-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IiPSHeysRU/+04E4XrAUOe7///h+vGkVG6KVynXajSPNy4M+piWxggYrD6x9HKxD /xcToIdmqd9iPoS2t3yvaQ== 0000950131-96-006311.txt : 19961216 0000950131-96-006311.hdr.sgml : 19961216 ACCESSION NUMBER: 0000950131-96-006311 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961001 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961213 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PATTERSON DENTAL CO CENTRAL INDEX KEY: 0000891024 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MEDICAL, DENTAL & HOSPITAL EQUIPMENT & SUPPLIES [5047] IRS NUMBER: 410886515 STATE OF INCORPORATION: MN FISCAL YEAR END: 0427 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-20572 FILM NUMBER: 96680322 BUSINESS ADDRESS: STREET 1: 1031 MENDOTA HEIGHTS ROAD CITY: ST PAUL STATE: MN ZIP: 55120-1419 BUSINESS PHONE: 6126861600 MAIL ADDRESS: STREET 1: 1100 EAST 80TH ST CITY: MINNEAPOLIS STATE: MN ZIP: 55450 8-K/A 1 FORM 8-K/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. FORM 8-K/A AMENDMENT NO. 1 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 PATTERSON DENTAL COMPANY (Exact name of registrant as specified in its charter) Minnesota 0-20572 41-0886515 --------- ------- ---------- (State or other jurisdiction (Commission File No.) (IRS Employer ID No.) of incorporation) 1031 Mendota Heights Road, St. Paul, Minnesota 55120 ---------------------------------------------------- (Address of principal executive offices) (612) 686-1600 -------------- (Registrant's telephone number, including area code) The undersigned hereby amends the following items of its Form 8-K Report filed October 15, 1996 as set forth on the pages attached hereto: Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (a) Financial statements of business acquired. Financial statements required to be filed pursuant to Item 7 of Form 8-K for Colwell (An operating division of Deluxe Corporation)/1/ (b) Pro forma financial information. Pro forma financial information required to be filed pursuant to Item 7 of Form 8-K reflecting the acquisition of Colwell (An operating division of Deluxe Corporation) (c) Exhibits 23(a) Consent of Deloitte & Touche LLP - ------------------------- /1/ The financial statements for Colwell present the net assets acquired and revenues and direct operating expenses of Colwell, an operating division of Deluxe Corporation, and are not intended to be a complete presentation of Colwell's financial position and results of operations. 2 COLWELL (AN OPERATING DIVISION OF DELUXE CORPORATION) FINANCIAL STATEMENTS Table of Contents
Page ---- Independent Auditors' Report 4 Statements of Net Assets Acquired as of December 31, 1995 and 1994 5 Statements of Revenues and Direct Operating Expenses for the Years ended December 31, 1995 and 1994 6 Notes to Financial Statements 7 Statements of Net Assets Acquired as of June 30, 1996 and 1995 (Unaudited) 11 Statements of Revenues and Direct Operating Expenses for the Six month periods ended June 30, 1996 and 1995 (Unaudited) 12 Notes to Financial Statements 13
3 INDEPENDENT AUDITORS' REPORT To the Board of Directors of Deluxe Corporation We have audited the accompanying statements of net assets acquired of Colwell, an operating division of Deluxe Corporation (the Seller), as of December 31, 1995 and 1994 and the related statements of revenues and direct operating expenses for the years then ended. These financial statements are the responsibility of the Seller's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits 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 audits provide a reasonable basis for our opinion. The accompanying statements were prepared to present the net assets acquired and revenues and direct operating expenses of Colwell, an operating division of the Seller, pursuant to the Purchase Agreement described in Note 1, and are not intended to be a complete presentation of Colwell's financial position and results of operations. In our opinion, the accompanying statements present fairly, in all material respects, the net assets acquired of Colwell as of December 31, 1995 and 1994 and its revenues and direct operating expenses for the years then ended pursuant to the Purchase Agreement described in Note 1, in accordance with generally accepted accounting principles. /s/ Deloitte & Touche LLP Minneapolis, Minnesota October 7, 1996 4 COLWELL (AN OPERATING DIVISION OF DELUXE CORPORATION) STATEMENTS OF NET ASSETS ACQUIRED DECEMBER 31, 1995 AND 1994 - --------------------------------------------------------------------------------
1995 1994 CURRENT ASSETS: Trade accounts receivable, less allowance for doubtful accounts of $126,000 and $123,000 in 1995 and 1994, respectively $ 6,565,356 $ 5,760,604 Inventory 1,697,484 2,094,108 Deferred advertising 1,128,542 1,253,750 Prepaid expenses and other current assets 32,810 164,709 ------------ ------------ Total current assets 9,424,192 9,273,171 PROPERTY, PLANT, AND EQUIPMENT: Land 227,368 227,368 Buildings and improvements 5,802,970 5,773,856 Machinery and equipment 10,862,575 10,568,014 ------------ ------------ 16,892,913 16,569,238 Less accumulated depreciation (11,129,755) (10,176,370) ------------ ------------ Total property, plant, and equipment 5,763,158 6,392,868 INTANGIBLES, net 6,268,000 7,342,000 ------------ ------------ Total assets 21,455,350 23,008,039 CURRENT LIABILITIES ASSUMED (1,500,000) (1,500,000) ------------ ------------ NET ASSETS ACQUIRED $ 19,955,350 $ 21,508,039 ============ ============
See notes to financial statements. 5 COLWELL (AN OPERATING DIVISION OF DELUXE CORPORATION) STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES YEARS ENDED DECEMBER 31, 1995 AND 1994 ------------------------------------------------------------------
1995 1994 NET SALES $56,079,040 $53,464,772 DIRECT OPERATING EXPENSES: Cost of sales 29,546,880 28,071,991 Selling, general, and administrative 24,248,935 26,107,131 ----------- ----------- Total direct operating expenses 53,795,815 54,179,122 ----------- ----------- EXCESS OF REVENUES OVER (UNDER) DIRECT OPERATING EXPENSES $ 2,283,225 $ (714,350) =========== ===========
See notes to financial statements. 6 COLWELL (AN OPERATING DIVISION OF DELUXE CORPORATION) NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1995 AND 1994 ------------------------------------------------------------------------------ 1. BASIS OF PRESENTATION Colwell, an operating division of Deluxe Corporation (the Seller), produces and sells insurance and billing forms, record-keeping and filing systems, reference materials, clinical supplies, and a variety of other products. The primary market segment is small health care providers, including medical, dental, and chiropractic offices. Basis of Presentation - The accompanying statements of net assets acquired and statements of revenues and direct operating expenses have been prepared pursuant to Section 11.03 of the Asset Purchase Agreement (the Purchase Agreement) between Patterson Dental Company (the Buyer) and the Seller dated September 12, 1996. Section 11.03 of the Purchase Agreement requires the Seller to prepare statements of net assets acquired as of December 31, 1995 and 1994 and statements of revenues and direct operating expenses for the years ended December 31, 1995 and 1994, determined in accordance with generally accepted accounting principles. The statements include all revenues and costs and expenses directly incurred by, or related to, Colwell, including depreciation and rental costs related to facilities used in the business and payroll-based employee benefits. Costs and expenses also include allocated charges for the corporate profit sharing and pension expense. The costs of administrative and marketing personnel and facilities in certain locations are shared with, and allocated among, other Deluxe Corporation business units. The statements do not reflect corporate income taxes or the cost of certain other corporate services provided, such as legal, treasury, certain information systems costs, tax planning, shareholder services, and financing. The various allocated costs and expenses, as described herein, are not necessarily indicative of the costs and expenses that would have resulted had Colwell been operated as a separate company. 7 2. SIGNIFICANT ACCOUNTING POLICIES Revenue Recognition - Substantially all revenues are recognized upon shipment of product to customers with appropriate provision for uncollectible accounts. Inventory - Inventory is included at the lower of cost, on the last-in, first-out (LIFO) method, or market. LIFO inventories at December 31, 1995 and 1994 were approximately $646,000 and $486,000, respectively, less than replacement cost. The cost of inventory includes material only, as the labor and overhead cost associated with processed inventory is deemed immaterial for capitalization by Colwell. Property, Plant, and Equipment - Property, plant, and equipment are stated at cost. Buildings with 40-year lives and machinery and equipment with lives of 5 to 11 years are generally depreciated using accelerated methods. Leasehold and building improvements are depreciated on a straight-line basis over the estimated useful life of the property or the life of the lease, whichever is shorter. Intangibles - Intangibles include a customer data file which the Seller purchased in 1985 when it acquired Colwell. The intangible is shown in the statements of net assets acquired, net of amortization determined on the straight-line basis. The amortization period is 15 years. Intangibles are as follows at December 31:
1995 1994 Cost $16,125,000 $16,125,000 Less accumulated amortization (9,857,000) (8,783,000) ----------- ----------- Intangibles, net $ 6,268,000 $ 7,342,000 =========== ===========
Impairment of Long-Lived Assets - Effective January 1, 1995, Colwell adopted Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. Colwell evaluates the recoverability of long-lived assets by measuring the unamortized balance of the long-lived assets against estimated future cash flows. At the time such evaluations indicate that undiscounted estimated future cash flows of certain long-lived assets are not sufficient to recover the carrying value of such assets, the assets will be adjusted to their fair value. Based on current evaluations, there were no adjustments to the carrying value of long-lived assets in 1995. 8 Deferred Advertising - In accordance with the provisions of American Institute of Certified Public Accountants' Statement of Position No. 93-7, Colwell estimates and defers certain costs related to direct-response advertising of its products. These costs consist of materials, production, postage, and design costs required to produce catalogs for Colwell's direct mail businesses. Such costs are amortized over periods (generally less than 12 months) that correspond to the estimated revenue stream of the individual catalogs. Actual results could differ from the estimates noted above. The total amount charged to expense for the years ended December 31, 1995 and 1994 was $4,073,352 and $5,159,588, respectively. Current Liabilities Assumed - Pursuant to Section 1.03 of the Purchase Agreement, the Buyer has agreed to assume up to $1,500,000 of certain of Colwell's liabilities. These liabilities include accrued profit sharing and vacation for those who are employed by Colwell immediately preceding the closing date and who are hired by the Buyer and other current liabilities. The financial statements reflect a total of $1,500,000 of liabilities at December 31, 1995 and 1994, as the total division assumable liabilities are in excess of the $1,500,000 at those dates. Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. LEASE COMMITMENTS Minimum future rental payments for leased equipment under noncancelable operating leases for the five years ending December 31, 2000 are approximately $130,000, $50,000, $22,000, $13,000, and $3,000. There are no lease commitments extending past the year 2000. Rental expense was $316,500 and $345,429 for 1995 and 1994, respectively. 4. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying value of accounts receivable and current liabilities assumed approximate fair value due to the short-term nature of these instruments. 5. RELATED-PARTY TRANSACTIONS Purchases of inventory from Deluxe Corporation divisions and affiliated companies were $2,554,000 and $2,327,000, respectively, for the years ended December 31, 1995 and 1994. 9 6. INVENTORY The following is a breakdown of inventory, by category, as of December 31:
1995 1994 Raw materials $2,329,220 $2,324,442 Semifinished goods 99,959 76,988 Finished goods 327,809 538,764 LIFO reserve (646,401) (486,300) Reserve for obsolescence (413,103) (359,786) ---------- ---------- $1,697,484 $2,094,108 ========== ==========
7. BENEFIT PLANS Colwell participated in the Deluxe Corporation Pension Plan, a defined contribution pension plan that covers substantially all employees of Colwell. Colwell's allocated pension expense was $740,040 and $795,526 for the years ended December 31, 1995 and 1994, respectively. Colwell also participates in the Seller's profit sharing plan. Colwell was allocated $1,110,061 and $1,193,288 for the years ended December 31, 1995 and 1994, respectively, of its share of corporate contributions under these plans. Expenses were allocated to Colwell based on calculations for each Colwell employee participating in the plans. 10 COLWELL (AN OPERATING DIVISION OF DELUXE CORPORATION)
STATEMENT OF NET ASSETS ACQUIRED JUNE 30, 1996 AND 1995 (UNAUDITED) ---------------------------------------------------------------------------------------- 1996 1995 CURRENT ASSETS: Trade accounts receivable, less allowance for doubtful accounts of $126,000 in 1996 and 1995 $ 6,235,686 $ 6,123,699 Inventory, net 1,532,069 1,959,617 Deferred advertising 703,448 997,513 Prepaid expenses and other current assets 32,480 35,506 ------------ ----------- Total current assets 8,503,683 9,116,335 PROPERTY PLANT & EQUIPMENT: Land 227,368 227,368 Buildings and improvements 5,802,970 5,802,970 Machinery and equipment 10,111,329 10,944,575 ------------ ----------- 16,141,667 16,974,913 Less accumulated depreciation (10,942,343) (10,727,625) ------------ ----------- Total property, plant, and equipment 5,199,324 6,247,288 INTANGIBLES, net 5,730,000 6,805,000 ------------ ----------- Total assets 19,433,007 22,168,623 CURRENT LIABILITIES - Assumed (1,500,000) (1,500,000) ------------ ----------- NET ASSETS ACQUIRED $ 17,933,007 $20,668,623 ============ ===========
See notes to financial statements. 11 COLWELL (AN OPERATING DIVISION OF DELUXE CORPORATION) STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED) ------------------------------------------------------------------------------
1996 1995 NET SALES $27,998,068 $27,167,155 DIRECT OPERATING EXPENSES: Cost of sales 14,299,852 14,526,650 Selling, general and administrative 11,130,529 12,558,410 ----------- ----------- Total direct operating expenses 25,430,381 27,085,060 ----------- ----------- EXCESS OF REVENUES OVER DIRECT OPERATING EXPENSES $ 2,567,687 $ 82,095 =========== ===========
See notes to financial statements. 12 COLWELL (AN OPERATING DIVISION OF DELUXE CORPORATION) NOTES TO FINANCIAL STATEMENTS SIX MONTHS ENDED JUNE 30, 1996 AND 1995 ------------------------------------------------------------------------------ 1. In the opinion of management, the accompanying unaudited financial statements contain all adjustments necessary to present fairly the net assets acquired as of June 30, 1996, and the results of revenues and direct operating expenses for the six months ended June 30, 1996 and 1995. Such adjustments are of a normal recurring nature. The results of revenues and direct operating expenses for the six months ended June 30, 1996 and 1995, are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the audited financial statements for the years ended December 31, 1995 and 1994 included herein. 13 PATTERSON DENTAL COMPANY Pro Forma Condensed Consolidated Financial Statements The following unaudited pro forma condensed consolidated financial statements give effect to the acquisition by Patterson Dental Company (the "Company") of Colwell (an operating division of Deluxe Corporation) ("Colwell") using the purchase method of accounting, and are based on estimates and assumptions set forth below and in the notes to such statements, which include pro forma adjustments. These pro forma financial statements are based upon the historical financial statements of Patterson Dental Company, adjusted to give effect to the acquisition of Colwell on October 1, 1996. A pro forma consolidated balance sheet has not been presented herein as the acquisition is reflected in the October 26, 1996 Condensed Consolidated Balance Sheet of Patterson Dental Company. Such balance sheet reflects the application of purchase accounting adjustments to the historical balance sheet of Colwell. The aggregate purchase price of Colwell was $61.1 million. The pro forma Condensed Consolidated Statements of Income for the year ended April 27, 1996 and the six months ended October 26, 1996 give effect to the acquisition as if it had occurred at the beginning of the periods presented. Such statements are based on historical statements of revenues and direct operating expenses of Colwell for the year ended December 31, 1995 and five months ended September 30, 1996. The operating results of Colwell are included in the Company's financial statements from the date of acquisition, October 1, 1996. The pro forma adjustments are based upon preliminary estimates, available information and certain assumptions that management deemed appropriate. Final purchase accounting adjustments may differ from the pro forma adjustments presented herein. The unaudited pro forma consolidated financial information does not profess to represent the Company's results of operations had the above transaction, in fact, occurred on these dates, or to project the Company's combined results of operations for any date or period. The pro forma consolidated financial information should be read in conjunction with the Company's historical financial statements and notes thereto. 14 PATTERSON DENTAL COMPANY Pro Forma Condensed Consolidated Statement of Income For the Year Ended April 27, 1996 (In Thousands, except per share amounts) (Unaudited)
Patterson Dental Pro forma Pro forma Company Colwell (a) Adjustments Consolidated -------- ----------- ----------- ------------ Net Sales $581,893 $56,079 $637,972 Cost of Sales 376,507 29,547 ($440) (b) 405,614 -------- ------- ------- -------- Gross Profit 205,386 26,532 440 232,358 Operating expenses 161,676 24,249 1,152 (c) 187,077 -------- ------- ------- -------- Operating income 43,710 2,283 (712) 45,281 Other (expense)income 1,998 -- (3,668) (d) (1,670) -------- ------- ------- -------- Income before income taxes 45,708 2,283 (4,380) 43,611 Income taxes 16,961 -- (817) (e) 16,144 -------- ------- ------- -------- Net income $ 28,747 $ 2,283 ($3,563) $ 27,467 ======== ======= ======= ======== Net income available to common shareholders $ 28,125 $ 2,283 ($3,563) $ 26,845 ======== ======= ======= ======== Earnings per common and common equivalent $1.31 $1.25 share Weighted average common and common equivalent 21,539 21,539 shares outstanding 15
PATTERSON DENTAL COMPANY Pro Forma Condensed Consolidated Statement of Income For the Six Months Ended October 26, 1996 (In Thousands, except per share amounts) (Unaudited)
Patterson Dental Pro forma Pro forma Company Colwell (a) Adjustments Consolidated ----------- ----------- ----------- ------------ Net Sales $304,071 $23,765 $327,836 Cost of Sales 196,782 11,531 ($265) (b) 208,048 -------- ------- ------- -------- Gross Profit 107,289 12,234 265 119,788 Operating expenses 86,257 9,106 (241) (c) 95,122 -------- ------- ------- -------- Operating income 21,032 3,128 506 24,666 Other (expense)income 1,024 -- (1,552) (d) (528) -------- ------- ------- -------- Income before income taxes 22,056 3,128 (1,046) 24,138 Income taxes 7,993 -- 812 (e) 8,805 -------- ------- ------- -------- Net income $ 14,063 $ 3,128 ($1,858) $ 15,333 ======== ======= ======= ======== Net income available to common shareholders $ 14,063 $ 3,128 ($1,858) $ 15,333 ======== ======= ======= ======== Earnings per common and common equivalent $0.65 $0.71 share Weighted average common and common equivalent 21,625 21,625 shares outstanding 16
PATTERSON DENTAL COMPANY Notes to Pro Forma Condensed Consolidated Financial Statements October 26, 1996 (Unaudited) Pro Forma Adjustments --------------------- (a) The financial statements for Colwell present the net assets acquired and revenues and direct operating expenses of Colwell, an operating division of Deluxe Corporation, and are not intended to be a complete presentation of Colwell's financial position and results of operations. (b) Reflects the elimination of the employee benefit plans of Deluxe and replacement with Patterson's ESOP, bonus and incentive programs; and additional depreciation expense related to the fair value of assets acquired. (c) Reflects the elimination of the employee benefit plans of Deluxe and replacement with Patterson's ESOP, bonus and incentive programs; additional depreciation and amortization expense related to the fair value of assets acquired, identifiable intangible assets (e.g., customer lists) and incremental goodwill; and adjustments for costs previously allocated from Deluxe. (d) Reflects additional interest expense and reduction in interest income. (e) Reflects additional income tax expense at the statutory rate based on the adjusted income of Colwell. 17 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. PATTERSON DENTAL COMPANY Dated: December 12, 1996 By : /s/ Ronald E. Ezerski ----------------------- Ronald E. Ezerski Vice President and Treasurer (Principal Financial Officer and Principal Accounting Officer) 18 EX-23.A 2 INDEPENDENT AUDITORS CONSENT INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 33-56764) pertaining to the 1992 Stock Option Plan, 1992 Director Stock Option Plan, Employee Stock Purchase Plan, and Employee Stock Ownership Plan and the Registration Statement (Form S-8 No. 333-03583) pertaining to the Patterson Dental Company Capital Accumulation Plan, of Patterson Dental Company of our report dated October 7, 1996 with respect to the Colwell financial statements included in the Patterson Dental Company's Form 8K/A. /s/ Deloitte & Touche LLP Minneapolis, Minnesota December 12, 1996 -----END PRIVACY-ENHANCED MESSAGE-----