<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-KA-1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 4, 1997 (March 21, 1997)
-----------------------------
DIAGNOSTIC HEALTH SERVICES, INC.
Delaware 0-21758 22-2960048
- -------- ------- ----------
(State or other (Commission File (IRS Employer
jurisdiction of Number) ID Number)
incorporation)
2777 Stemmons Freeway, Suite 1525, Dallas, Texas 75207
-------------------------------------------------------------
(Address of principal executive offices)
(214) 634-0403
-------------------------------------------------------------
(Registrant's telephone number, including area code)
-------------------------------------------------------------
(Former name or former address, if changed since last report.)
This first amendment to the Company's report on Form 8-K, originally
dated April 4, 1997, is being filed for the purposes of providing and including
(a) the required special-purpose statements of Diagnostic Imaging Services, Inc.
related to the assets acquired and liabilities assumed, (b) the combined pro
forma financial information, and (c) the consent of Simonton, Kutac & Barnidge,
L.L.P., independent public accountants.
Consistent with the foregoing, only Item 7 of the report on Form 8-K
is being amended, and the financial statements, pro forma financial information
and accountants' consent are attached hereto.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
- --------------------------------------------------------------------------
(a) Special-purpose financial statements of Diagnostic Health Services, Inc.
1. Statements of assets acquired and liabilities assumed from Diagnostic
Imaging Services, Inc. as of December 31, 1996 and 1995.
2. Statements of operations related to assets acquired and liabilities
assumed from Diagnostic Imaging Services, Inc. for the years ended
December 31, 1996 and 1995.
3. Statements of cash flows related to assets acquired and liabilities
assumed from Diagnostic Imaging Services, Inc. for the years ended
December 31, 1996 and 1995.
(b) Pro forma financial information.
(c) The following Exhibits are filed as part of this Form 8-KA-1:
1. Consent of Simonton, Kutac & Barnidge, L.L.P.
<PAGE>
ITEM 7 (a)
SPECIAL PURPOSE FINANCIAL STATEMENTS OF
DIAGNOSTIC IMAGING SERVICES, INC.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
----------------------------
To the Board of Directors
of Diagnostic Health Services, Inc.
We have audited the accompanying special-purpose statements of assets acquired
and liabilities assumed by Diagnostic Health Services, Inc. ("the Company") from
Diagnostic Imaging Services, Inc. ("DIS") as of December 31, 1996, and the
related special-purpose statements of operations and cash flows for the years
ended December 31, 1996 and 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying special-purpose financial statements were prepared for the
purpose of presenting the assets acquired and liabilities assumed pursuant to an
asset purchase agreement dated March 1, 1997 (consummated March 21, 1997),
between the Company and DIS as discussed in Note 1, and are not intended to be a
presentation of financial position, results of operations, and cash flows of the
Company in accordance with generally accepted accounting principles.
In our opinion, the special-purpose financial statements referred to above
present fairly, in all material respects, the assets acquired and liabilities
assumed from DIS as of December 31, 1996, and the statements of operations and
cash flows for the years ended December 31, 1996 and 1995 on the basis of
accounting described in Note 2.
/s/ Simonton, Kutac & Barnidge, L.L.P.
Simonton, Kutac & Barnidge, L.L.P.
Houston, Texas
June 16, 1997
<PAGE>
DIAGNOSTIC HEALTH SERVICES, INC. AND SUBSIDIARIES
-------------------------------------------------
STATEMENTS OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
-----------------------------------------------------
FROM DIAGNOSTIC IMAGING SERVICES, INC.
--------------------------------------
<TABLE>
<CAPTION>
ASSETS
------
December 31, December 31,
1996 1995
----------- -----------
<S> <C> <C>
Current Assets:
Accounts receivable:
Trade, net of allowance for doubtful
accounts of $0, respectively $ 112,350 $ 110,000
----------- ----------
Total Current Assets 112,350 110,000
----------- ----------
Property & Equipment:
Office furniture and equipment 48,058 48,058
Machinery and service equipment 3,156,511 2,941,301
Less: Accumulated depreciation and amortization (1,212,245) (918,231)
----------- ----------
Total Property & Equipment 1,992,324 2,071,128
----------- ----------
Total Assets $ 2,104,674 $2,181,128
=========== ==========
LIABILITIES & NET ASSETS
------------------------
Current Liabilities:
Current capital lease obligations $ 396,804 $ 297,135
----------- ----------
Total Current Liabilities 396,804 297,135
----------- ----------
Long-term capital lease obligations 1,209,956 1,606,760
----------- ----------
Total Liabilities 1,606,760 1,903,895
----------- ----------
Net Assets 497,914 277,233
----------- ----------
Total Liabilities and Net Assets $ 2,104,674 $2,181,128
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DIAGNOSTIC HEALTH SERVICES, INC. AND SUBSIDIARIES
-------------------------------------------------
STATEMENTS OF OPERATIONS RELATED TO ASSETS ACQUIRED AND LIABILITIES ASSUMED
---------------------------------------------------------------------------
FROM DIAGNOSTIC IMAGING SERVICES, INC.
--------------------------------------
<TABLE>
<CAPTION>
For the For the
Year Ended Year Ended
December 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Gross revenues $3,767,465 $4,231,842
---------- ----------
Expenses:
General & administrative 30,624 19,531
Salaries & employee benefits 1,864,567 2,074,961
Legal & professional 67,264 14,538
Rent & utilities 95,973 96,921
Taxes & insurance 154,098 170,941
Technical operating expenses 382,877 209,863
Depreciation and amortization 294,015 423,186
---------- ----------
Total operating expenses 2,889,418 3,009,941
---------- ----------
Income from operations 878,047 1,221,901
---------- ----------
Other expense:
Other expense 133,792 121,277
Interest expense 98,431 68,250
---------- ----------
Total other expense 232,223 189,527
---------- ----------
Income before taxes 645,824 1,032,374
Income tax expense 219,580 351,007
---------- ----------
Net income $ 426,244 $ 681,367
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DIAGNOSTIC HEALTH SERVICES, INC. AND SUBSIDIARIES
-------------------------------------------------
STATEMENTS OF CASH FLOWS RELATED TO ASSETS ACQUIRED AND LIABILITIES ASSUMED
---------------------------------------------------------------------------
FROM DIAGNOSTIC IMAGING SERVICES, INC.
--------------------------------------
<TABLE>
<CAPTION>
For the For the
Year Ended Year Ended
December 31, December 31,
1996 1995
------------- -------------
<S> <C> <C>
Cash Flows from Operations:
Net income $ 426,244 $ 681,367
Adjustments to Reconcile Net Income to
Net Cash Provided by Operations:
Depreciation and amortization 294,015 423,186
Increase in accounts receivable (2,350) (9,991)
Decrease in accounts payable (205,564) (124,107)
--------- ---------
Net Cash Provided by Operations 512,345 970,455
--------- ---------
Cash Flows from Investing Activities:
Cash payments for the purchase of property (55,612) (617,828)
--------- ---------
Net Cash Used by
Investing Activities (55,612) (617,828)
--------- ---------
Cash Flows from Financing Activities:
Payments on capital lease obligations (456,733) (352,627)
--------- ---------
Net Cash Used in Financing Activities (456,733) (352,627)
--------- ---------
Net increase (decrease) in cash -- --
Cash, beginning of year -- --
--------- ---------
Cash, end of year $ -- $ --
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DIAGNOSTIC HEALTH SERVICES, INC. AND SUBSIDIARIES
-------------------------------------------------
NOTE 1 - BUSINESS AND ASSET ACQUISITION FROM DIAGNOSTIC IMAGING SERVICES, INC.
- ------------------------------------------------------------------------------
("DIS")
- -------
Effective March 1, 1997, the Company through its SoCal Diagnostic Services, Inc.
subsidiary, purchased substantially all of the operating assets of the
ultrasound division of Diagnostic Imaging Services, Inc. ("DIS"). The acquired
business includes a mobile/fixed ultrasound business servicing clients in San
Diego, Orange and Los Angeles Counties of California. The purchase price paid
was $6,519,475 (subject to post-closing adjustment), which was paid entirely in
cash. In addition, SoCal assumed capital lease obligations, financing
agreements and other commitments related to the fixed assets purchased in the
aggregate principal amount of $1,519,261.
NOTE 2 - BASIS OF PRESENTATION
- ------------------------------
The special-purpose financial statements included herein do not include all
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles.
In the opinion of management, the special-purpose financial statements include
all necessary adjustments for the fair presentation of the statements of assets
acquired and liabilities assumed and the related statements of operations and
cash flows for the periods noted therein.
The statements of operations for all periods presented reflect allocations of a
proportionate share of general and administrative expenses incurred by DIS.
Management believes that the allocation methods are reasonable and that
allocated costs and expenses approximate what such amounts would be if DIS was
operated on a stand-alone basis.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Equipment --- Equipment is carried at cost. Depreciation is calculated on a
straight-line basis over the estimated useful life of the asset or over the
lease term, if shorter. Lease terms are generally five to seven years for
equipment and furniture.
NOTE 4 - LEASES
- ---------------
The Company, as lessee, has entered into and/or assumed various non-cancelable
leases for machinery, service equipment, and vehicles. The following assets,
subject to capital leases, are included in the balance sheet under the
corresponding asset categories at December 31, 1996.
<PAGE>
DIAGNOSTIC HEALTH SERVICES, INC. AND SUBSIDIARIES
-------------------------------------------------
NOTE 4 - LEASES (CONTINUED)
- ---------------------------
Future minimum lease payments under non-cancelable leases at December 31, 1996
are as follows:
<TABLE>
<CAPTION>
For the Years Ending Capital
December 31, Leases
---------------------- -----------
<S> <C>
1997 $ 521,476
1998 515,976
1999 488,476
2000 447,770
----------
Total minimum lease payments 1,973,698
Less: amount representing interest (366,938)
----------
Present value of minimum lease payments 1,606,760
----------
Less: current portion (396,804)
----------
Long-term capital lease obligation $1,209,956
==========
</TABLE>
Rent expense during the years ended December 31, 1996 and 1995, for all
operating leases was $58,699 and $68,864, respectively, and is included in
operating expenses.
<PAGE>
DIAGNOSTIC HEALTH SERVICES, INC. AND SUBSIDIARIES
-------------------------------------------------
PRO-FORMA BALANCE SHEET (UNAUDITED)
-----------------------------------
DECEMBER 31, 1996
-----------------
ASSETS
------
<TABLE>
<CAPTION>
Diagnostic Diagnostic
Health Imaging Pro-Forma Pro-Forma
Services Services Adjustments Combined
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 229,547 $ -- $ -- $ 229,547
Short-term investments 5,000,000 -- (2,019,475) 2,980,525
Accounts receivable, net 11,458,590 112,350 -- 11,570,940
Contracts receivable-current 1,317,146 -- -- 1,317,146
Prepaid expenses 1,359,596 -- -- 1,359,596
Deferred tax asset 57,876 -- -- 57,876
----------- ----------- ----------- -----------
Total Current Assets 19,422,755 112,350 (2,019,475) 17,515,630
----------- ----------- ----------- -----------
Fixed Assets:
Property and equipment 21,274,620 3,204,569 (1,212,245) 23,266,944
Less: accumulated depreciation (5,425,437) (1,212,245) 1,212,245 (5,425,437)
----------- ----------- ----------- -----------
Total Fixed Assets 15,849,183 1,992,324 -- 17,841,507
----------- ----------- ----------- -----------
Other Assets:
Deposits and other 958,391 -- -- 958,391
Deferred acquisition costs 164,199 -- -- 164,199
Contracts receivable 1,739,587 -- -- 1,739,587
Goodwill 15,022,858 -- 6,021,561 21,044,419
Non-compete agreements 1,586,818 -- 1,000,000 2,586,818
Less: accumulated amortization (1,423,418) -- -- (1,423,418)
----------- ----------- ----------- -----------
Total Other Assets 18,048,435 -- 7,021,561 25,069,996
----------- ----------- ----------- -----------
Total Assets $53,320,373 $ 2,104,674 $ 5,002,086 $60,427,133
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DIAGNOSTIC HEALTH SERVICES, INC. AND SUBSIDIARIES
-------------------------------------------------
PRO-FORMA BALANCE SHEET (UNAUDITED), CONTINUED
----------------------------------------------
DECEMBER 31, 1996
-----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
Diagnostic Diagnostic
Health Imaging Pro-Forma Pro-Forma
Services Services Adjustments Combined
------------ ---------- ------------ ------------
<S> <C> <C> <C> <C>
Current Liabilities:
Accounts payable $ 1,957,758 $ -- $ -- $ 1,957,758
Accrued expenses 1,534,551 -- -- 1,534,551
Current portion of long-term debt 1,991,824 -- 1,100,000 3,091,824
Current lease obligations 2,154,035 396,804 -- 2,550,839
Notes payable 1,572,000 -- -- 1,572,000
Other current liabilities 195,000 -- -- 195,000
----------- ---------- ---------- -----------
Total Current Liabilities 9,405,168 396,804 1,100,000 10,901,972
Long-term debt 7,081,745 -- 4,400,000 11,481,745
Long-term lease obligations 4,865,190 1,209,956 -- 6,075,146
Other liabilities 933,872 -- -- 933,872
Deferred tax liability 1,057,779 -- -- 1,057,779
----------- ---------- ---------- -----------
Total Liabilities 23,343,754 1,606,760 5,500,000 30,450,514
----------- ---------- ---------- -----------
Stockholders' equity:
Preferred stock, $0.001 par value,
authorized 3,000,000 shares;
issued and outstanding 648,986 shares;
$4.5 million liquidation preference 649 -- -- 649
Common stock, $.001 par value,
authorized 15,000,000 shares;
issued 8,400,762 shares; outstanding
8,167,503 shares 8,401 -- -- 8,401
Intercompany due to parent -- 497,914 (497,914) --
Additional paid-in-capital 27,617,425 -- -- 27,617,425
Retained earnings 2,567,195 -- -- 2,567,195
Foreign currency translation adjustment (5,900) -- -- (5,900)
Stockholder receivable (103,500) -- -- (103,500)
Treasury stock (at cost) (107,651) -- -- (107,651)
----------- ---------- ---------- -----------
Total Stockholders' Equity 29,976,619 497,914 (497,914) 29,976,619
----------- ---------- ---------- -----------
Total Liabilities and Stockholders' Equity $53,320,373 $2,104,674 $5,002,086 $60,427,133
=========== ========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DIAGNOSTIC HEALTH SERVICES, INC. AND SUBSIDIARIES
-------------------------------------------------
PRO-FORMA STATEMENT OF OPERATIONS (UNAUDITED)
---------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
<TABLE>
<CAPTION>
Diagnostic Diagnostic
Health Imaging Pro-Forma Pro-Forma
Services Services Adjustments Combined
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Gross Revenues $24,171,286 $3,767,465 $ -- $27,938,751
----------- ---------- ----------- -----------
Expenses:
General & administrative 1,385,305 30,624 -- 1,415,929
Salaries & employee benefits 11,898,905 1,864,567 -- 13,763,472
Legal & professional 177,756 67,264 -- 245,020
Rent & utilities 389,533 95,973 -- 485,506
Taxes & insurance 420,375 154,098 -- 574,473
Technical operating expenses 3,158,037 382,877 -- 3,540,914
Provision for doubtful accounts 40,970 -- -- 40,970
Depreciation and amortization 2,796,865 294,015 -- 3,090,880
----------- ---------- ----------- -----------
Total operating expenses 20,267,746 2,889,418 -- 23,157,164
----------- ---------- ----------- -----------
Income from operations 3,903,540 878,047 -- 4,781,587
Other income (expense):
Other income (expense) 486,704 (133,792) -- 352,912
Interest expense (869,601) (98,431) -- (968,032)
----------- ---------- ----------- -----------
Total other income (expense) (382,897) (232,223) -- (615,120)
----------- ---------- ----------- -----------
Income before income tax expense 3,520,643 645,824 -- 4,166,467
Income tax expense 1,061,560 219,580 -- 1,281,140
----------- ---------- ----------- -----------
Net income $ 2,459,083 $ 426,244 $ -- $ 2,885,327
=========== ========== =========== ===========
Earnings per share:
Primary $ 0.32 $ 0.06 $ 0.00 $ 0.38
=========== ========== =========== ===========
Fully diluted $ 0.31 $ 0.06 $ 0.00 $ 0.36
=========== ========== =========== ===========
Weighted average common shares:
Primary 7,738,414 7,738,414 7,738,414 7,738,414
=========== ========== =========== ===========
Fully diluted 8,133,401 8,133,401 8,133,401 8,133,401
=========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DIAGNOSTIC HEALTH SERVICES, INC. AND SUBSIDIARIES
-------------------------------------------------
NOTES TO PRO-FORMA FINANCIAL STATEMENTS
---------------------------------------
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
Effective March 1, 1997, the Company through its SoCal Diagnostic Services, Inc.
subsidiary, purchased substantially all of the operating assets of the
ultrasound division of Diagnostic Imaging Services, Inc. ("DIS"). The acquired
business includes a mobile/fixed ultrasound business servicing clients in San
Diego, Orange and Los Angeles Counties of California. The purchase price paid
was $6,519,475 (subject to post-closing adjustment), which was paid entirely in
cash. In addition, SoCal assumed capital lease obligations, financing
agreements and other commitments related to the fixed assets purchased in the
aggregate principal amount of $1,519,261.
The pro-forma financial statements included herein do not include all
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles.
In the opinion of management, the pro-forma financial statements include all
necessary adjustments for the fair presentation of the balance sheets and the
related statements of operations for the periods noted therein.
The balance sheet shows pro-forma adjustments to reflect the borrowing of
$5,500,000 senior bank debt, from the Company's acquisition credit facility
("Credit Facility") with Texas Commerce Bank, which was required to complete the
purchase transaction. Borrowings under the Credit Facility are secured by
substantially all of the assets of the Company (including the capital stock of
the Company's subsidiaries) and bear interest at one of two variable rates
selected by the Company based upon (i) the reserve adjusted LIBOR rate plus a
margin ranging from 1.75% to 2.5%, or (ii) the greater of the Bank's prime rate
or the federal funds rate plus 0.50%, plus a margin ranging from 0.25% to 1.00%.
The statements of operations for the period presented reflect no adjustments.
Management believes that the amounts presented are reasonable and approximate
what such amounts would be on a combined basis.
<PAGE>
DIAGNOSTIC HEALTH SERVICES, INC. AND SUBSIDIARIES
-------------------------------------------------
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 hereto duly authorized.
DIAGNOSTIC HEALTH SERVICES, INC.
(Registrant)
Dated: June 20, 1997 By: /s/ BRAD A. HUMMEL
----------------------------------------
Brad A. Hummel, President and
Chief Operating Officer
<PAGE>
ITEM 7(c)
EXHIBITS
<PAGE>
EXHIBIT 1
- ---------
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------------------
We consent to the use in this Form 8-KA-1 of our report dated June 16, 1997
relating to the Statement of Assets Acquired and Liabilities Assumed from
Diagnostic Imaging Services, Inc. as of December 31, 1995 and 1996 and the
Statements of Operations and Cash Flows for the years ended December 31, 1995
and 1996.
/s/ Simonton, Kutac & Barnidge, L.L.P.
Simonton, Kutac & Barnidge, L.L.P.
Houston, Texas
June 20, 1997
