - 31,851
Other expense - asset write down 5,500 - 5,500
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Total operating expenses 41,806 - 41,806
(Loss) from continuing operations (1,525) - (1,525)
Interest (expense), net (191) - (191)
(Loss) from continuing operations before income taxes (1,716) - (1,716)
Income tax benefit 438 - 438
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Net (loss) from continuing operations $ (1,278) $ - $ (1,278)
Net loss per share
Basic loss per share from continuing operations $ (0.10) $ (0.10)
Basic weighted-average shares 12,116 12,116
Diluted loss per share from continuing operations $ (0.10) $ (0.10)
Diluted weighted-average shares 12,116 12,116
</TABLE>
See accompanying notes to consolidated pro forma financial statements.
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Notes to Unaudited Pro Forma Consolidated Statements of Income
The following describes the pro forma adjustments made to the unaudited pro
forma statements of income for the three months ended September 29, 2000 and the
year ended June 30, 2000:
o Pro forma adjustments only include adjustments from continuing
operations before nonrecurring charges and credits directly
attributable to the transaction. In addition, only the portion of the
income statement through "income from continuing operations" is
required to be shown on the pro forma statements of income. The
Diagnostic Products subsidiary has been reported as discontinued
operations on the historical statements and no adjustments are
required to give effect to the sale on the pro forma statements of
income.
o Material nonrecurring charges and credits and related tax effects
directly attributable to the transaction are disclosed separately. See
Note (5) to the Pro Forma Consolidated Balance Sheet for disclosure
related to the gain on sale and the related tax effect.
o Interest income from the investment of proceeds from the transaction
is not included as an adjustment on the face of the Pro Forma
Consolidated Statements of Income. See the note below for the related
disclosure.
The Company intends to use the net proceeds from the sales transaction to make
additional investments in the business. For pro forma purposes, estimated
interest income from investments associated with excess cash from the sales
transaction has been calculated based on the following assumptions:
o Excess cash was invested on the date of sale in short-term government
securities.
o The transaction and other costs and the income tax liability were paid
on the date of sale.
o The $9.500 million common stock received in the sales transaction was
held for the entire period presented.
o The income tax rate is 40%.
o The excess cash available was calculated as follows:
(in thousands)
Cash proceeds from sales transaction $ 30,475
Less estimated transaction and other related costs (3,350)
Less estimated income taxes (10,460)
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Estimated excess cash $ 16,665
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Based on the above assumptions, the following shows the estimated
interest income from investments associated with the excess cash from
the sales transaction had the transaction occurred at the beginning of
the period presented:
<TABLE>
<CAPTION>
(in thousands) Interest
Cash Interest Interest Income Tax Income,
Period Invested Rate Income Expense net of tax
------ -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended June 30, 2000 (52 weeks) $16,665 5.4% $900 ($360) $540
Quarter Ended September 29, 2000 (13 weeks) $16,665 6.2% $258 ($103) $155
</TABLE>
(c) Exhibits
2.1 Asset Purchase Agreement dated December 1, 2000 between Chronimed Inc.
and Medisys PLC without exhibits and schedules. (Incorporated by
reference from Exhibit 2.1 in the Company's Form 8-K filed December
18, 2000).
2.2 January 5, 2001, Amendment to Asset Purchase Agreement.
99.1 Press release dated January 8, 2001 announcing the closing of the sale
of Chronimed's Diagnostic Products subsidiary to Medisys PLC.
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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 of the
undersigned thereunto duly authorized.
CHRONIMED INC.
(Registrant)
Date: January 19, 2001
By: /s/ Henry F. Blissenbach
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Henry F. Blissenbach
Chief Executive Officer and
Chairman of the Board of Directors
/s/ Gregory H. Keane
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Gregory H. Keane
Vice President and Chief Financial
Officer
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
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2.1 Asset Purchase Agreement dated December 1, 2000 between Chronimed
Inc. and Medisys PLC without exhibits and schedules. (Incorporated
by reference from Exhibit 2.1 in the Company's Form 8-K filed
December 18, 2000).
2.2 January 5, 2001, Amendment to Asset Purchase Agreement
99.1 Press release dated January 8, 2001 announcing the closing of the
sale of Chronimed's Diagnostic Products subsidiary to Medisys PLC.
