-----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, VbRzRigmai9+f3WRbMfET8pyvPkgfBhNNbEfvOLTp7jJmOTrveCJBppAFnf3OYMW OdPXPJduF9RjzwlYHW9GoA== 0000950152-96-005295.txt : 19961023 0000950152-96-005295.hdr.sgml : 19961022 ACCESSION NUMBER: 0000950152-96-005295 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960813 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961021 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NCS HEALTHCARE INC CENTRAL INDEX KEY: 0001004990 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DRUG STORES AND PROPRIETARY STORES [5912] IRS NUMBER: 341816187 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-27602 FILM NUMBER: 96645734 BUSINESS ADDRESS: STREET 1: 3201 ENTERPRISE PARKWAY STREET 2: SUITE 2200 CITY: BEACHWOOD STATE: OH ZIP: 44122 MAIL ADDRESS: STREET 1: 1400 MCDONALD INVESTMENT CENTER STREET 2: 800 SUPERIOR AVE CITY: CLEVELAND STATE: OH ZIP: 44114 8-K/A 1 NCS HEALTHCARE, INC 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- FORM 8-K/A-1 CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report: August 13, 1996 --------------- (Date of earliest event reported) NCS HEALTHCARE, INC. -------------------- (Exact name of Registrant as specified in its charter) Delaware 0-027602 34-1816187 - ---------------------------- ----------- ----------------- (State or other jurisdiction (Commission (I.R.S. employer of incorporation) file number) identification no.) 3201 Enterprise Parkway, Suite 220, Beachwood, Ohio 44122 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (216) 514-3350 -------------- 2 The undersigned Registrant hereby amends the following items, financial statements, exhibits or other portions of its Current Report on Form 8-K dated August 13, 1996 as set forth in the pages attached hereto: "Item 7. Financial Statements, Pro Forma Financial Information and Exhibits" is hereby amended and restated to include historical and pro forma financial information required in connection with the acquisition of Thrifty Medical Systems by the Registrant. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. - ---------------------------------------------------------------------------- (a) Financial Statements of Businesses Acquired. -------------------------------------------- Thrifty Medical Systems Financial Statements Report of Independent Auditors Combined Balance Sheet at June 30, 1996 Combined Statement of Income for the year ended June 30, 1996 Combined Statement of Cash Flows for the year ended June 30, 1996 Notes to Combined Financial Statements (b) Pro Forma Financial Information. -------------------------------- Pro Forma Consolidated Balance Sheet Pro Forma Consolidated Statement of Income (c) Exhibits. ---------
Sequential Exhibit No. Description Page No. - ----------- ----------- -------- 2.1 Asset Purchase Agreement, dated August 13, 1996, by and among * Thrifty Medical of Tulsa, L.L.C., an Oklahoma limited liability company, Willis V. Smith, Charles Oliver and NCS HealthCare of Oklahoma, Inc., an Oklahoma corporation. 2.2 Agreement of Merger, dated August 13, 1996, by and among Northside * Pharmacy, Inc., an Oklahoma corporation, Willis V. Smith, Charles Oliver, the Willis Vernon Smith Unitrust Dated August 8, 1996, NCS HealthCare of Oklahoma, Inc., an Oklahoma corporation, and the Registrant. 2.3 Stock Purchase Agreement, dated August 13, 1996, by and among the * Willis Vernon Smith Unitrust Dated August 8, 1996, Charles Oliver, Willis V. Smith and the Registrant. 99.1 Employment Agreement, dated as of August 13, 1996, by and between * NCS HealthCare of Oklahoma, Inc., an Oklahoma corporation, and Willia V. Smith.
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Sequential Exhibit No. Description Page No. - ----------- ----------- -------- 99.2 Employment Agreement, dated as of August 13, 1996, by and between * NCS HealthCare of Oklahoma, Inc., an Oklahoma corporation, and Charles Oliver. 99.3 Employment Agreement, dated as of August 13, 1996, by and between * NCS HealthCare of Oklahoma, Inc., an Oklahoma corporation, and Gail Benjamin. - ---------------------------- * Previously filed.
3 4 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. NCS HEALTHCARE, INC. By: /s/Jeffrey R. Steinhilber -------------------------- Jeffrey R. Steinhilber, Senior Vice President and Chief Financial Officer Date: October 21, 1996 4 5 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholders of NCS HealthCare, Inc. We have audited the accompanying combined balance sheet of Thrifty Medical Systems (Systems) as of June 30, 1996, and the related combined statements of income and cash flows for the year then ended. These financial statements are the responsibility of Systems' 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. In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial position of Thrifty Medical Systems at June 30, 1996, and the combined results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Cleveland, Ohio August 26, 1996 6 THRIFTY MEDICAL SYSTEMS COMBINED BALANCE SHEET JUNE 30, 1996 ASSETS CURRENT ASSETS Cash and cash equivalents.................................................... $ 1,560 Accounts receivable, less allowance for doubtful accounts of $327,300........ 2,529,786 Inventories, less obsolescence reserve of $125,000........................... 967,536 Deferred income taxes........................................................ 135,500 Other........................................................................ 5,753 ---------- Total current assets........................................................... 3,640,135 PROPERTY AND EQUIPMENT Fixtures and equipment....................................................... 1,275,222 Land, building and improvements.............................................. 363,545 Vehicles..................................................................... 440,684 ---------- 2,079,451 Less accumulated depreciation................................................ 916,449 ---------- 1,163,002 ---------- TOTAL ASSETS................................................................... $4,803,137 ==========
See accompanying notes. 7 THRIFTY MEDICAL SYSTEMS COMBINED BALANCE SHEET JUNE 30, 1996 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable............................................................. $ 658,323 Accrued payroll.............................................................. 63,736 Income taxes payable......................................................... 356,100 Accrued expenses and other................................................... 36,004 Notes payable to principal shareholders...................................... 352,236 Current portion of long-term debt............................................ 1,567,935 ---------- Total current liabilities............................................ 3,034,334 Long-term debt, excluding current portion...................................... 406,649 STOCKHOLDERS' EQUITY Common stock, no par value; 500 shares authorized, issued and outstanding.... 500 Retained earnings............................................................ 1,361,654 ---------- 1,362,154 ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................................... $4,803,137 ==========
See accompanying notes. 8 THRIFTY MEDICAL SYSTEMS COMBINED STATEMENT OF INCOME YEAR ENDED JUNE 30, 1996 Revenues...................................................................... $10,985,666 Cost of revenues.............................................................. 5,800,923 ----------- Gross profit.................................................................. 5,184,743 Selling, general and administrative expenses.................................. 4,475,562 ----------- Operating income.............................................................. 709,181 Interest expense.............................................................. 159,265 ----------- Income before income taxes.................................................... 549,916 Income tax expense............................................................ 220,600 ----------- Net income.................................................................... $ 329,316 ===========
See accompanying notes. 9 THRIFTY MEDICAL SYSTEMS COMBINED STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 1996 OPERATING ACTIVITIES Net income.................................................................... $ 329,316 Depreciation................................................................ 278,256 Provision for doubtful accounts............................................. 356,793 Provision for inventory obsolescence reserve................................ 43,000 Deferred income taxes....................................................... (23,200) Changes in operating assets and liabilities: Accounts receivable...................................................... (868,867) Inventories.............................................................. (344,099) Other assets............................................................. 565 Accounts payable......................................................... 27,461 Accrued payroll and income taxes payable................................. 18,245 Income taxes payable..................................................... 243,800 Accrued expenses and other............................................... 34,243 ----------- Net cash provided by operating activities..................................... 95,513 INVESTING ACTIVITIES Capital expenditures for property, plant and equipment........................ (358,562) ----------- Net cash used in investing activities......................................... (358,562) FINANCING ACTIVITIES Proceeds from additional debt................................................. 651,030 Repayments of debt............................................................ (390,404) ----------- Net cash provided by financing activities..................................... 260,626 ----------- Net decrease in cash and cash equivalents..................................... (2,423) Cash and cash equivalents at beginning of year................................ 3,983 ----------- CASH AND CASH EQUIVALENTS AT END OF YEAR...................................... $ 1,560 =========== INTEREST PAID................................................................. $ 159,265 =========== TAXES PAID.................................................................... $ 0 ===========
See accompanying notes. 10 THRIFTY MEDICAL SYSTEMS NOTES TO COMBINED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 1996 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF BUSINESS Thrifty Medical of Tulsa, LLC which is a limited liability company, Northside Pharmacy, Inc., a C Corporation, and Thrifty Medical Supply, Inc., a C Corporation are under common control and are combined as Thrifty Medical Systems (Systems). All entities operate in one business segment providing a broad range of health care services primarily to long-term care, assisted living facilities and other institutional settings. These services include pharmacy, pharmacy consulting, infusion therapy and home care services. On August 13, 1996 NCS Healthcare, Inc. purchased substantially all of the assets of Thrifty Medical Supply of Tulsa, LLC and all of the outstanding stock of Northside Pharmacy, Inc. and Thrifty Supply, Inc. REVENUE RECOGNITION Revenue is recognized when products or services are provided to the customer. A significant portion of Systems' revenues from sales of pharmaceutical and medical products are reimbursable from third-party payors (principally Medicaid and Medicare). Systems monitors its receivables from these reimbursement sources under policies established by management and reports such revenues at the net realizable amount expected to be received from these third-party payors. In addition, an allowance for doubtful accounts is provided for the estimated losses that will be incurred in the collection of outstanding accounts receivable balances. Estimated losses are based on a review of the current status of outstanding accounts receivable balances. CASH EQUIVALENTS Systems considers all investments in highly liquid instruments with original maturities of three months or less at the date purchased to be cash equivalents. Investments in cash equivalents are carried at cost which approximates market value. INVENTORIES Inventories consist primarily of purchased pharmaceuticals and medical supplies and are stated at the lower of cost or market, determined using primarily the first-in, first-out (FIFO) method. PROPERTY AND EQUIPMENT Property and equipment are on the basis of cost. Depreciation (including amortization of capital leased assets) on property and equipment is computed using an accelerated method for all property and equipment over the estimated useful lives of the assets or lease period, whichever is less. INCOME TAXES Systems follows Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. This accounting standard requires that the liability method be used in accounting for income taxes. Under this accounting method, deferred income taxes are determined based on the differences between the financial reporting basis and the tax basis of assets and liabilities and are measured using the enacted tax rates and laws that apply in the periods in which the deferred income tax asset or liability is expected to be realized or settled. 11 THRIFTY MEDICAL SYSTEMS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS 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 liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results can differ from these estimates. 2. LONG-TERM DEBT Long-term debt consists of the following: Notes payable due in monthly installments through October, 1998 at interest rates ranging from 8.49% to 10.25%.................. $ 828,199 9.5% notes payable due in monthly installments through January, 2000........................................................ 681,238 Credit facility up to $100,000 at 9.5% due July, 1996.................. 96,000 8.0% notes payable due in October, 1996................................ 22,442 Various capital lease agreements due in monthly installments through October, 1996 at interest rates ranging from 9.25% to 10.25%............................................................... 331,354 Other.................................................................. 15,351 ---------- Total long-term debt................................................... 1,974,584 Less: current portion.................................................. 1,567,935 ---------- LONG-TERM PORTION...................................................... $ 406,649 ==========
The future maturities of long-term debt are as follows: Fiscal Years Ending June 30: 1997............................................. $1,567,935 1998............................................. 247,220 1999............................................. 101,303 2000............................................. 58,126 ---------- $1,974,584 ==========
3. INCOME TAX EXPENSE Income tax expense for the year ended June 30, 1996 consists of:
CURRENT DEFERRED TOTAL -------- -------- -------- Federal............................................. $204,800 $(18,600) $186,200 State............................................... 39,000 (4,600) 34,400 -------- -------- -------- $243,800 $(23,200) $220,600 ======== ======== ========
Systems' deferred income tax asset is due to the temporary effects of the allowance for doubtful accounts and accrued expenses. The differences between the statutory federal income tax rate of 34% and the effective income tax rate of 40% is due primarily to state income taxes, net of federal benefit. 12 THRIFTY MEDICAL SYSTEMS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) 4. OPERATING LEASES Systems is obligated under several operating leases primarily for real estate and machinery. Future minimum lease payments under noncancelable operating leases as of June 30, 1996 are as follows: Year Ending June 30: 1997............................................. $ 66,683 1998............................................. 45,472 1999............................................. 26,202 2000............................................. 660 2001............................................. 660 -------- $139,677 ========
Rent expense for Systems was $198,123 for the year ended June 30, 1996. 5. RELATED PARTY TRANSACTIONS Systems leases certain primary operating facilities from its principal shareholder under a month-to-month operating lease agreement. Systems paid the principal shareholder $59,300 of rent expense for the year ended June 30, 1996. Systems has non-interest bearing demand notes payable to its principal shareholders amounting to $352,236 at June 30, 1996. 6. 401(K) PLAN Systems maintains a 401(k) plan covering all eligible employees which allows for both employer and employee contributions. Systems' contributions to the plan and related expense recorded approximated $6,000 for the year ended June 30, 1996. 13 PRO FORMA CONSOLIDATED FINANCIAL DATA The following unaudited Pro Forma Consolidated Balance Sheet as of June 30, 1996 and Consolidated Statement of Income for the year ended June 30, 1996 are based on the historical consolidated financial statements of the Company. The Consolidated Balance Sheet is adjusted to give effect to acquisitions completed subsequent to June 30, 1996 and prior to August 28, 1996, and to the sale of 3,650,000 shares of Class A Common Stock by the Company pursuant to a registered public offering in September 1996 and the application of the estimated net proceeds therefrom as if these events had occurred on June 30, 1996, but does not give effect to borrowings of approximately $3.1 million occurred subsequent to August 28, 1996. The Pro Forma Consolidated Statement of Income is adjusted to give effect to the completion of acquisitions completed subsequent to June 30, 1995 and prior to August 28, 1996, and to the sale by the Company in February 1996 of 4,476,000 shares of Class A Common Stock and the application of net proceeds therefrom as if these events had occurred as of July 1, 1995. The Pro Forma Consolidated Statements of Income combine the historical operations of the Company with the historical operations of the acquired businesses prior to the dates the Company made such acquisitions, using the purchase method of accounting. The pro forma operating results are not necessarily indicative of the operating results that would have been achieved had the acquisitions actually occurred at July 1, 1995. These Pro Forma Consolidated Financial Statements are based on the assumptions set forth in the notes to such statements. PRO FORMA CONSOLIDATED BALANCE SHEET (1) JUNE 30, 1996 (IN THOUSANDS)
ASSETS Historical NCS Pro Forma HealthCare and Acquired Offering Pro Forma as Subsidiaries Companies (A) Pro Forma Adjustments(B) Adjusted ------------ ------------- --------- -------------- -------- Current assets: Cash and cash equivalents.......... $ 21,460 $(17,892) $ 3,568 $102,892 $106,460 Accounts receivable, net........... 27,762 5,200 32,962 --- 32,962 Inventories........................ 7,487 2,763 10,250 --- 10,250 Prepaid expenses and other assets.. 2,484 205 2,689 --- 2,689 ------- -------- ------- ------- ------- Total current assets............. 59,193 (9,724) 49,469 102,892 152,361 Property, plant and equipment, net.... 10,283 2,727 13,010 --- 13,010 Goodwill, net......................... 39,101 26,930 66,031 --- 66,031 Other assets, net..................... 2,091 1,309 3,400 3,400 ------- -------- ------- ------- ------- Total assets....................... $110,668 $ 21,242 $131,910 $102,892 $234,802 ======= ======== ======= ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable................... $ 4,968 $ 719 $ 5,687 $ --- $ 5,687 Accrued expense and other current liabilities...................... 5,088 1,639 6,727 --- 6,727 Current portion of long term debt.. 801 5,196 5,997 (4,000) 1,997 -------- -------- ------- ------- ------- Total current liabilities........ 10,857 7,554 18,411 (4,000) 14,411 Long-term debt, excluding current portion............................ 1,961 3,088 5,049 --- 5,049 Convertible subordinated debentures... 6,549 --- 6,549 --- 6,549 Minority interests.................... 201 --- 201 --- 201 Stockholders' equity: Preferred stock.................... --- --- --- --- --- Common Stock, par value $.01 per share: Class A........................... 56 3 59 39 98 Class B........................... 66 --- 66 (3) 63 Paid-in capital.................... 84,907 10,597 95,504 106,856 202,360 Retained earnings.................. 6,071 --- 6,071 --- 6,071 -------- -------- -------- -------- -------- Total stockholders' equity........ 91,100 10,600 101,700 106,892 208,592 -------- -------- -------- -------- -------- Total liabilities and stockholders' equity............. $110,668 $ 21,242 $131,910 $102,892 $234,802 ======== ======== ======== ======== ======== - ----------------- (1) See accompanying Notes to Pro Forma Consolidated Balance Sheet.
14 NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET JUNE 30, 1996 (A) Reflects acquisitions completed subsequent to June 30, 1996 and prior to August 28, 1996 by the Company, all of which were accounted for under the purchase method, at an aggregate purchase price of $36,705,000. (B) Reflects the sale of the 3,650,000 shares of Class A Common Stock by the Company pursuant to a registered public offering in September 1996 and the receipt and application of the proceeds therefrom as follows: (IN THOUSANDS) --------------
Gross proceeds from the offering.................... $113,150 Underwriting discounts and commissions......... (5,658) Estimated expenses of the offering.................. (600) ------- Net proceeds ....................................... 106,892 Repayment of notes payable.......................... (4,000) ------- Net increase in cash and cash equivalents........... $102,892 =======
Also reflects the conversion, by certain Selling Stockholders, of 196,268 shares of Class B Common Stock into an equal number of shares of Class A Common Stock in connection with the registered public offering. 15 PRO FORMA CONSOLIDATED STATEMENT OF INCOME (1) YEAR ENDED JUNE 30, 1996 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL ---------------------------------- NCS HEALTHCARE ACQUIRED PRO FORMA PRO AND SUBSIDIARIES COMPANIES(B) ADJUSTMENTS FORMA ---------------- ------------ ----------- ----- Revenues.................................... $113,281 $64,255 $ --- 177,536 Cost of revenues............................ 82,415 48,430 --- 130,845 --------- ------- ------ -------- Gross profit................................ 30,866 15,825 --- 46,691 Selling, general and administrative expenses.................................. 22,236 11,132 381(C) 33,749 Special compensation........................ 2,811(A) --- --- 2,811 ----- ------- ------ -------- Operating income (loss)..................... 5,819 4,693 (381) 10,131 Interest expense............................ (2,282) (567) 1,244(D) (1,605) Interest income............................. 671 --- (671)(D) --- ------- ------- ------- -------- Income before income taxes.................. 4,208 4,126 192 8,526 Income tax expense.......................... 1,852 1,814 84 3,750 ----- ------- ------ -------- Net income.................................. $2,356 $ 2,312 $ 108 $ 4,776 ====== ======= ====== ======== Net income per share........................ $ 0.26 $ 0.38 ======= ======== Shares used in the computation.............. 8,971 12,695 ===== ======== - ------------------- (1) See accompanying Notes to Pro Forma Consolidated Statement of Income
2 16 NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME YEAR ENDED JUNE 30, 1996 (IN THOUSANDS) (A) Represents a one-time, non-recurring charge in connection with the termination of performance incentive agreements with prior owners of certain acquired companies. (B) The historical statement of income data for the acquired companies for the year ended June 30, 1996 represents the results of operations of such companies from July 1, 1995 to the earlier of their respective dates of acquisition or June 30, 1996. Each of the acquisitions has been accounted for as a purchase. Accordingly, the results of the operations of each such acquired company are included in the Company's results of operations from the date of acquisition. The table below presents the details of the historical operations of the acquired companies. The details of the historical operations of the acquired companies for the periods from July 1, 1995 to the earlier of their respective dates of acquisition or June 30, 1996 are as follows:
ACQUIRED COMPANY (DATE OF ACQUISITION) -------------------------------------------------------------------------------- Uni-Care IPAC Thrifty Others Others (May 15, (August 1, (August 13, (Fiscal (Fiscal 1996) 1996) 1996) 1996) 1997) Total ----------- ------------- ------------- ------ ------ ----- STATEMENT OF OPERATIONS DATA: Revenues................................ $14,500 $13,829 $11,627 $12,821 $11,478 $64,255 Cost of revenues........................ 11,165 10,164 8,604 9,919 8,578 48,430 ------ ------ ------ ------ ------ ------ Gross profit............................ 3,335 3,665 3,023 2,902 2,900 15,825 Selling, general and administrative expenses.............. 2,300 3,079 1,789 1,618 2,346 11,132 ----- ------ ------ ------ ------ ------ Operating income........................ 1,035 586 1,234 1,284 554 4,693 Interest expense........................ --- 324 159 80 4 567 ------ ------ ------ ------ ------ ------ Income before income taxes.............. 1,035 262 1,075 1,204 550 4,126 Income tax expense...................... 455 115 473 529 242 1,814 ------ ------ ------ ------ ------ ------ Net income.............................. $ 580 $ 147 $ 602 $ 675 $ 308 $ 2,312 ====== ====== ======= ======= ======= =======
(C) The adjustment to selling, general and administrative expenses consists of (i) a reduction of $1,012 to acquired companies' historical amounts of compensation for owners and certain employee benefits for the difference between such historical amounts and amounts specified in the post-acquisition employment contracts for such individuals and continuing benefit programs and (ii) a $1,393 adjustment to increase amortization of the excess of cost over the fair value of net assets of the acquired companies, using a 30-year amortization schedule. (D) The adjustments reflect the reduction in interest expense and the elimination of interest income, had the entire net proceeds of approximately $67.0 million from the Company's initial public offering in February 1996 been used to reduce certain outstanding indebtedness and to fund the acquisitions, as if such offering had occurred on July 1, 1995. 3 -----END PRIVACY-ENHANCED MESSAGE-----