-----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, BL55TdvzAMWDF/NyKN3nD9RUnWJ6ojylRWR8L0YGkBHYoCCQhd0MYzgtvyThYQmV mbquCbhTdJMoDzHaGoP/Kg== 0000950152-96-003637.txt : 19960730 0000950152-96-003637.hdr.sgml : 19960730 ACCESSION NUMBER: 0000950152-96-003637 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960515 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960729 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: 96600528 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 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: May 15, 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 May 15, 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 Uni-Care by the Registrant. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. ------------------------------------------------------------------- (a) Financial Statements of Businesses Acquired. Americare Health Services, Inc. and subsidiaries, Consolidated Financial Statements Report of Independent Auditors Consolidated Balance Sheets at December 31, 1994 and 1995 and March 31, 1996 (Unaudited) Consolidated Statements of Operations on Retained Earnings Consolidated Statements of Cash Flow for the years ended December 31, 1994 and 1995 and for the three-month period ended March 31, 1996 (Unaudited) Notes to Consolidated Financial Statements (b) Pro Forma Financial Information. NCS HealthCare, Inc. and subsidiaries, and Uni-Care Pro Forma Condensed Combined Financial Statements Pro Forma Condensed Combined Balance Sheet of NCS HealthCare, Inc. and subsidiaries and Uni-Care at March 31, 1996 Pro Forma Condensed Combined Statements of Income of NCS HealthCare, Inc. and subsidiaries and Uni-Care for the nine months ended March 31, 1996 and for the year ended June 30, 1995 2 3 (c) Exhibits. ---------
Sequential Exhibit No. Description Page No. - ----------- ----------- -------- 2.1 Stock Purchase Agreement, dated May 15, 1996, by and among * NCS HealthCare, Inc., a Delaware corporation, and the owners of capital stock of Uni-Care Health Services, Inc., a New Hampshire corporation, and Uni-Care Health Services of Maine, Inc., a New Hampshire corporation (without schedules). 99.1 Employment Agreement, dated as of May 15, 1996, by and * between Uni-Care Health Services, Inc. and Michael F. Fecteau. 99.2 Employment Agreement, dated as of May 15, 1996, by and * between Uni-Care Health Services of Maine, Inc., and Richard P. Legere. 99.3 Employment Agreement, dated as of May 15, 1996, by and * between Uni-Care Health Services, Inc. and Leon Parker. 99.4 Noncompetition Agreement, dated as of May 15, 1996, by and * between NCS HealthCare, Inc. and Francis J. Cassidy. - --------------- * Previously filed.
3 4 AMERICARE HEALTH SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1994 AND 1995, AND MARCH 31, 1996 (Unaudited) 5 R.E. REED & COMPANY CERTIFIED PUBLIC ACCOUNTANTS ================================================================================ REPORT OF INDEPENDENT AUDITORS To the Board of Directors AMERICARE HEALTH SERVICES, INC. 23 Perimeter Road, South Londonderry, New Hampshire 03053 We have audited the accompanying consolidated balance sheets of Americare Health Services, Inc. and Subsidiaries as of December 31, 1994 and 1995, and the related consolidated statements of operations and retained earnings, and cash flows for the two years ended December 31, 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 audits. 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 audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Americare Health Services, Inc. and Subsidiaries at December 31, 1994 and 1995, and the consolidated results of their operations and their cash flows for the two years ended December 31, 1995, in conformity with generally accepted accounting principles. R.E. Reed & Company /s/ R.E. Reed & Company Laconia, New Hampshire March 21, 1996 174 COURT STREET LACONIA NEW HAMPSHIRE 03246 (603) 524-4693 FAX (603) 528-5762 6 AMERICARE HEALTH SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS
December 31 December 31 March 31 1994 1995 1996 --------- --------- --------- (Unaudited) CURRENT ASSETS Cash $ 0 $ 115,460 $ 0 Accounts Receivable, Net 1,610,942 2,561,244 2,636,670 Other Receivables 46,477 56,245 64,936 Inventory 741,892 862,565 743,309 Prepaid Expenses 37,529 68,201 30,750 --------- --------- --------- Total Current Assets 2,436,840 3,663,715 3,475,665 --------- --------- --------- PROPERTY AND EQUIPMENT Computer Equipment 436,392 516,827 572,956 Office Equipment 190,333 231,114 212,637 Medical Carts 540,957 574,465 663,220 Vehicles 161,450 152,219 161,450 Leasehold Improvements 158.648 184,431 201.016 --------- --------- --------- 1,487,780 1,659,056 1,811,279 Accumulated Depreciation (932,700) (1,084,080) (1,130,448) --------- --------- --------- Net Property and Equipment 555,080 574,976 680,831 --------- --------- --------- OTHER ASSETS Note Receivable 213,234 204,109 201,726 Intangible Assets 99,022 63,094 61,612 Security Deposits 7,874 7,775 7,775 Deferred Tax Asset 0 89,739 89,739 --------- --------- --------- Total Other Assets 320,130 364,717 360,852 --------- --------- --------- TOTAL ASSETS $ 3,312,050 $ 4,603,408 $ 4,517,348 ========= ========= =========
See accompanying notes 7 AMERICARE HEALTH SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY
December 31 December 31 March 31 1994 1995 1996 ---------- ----------- ----------- (Unaudited) CURRENT LIABILITIES Accounts Payable $ 646,482 $ 896,800 $ 762,801 Bank Overdraft 137,425 99,976 665,371 Advance Payment - State of N.H. 425,000 60,000 60,000 Line of Credit and Demand Note 76,000 1,120,000 165,000 Accrued Expenses 270,198 496,457 545,020 Current Portion of Long-Term Debt 180,607 178,755 196,232 Current Portion of Covenant Payable 30,000 0 0 ---------- ----------- ----------- Total Current Liabilities 1,765,712 2,851,988 2,394,424 ---------- ----------- ----------- LONG-TERM DEBT - NET OF CURRENT PORTION 552,357 373,923 515,435 ---------- ----------- ----------- TOTAL LIABILITIES 2,318,069 3,225,911 2,909,859 ---------- ----------- ----------- STOCKHOLDERS' EQUITY Common Stock, No Par Value, 100 Shares Authorized, 100 Shares Issued and Outstanding 22,833 22,833 22,833 Additional Paid-In Capital 200,853 200,853 200,853 Retained Earnings 770,295 1,153,811 1,383,803 ---------- ----------- ----------- Total Stockholders' Equity 993,981 1,377,497 1,607,489 ---------- ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,312,050 $ 4,603,408 $ 4,517,348 ========== =========== ===========
See accompanying notes 8 AMERICARE HEALTH SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995 AND THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
Year Ended December 31 Three Months Ended ---------------------- ------------------ 1994 1995 March 31, 1996 ---- ---- -------------- (Unaudited) SALES (NET) $12,350,848 $15,012,358 $ 4,604,204 COST OF SALES 6,922,847 8,329,333 2,566,441 ----------- ----------- ----------- GROSS PROFIT 5,428,001 6,683,025 2,037,763 OPERATING EXPENSES 5,143,585 5,986,735 1,654,251 ----------- ----------- ----------- INCOME FROM OPERATIONS 284,416 696,290 383,512 ----------- ----------- ----------- OTHER INCOME AND (EXPENSES) Interest Income 18,617 34,805 4,400 Interest Expense (76,715) (113,018) (19,517) Sale of Equipment 2,896 (55,443) 0 Miscellaneous Income 7,690 6,323 14,820 ----------- ----------- ----------- Total Other Income and (Expenses) (47,512) (127,333) (297) ----------- ----------- ----------- INCOME BEFORE TAXES 236,904 568,957 383,215 PROVISION FOR INCOME TAXES 106,511 185,441 153,223 ----------- ----------- ----------- NET INCOME 130,393 383,516 229,992 RETAINED EARNINGS - - BEGINNING OF YEAR 639,902 770,295 1,153,811 ----------- ----------- ----------- RETAINED EARNINGS - - END OF YEAR $ 770,295 $ 1,153,811 $ 1,383,803 =========== =========== ===========
See accompanying notes 9 AMERICARE HEALTH SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995 AND THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
Year Ended December 31 Three Months Ended ---------------------- ------------------ 1994 1995 March 31, 1996 ---- ---- -------------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 130,393 $ 383,516 $ 229,992 --------- --------- --------- Adjustments to Reconcile Net Income to Net Cash Provided by Operations: Change in Reserve for Bad Debt 34,938 117,118 20,576 Depreciation 216,989 247,065 46,368 Amortization 36,783 35,928 1,482 (Gain) Loss on Sale of Assets (2,896) 55,443 Deferred Taxes (89,739) (Increase) Decrease in Current Assets: Accounts Receivable (393,923) (1,067,420) (96,002) Other Receivables 36,058 (9,768) (8,691) Inventory (37,802) (120,673) 119,256 Prepaid Expenses 32,045 (30,671) 37,451 Increase (Decrease) in Current Liabilities: Accounts Payable 73,249 250,318 (133,999) Accrued Expenses 7,208 226,259 48,563 Bank Overdraft 137,425 (37,449) 565,395 Advance Payment - State of N.H. 425,000 (365,000) 0 --------- --------- --------- Total Adjustments 565,074 (788,589) 600,399 --------- --------- --------- Net Cash Flows From Operations $ 695,467 $(405,073) $ 830,391 --------- --------- ---------
See accompanying notes 10 AMERICARE HEALTH SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995 AND THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
Year Ended December 31 Three Months Ended ---------------------- ------------------ 1994 1995 March 31, 1996 ---- ---- -------------- (Unaudited) CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds From Sale of Equipment $ 5,896 $ 7,930 $ 0 Purchases of Equipment (342,333) (330,336) (152,223) Increase in Note Receivable (27,062) 9,125 2,383 Change in Deposits (250) 99 0 Change in Covenant Payable (30,000) (30,000) 0 --------- ---------- --------- Net Cash Flows From Investing Activities (393,749) (343,182) (149,840) --------- ---------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Capital Stock 2,000 0 0 Loan Proceeds Loan Principal Reduction 182,962 2,418,670 200,000 (492,236) (1,554,955) (996,011) --------- ---------- --------- Net Cash Flows From Financing Activities (307,274) 863,715 (796,011) --------- ---------- --------- Net Change in Cash and Cash Equivalents (5,556) 115,460 (115,460) Cash, Beginning of Year 5,556 0 115,460 --------- ---------- --------- Cash, End of Year 0 $ 115,460 0 ========= ========== ========= SUPPLEMENTAL DISCLOSURE OF CASH PLOW INFORMATION: Cash Paid During the Year for: Income Taxes $ 132,726 $ 151,347 $ 0 Interest 76,655 113,088 19,517
See accompanying notes 11 AMERICARE HEALTH SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995 AND UNAUDITED FOR THE THREE MONTHS ENDED MARCH 31, 1996 Uni-Care Health Services, Inc. was incorporated on July 1, 1979. The corporation provides for the pharmaceutical needs of nursing homes, jails and group home residents in New Hampshire and Maine. On January 1, 1994, AmeriCare Health Services, Inc., a holding company, was formed. The shareholders of Uni-Care Health Services, Inc. exchanged their stock for shares in the holding company. Uni-Care Health Services, Inc. is now a wholly owned subsidiary of AmeriCare Health Services, Inc. Also on January 1, 1994, Uni-Care Health Services of Maine, Inc. was formed by the three existing shareholders of Uni-Care Health Services, Inc. Certain assets of Uni-Care Health Services, Inc., pertaining to the Maine operations were sold at fair market value to the new corporation. NOTE 1: Summary of Significant Accounting Policies The consolidated financial statements include the company's subsidiaries, Uni-Care Health Services, Inc. and Uni-Care Health Services of Maine, Inc. All significant inter-company transactions have been eliminated in consolidation. Income and expenses are recognized on the accrual basis of accounting, whereby income is recognized when earned rather than when received and expenses are recognized when incurred rather than when paid. Accounts receivable at December 31, 1995 and 1994 are shown net of an allowance for doubtful accounts of $190,776 and $73,658, respectively. Inventories are stated at cost, utilizing the first-in, first-out (FIFO) method. Inventories are located at the Londonderry and Wells distribution centers as well as at the various nursing facilities as follows: 1995 1994 ---- ---- Londonderry $564,839 $469,981 Wells 174,893 189,976 Off-site Facilities 122,833 81,935 -------- -------- $862,565 $741,892 ======== ======== 12 AMERICARE HEALTH SERVICES, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS CONTINUED NOTE 1: Summary of Significant Accounting Policies (Continued) Property and equipment are recorded at cost and are being depreciated over their estimated useful lives, shown below, using both straight-line and accelerated methods. Life ---- Computer Equipment 5 years Office Equipment 5 - 7 years Medical Carts 5 - 8 years Vehicles 5 years Leasehold Improvements 7 - 31.5 years Accrued vacation expense represents vacation, holiday and sick time accumulated by employees. The corporation accrues on behalf of its employees, based upon the following policy with a maximum of 40 days accumulation: Years of Service Full-time Part-time ---------------- --------- --------- 1 - 5 years 20 days/year 15 days/year 5 - 15 years 25 days/year 20 days/year 15 - 20 years 30 days/year 25 days/year 20 + years 35 days/year 30 days/year The corporation has a 401k profit sharing plan which is available to all employees. Management elected to fund this plan and charge expense in the amount of $14,090 and $41,430 for the years ended December 31, 1994 and 1995, respectively. The plan has a December 31 year end and is administered by Benefit Strategies, Inc. Management uses estimates and assumptions in preparing financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were used. 13 AMERICARE HEALTH SERVICES, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS CONTINUED NOTE 1: Summary of Significant Accounting Policies (Continued) For purposes of the statement of cash flows, the company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. The company maintains its cash in bank deposit accounts, which, at times, may exceed federally insured limits. The company has not experienced any losses in such account. The company believes it is not exposed to any significant credit risk on cash and cash equivalents. Federal and state income taxes are recognized at the corporate level. 1995 1994 ---- ---- Federal $231,380 $ 93,724 State Taxes 43,800 12,787 Deferred Taxes (89,739) 0 -------- -------- $185,441 $106,511 ======== ======== The company's deferred tax asset results from temporary timing differences between book and tax expenses. The corporation has expensed on its books, bad debts and vacation expenses resulting from accrual and reserve allowances. These expenses cannot be taken for tax purposes until paid or incurred. Under FASB 109 the company has recognized a deferred tax asset and reduced current period tax expense by the amount of this asset. NOTE 2: Life Insurance The corporation is the owner and beneficiary of the following term life insurance policies on the shareholder and key employee. Face Value ---------- Richard Fortier $ 516,600 Michael Fecteau 300,000 --------- $ 816,600 ========= MOTE 3: Intangible Assets Loan origination fees associated with the 1992 refinancing are being amortized using the straight-line method over 7 years. Organization costs, contract rights and goodwill related to the acquisition of the Uni-Care Health Services of Maine, Inc. are being amortized using the straight-line method over 15 years. 14 AMERICARE HEALTH SERVICES, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS CONTINUED NOTE 3: Intangible Assets (continued) A covenant not to compete' is being amortized using the straight-line method over 15 years. The 1995 amortization expense and net balances of the intangible assets at December 31, 1995 are as follows: Beginning Amortization 12/31/95 Balance Expense Balance -------- -------- --------- Loan Fees $ 6,016 $ (1,331) $ 4,685 Organization Costs 8,333 (600) 7,733 Contract Rights 13,672 (996) 12,676 Goodwill 4,552 (336) 4,216 Covenants 66,449 (32,665) 33,784 -------- -------- -------- $ 99,022 $(35,928) $ 63,094 ======== ======== ======== NOTE 4: Demand Note The corporation has a $2,000,000 working capital credit line with a bank. Interest at .5% over the bank's base rate is payable monthly. The balance at December 31, 1994 and 1995 was $76,000 and $1,120,000, respectively. This note is secured by assets of the corporation. NOTE 5: Long-Term Debt
1994 1995 March 31, 1996 (Unaudited) Bank Note - SBA Guarantee is payable in monthly installments of $10,215 including interest at 1.5% above the bank's base rate. The rate and monthly payment are adjusted on a quarterly basis in January, April, July and October. This note is being amortized over 7 years and is secured by the assets of the corporation. This loan matures on May 27, 1999. $432,504 $351,276 $336,717 Bank Note is payable in monthly principal installments of $2,778 plus interest at 1% over the bank's base rate. This note is being amortized over 36 months and is secured by the assets of the corporation. This loan matures on November 30, 1996. 61,111 27,778 22,222
15 AMERICARE HEALTH SERVICES, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS CONTINUED
NOTE 5: LONG-TERM DEBT (CONTINUED) Note Payable to bank in monthly installments of $2,453 including principal and interest. Interest is 1% over bank base rate and the note will mature on September 1, 1998. $ 110,414 $ 80,970 $ 73,609 Note payable to bank for vehicle purchase. Monthly payments of $571 including principal and interest. This note matures on October 10, 1998. 21,961 16,763 15,394 Capital lease payable for computer requiring monthly payments of $1,715 per month. There are 12 payments left on this lease. 29,364 22,132 16,229 Note Payable to bank in monthly installments of $4,166 including principle and interest. Interest is 3/4 % over the bank base rate. This note matures on 3/21/2000. 0 0 200,000 Note Payable - Paul Boisseau is payable in 20 quarterly installments of $7,339 through 1998. The stated rate of interest is 8% and this note is secured by the personal guarantee of a shareholder and key employee. 77,610 53,760 47,496 --------- --------- --------- Total Long-Term Debt Less Current Portion 732,964 552,679 711,667 (180,607) (178,755) (196,232) --------- --------- --------- Long-Term Debt Net of Current Portion $ 552,357 $ 373,924 $ 515,435 ========= ========= =========
Maturities of long-term debt for the next four years are as follows: 1996 $ 178,755 1997 138,670 1998 140,077 1999 41,111 The corporation is not in compliance with one of its loan convenants at December 31, 1995. It meets all ratios except the total debt to tangible net worth ratio. The bank requires a 2.5:1 and the actual is 3.0:1. Management has obtained a waiver for this financial covenant. 16 AMERICARE HEALTH SERVICES, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS CONTINUED NOTE 6: Financial Instruments All financial instruments are held for purposes other than trading. The following methods and assumptions were used to estimate the fair value of each financial instrument for which it is practicable to estimate that value: Cash and Cash Equivalents ------------------------- The carrying amount approximates fair value because of the short maturity of those instruments. Notes Receivable ---------------- The fair market value of the companies notes receivable are based upon an interest rate of 6% as compared to the actual rate of 7% and 10%. Long-Term Debt -------------- The fair value of the company's long-term debt is estimated based on borrowing rates currently available to the company for bank loans with similar terms and maturities. The companies current debt interest rate, floats with prime. As a result its fair market value equals the carrying value. Investments ----------- None. The estimated fair value of the company's financial instruments are as follows: ASSETS ------ CARRYING AMOUNT FAIR VALUE Cash and Cash Equivalents $ 115,460 $ 115,460 Notes Receivable 206,109 292,000 LIABILITIES ----------- Long-Term Debt $ 552,679 $ 552,679 17 AMERICARE HEALTH SERVICES, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS CONTINUED NOTE 7: PAYABLE - STATE OF NEW HAMPSHIRE During June and July of 1994, the state of New Hampshire had problems processing medicaid claims for payment. As a result, the state processed blanket advances amounting to $425,000 to the corporation. These advances were not matched to claims. Subsequently, the actual claims, less the current balance owed, were paid by the State. The balance owed on these advances as of December 31, 1995 is $60,000. NOTE 8: STOCK OWNERSHIP Americare Health Services, Inc. 100 shares of issued and outstanding no par common stock: Michael Fecteau 59.7 Francis Cassidy 40.3 Uni-Care Health Services, Inc. 250 shares of no par value: Americare Health Services, Inc. 250 Uni-Care Health Services of Maine, Inc. 375 shares 324 issued and outstanding no par value common stock: Americare Health Services, Inc. 300 Richard Legree 24 Fifty one shares of Uni-Care Health Services of Maine, Inc. are being held in escrow for future stock bonuses to Richard Legree. Refer to Note 13 for the 1995 shares to be bonused in 1996. 18 AMERICARE HEALTH SERVICES, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS CONTINUED NOTE 9: RELATED PARTY TRANSACTIONS One of the shareholders owes the corporation monies for the original acquisition of his shares. This note bears 10% interest and as of December 31, 1995, $54,355 has been accrued. The balance and principal reductions on these notes are as follows: Michael Fecteau ------- Balance 12/31/94 $116,976 Payment -0- -------- Balance 12/31/95 $116,476 ======== During 1995, the corporation leased its New Hampshire facility from Michael Fecteau, a shareholder of the corporation. The total lease payments for the facility for 1995 were $144,960. NOTE 10: LEASES The corporation has two long-term real estate leases. The first lease is for the former location on Brown Avenue, Manchester, New Hampshire. This lease expires on October 30, 1998 and requires monthly payments of $1,419. A portion of this facility is being sublet for $450 per month. The second lease is with a shareholder (Note 10) for 15 years at $12,079 per month. This lease is subject to annual CPI (Consumer Price Index) increases. The corporation is leasing its facility in Wells, Maine under a three year lease through October 1996. Monthly lease payments of $1,500 began November 1, 1994. This lease has a renewal option of three years at which time the monthly rent will be recalculated based on the CPI for the Northeast Region. The corporation has 12 operating leases for vehicles and postage machines. The total obligation under these leases amount to $116,335 which will be paid over a four year period. The total projected lease payments over the next five years are as follows: 1996 $ 229,204 1997 192,963 1998 173,060 1999 141,147 2000 139,200 19 AMERICARE HEALTH SERVICES, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS CONTINUED NOTE 11: CONTINGENT LIABILITIES Under the employment agreements referenced in Note 13 the corporation has liabilities that would accelerate in the event of the sale of 50% or more of the corporate ownership. The accelerated liability would be as follows: Severance Pay under Employment Agreements $ 336,511 Deferred Compensation Agreement 372,000 --------- $ 708,511 ========= NOTE 12: EMPLOYMENT AGREEMENTS The corporation has three employment agreements with key employees. These agreements are in effect for a period of two to five years. The annual obligation under these agreements amounts to $271,650 adjusted annually for CPI. One agreement contains a provision for a stock bonus equaling 1% ownership interest in the Maine corporation for every 100 bed increase in Maine. At December 31, 1995 sixteen additional shares have been earned under this agreement. At December 31, 1995 these additional shares had not been issued. Refer to Note 11 for obligations as to severance pay liabilities. One agreement contains a deferred compensation package totaling $400,000 to be paid on a five year period commencing March 31, 1998. NOTE 13: SUBSEQUENT EVENT (UNAUDITED) On May 15, 1996 all of the outstanding stock of Americare Health Care Services, Inc. and Uni-Care Health Services of Maine were acquired by NCS HealthCare, Inc. 20 Pro Forma Condensed Combined Financial Statements The following pro forma condensed combined balance sheet as of March 31, 1996 and the pro forma condensed combined statements of income for the nine-month period ended March 31, 1996 and for the year ended June 30, 1995, give effect to the NCS HealthCare, Inc. (NCS) acquisition of Americare Health Services, Inc. (d.b.a Uni-Care) on May 15, 1996 in exchange for 34,483 shares of NCS Class A common stock valued at $1,000,000 and $7,370,000 in cash accounted for as a purchase. The pro forma information is based on the historical consolidated financial statements of NCS and Uni-Care and their subsidiaries under the assumptions and adjustments set forth in the accompanying notes to the pro forma condensed combined financial statements. The pro forma information is presented for illustrative purposes only and may not be indicative of the results that actually would have occurred if the NCS acquisition of Uni-Care had been in effect during the periods presented or which may be attained in the future. The pro forma condensed combined financial statements should be read in conjunction with the historical consolidated financial statements and notes thereto of NCS and Uni-Care. 21 NCS HealthCare, Inc. and Uni-Care Pro Forma Condensed Combined Balance Sheet March 31, 1996 (In Thousands, Except Per Share Amounts)
Historical NCS HealthCare and Pro Forma Pro Forma Subsidiaries Uni-Care Adjustments Eliminations Combined ------------------------------------------------------------------------------------ (Note A) (Note B) ASSETS Current assets: Cash and cash equivalents $ 40,752 $ (7,370) $ 33,382 Accounts receivable, net 23,950 $ 2,637 26,587 Inventories 6,048 743 6,791 Prepaid expenses and other assets 3,190 96 3,286 ------------------------------------------------------------------------------------ Total current assets 73,940 3,476 (7,370) 70,046 Property, plant and equipment, net 8,275 680 8,955 Goodwill, net 24,636 8,370 $ (1,608) 31,398 Other assets, net 542 361 903 ------------------------------------------------------------------------------------ TOTAL ASSETS $ 107,393 $ 4,517 $ 1,000 $ (1,608) $ 111,302 ==================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 4,312 $ 1,488 $ 5,800 Accrued expenses and other current liabilities 4,220 545 4,765 Current portion of long-term debt 361 361 ------------------------------------------------------------------------------------ Total current liabilities 8,532 2,394 10,926 Long-term debt, excluding current portion 3,438 515 3,953 Convertible subordinated debentures 6,549 6,549 Other 565 565 Stockholders' equity: Common stock, par value $.01 per share: Class A 55 23 $ (23) 55 Class B 66 66 Paid-in capital 83,676 201 $ 1,000 (201) 84,676 Retained earnings 4,512 1,384 (1,384) 4,512 ------------------------------------------------------------------------------------ Total stockholders' equity 88,309 1,608 1,000 (1,608) 89,309 ------------------------------------------------------------------------------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 107,393 $ 4,517 $ 1,000 $ (1,608) $ 111,302 ==================================================================================== Book value per common share $ 7.28 $ 7.35 =================== ==================
See accompanying notes to pro forma condensed combined financial statements. 22 NCS HealthCare, Inc. and Uni-Care Pro Forma Condensed Combined Statements of Income Nine Months Ended March 31, 1996 (In Thousands, Except Per Share Amounts)
Historical ---------------------------------- Previously Acquisitions Offering NCS HealthCare Acquired Pro Forma Pro Forma Pro Forma and Subsidiaries Companies (C) Uni-Care (C) Adjustments Adjustments as Adjusted ------------------------------------------------------------------------------------------------- Revenues $ 80,236 $ 5,650 $ 12,590 $ 98,476 Cost of revenues 58,183 4,254 6,925 69,362 ------------------------------------------------------------------------------------------------- Gross profit 22,053 1,396 5,665 29,114 Selling, general and administrative expenses 16,044 822 4,914 $ (70)(D) 21,710 Special compensation 2,811 2,811 ------------------------------------------------------------------------------------------------- Operating income (loss) 3,198 574 751 70 4,593 Interest expense 1,775 80 87 516 (E) $ (1,735)(F) 723 ------------------------------------------------------------------------------------------------- Income (loss) before income taxes 1,423 494 664 (446) 1,735 3,870 Income tax expense (benefit) 626 192 223 (101) 763 1,703 ------------------------------------------------------------------------------------------------- Net income (loss) $ 797 $ 302 $ 441 $ (345) $ 972 $ 2,167 ================================================================================================= Net income per share $ 0.10 $ 0.18 =================== ================= Shares used in the computation 7,854 12,276(G) =================== =================
See accompanying notes to pro forma condensed combined financial statements. 23 NCS HealthCare, Inc. and Uni-Care Pro Forma Condensed Combined Statements of Income Year Ended June 30, 1995 (In Thousands, Except Per Share Amounts)
Historical ---------------------------------- Previously Acquisitions Offering NCS HealthCare Acquired Pro Forma Pro Forma Pro Forma and Subsidiaries Companies (C) Uni-Care (C) Adjustments Adjustments as Adjusted ------------------------------------------------------------------------------------------------- Revenues $ 65,602 $ 32,184 $ 13,617 $ 111,403 Cost of revenues 46,570 24,996 7,685 79,251 ------------------------------------------------------------------------------------------------- Gross profit 19,032 7,188 5,932 32,152 Selling, general and administrative expenses 14,539 5,251 5,455 $ 166 (D) 25,411 ------------------------------------------------------------------------------------------------- Operating income (loss) 4,493 1,937 477 (166) 6,741 Interest expense 1,089 397 83 (1,990)(E) $(2,886) (F) 673 ------------------------------------------------------------------------------------------------- Income (loss) before income taxes 3,404 1,540 394 (2,156) 2,886 6,068 Income tax expense (benefit) 1,536 678 169 (951) 1,302 2,734 ------------------------------------------------------------------------------------------------- Net income (loss) $ 1,868 $ 862 $ 225 $(1,205) $ 1,584 $ 3,334 ================================================================================================= Net income per share $ 0.28 $ 0.27 =================== ================= Shares used in the computation 6,764 12,276(G) =================== =================
See accompanying notes to pro forma condensed combined financial statements. 24 NCS HealthCare, Inc. and Uni-Care Notes to Pro Forma Condensed Combined Financial Statements (A) Issuance of 34,483 shares of NCS Class A common stock valued at $1,000,000 and $7,370,000 in cash in exchange for all of the outstanding shares of Uni-Care. The transaction is accounted for as a purchase resulting in an excess purchase price over historical cost of $6,762,000 all of which was allocated to goodwill. (B) Adjustments to consolidate Uni-Care with NCS. (C) The historical statement of income data for the acquired companies and Uni-Care for the year ended June 30, 1995 represent the results of operations of such companies from July 1, 1994 to the earlier of their respective dates of acquisition or June 30, 1995. The historical statement of income data for the acquired companies and Uni-Care for the nine months ended March 31, 1996 represent the results of operations for such companies from July 1, 1995 to their respective dates of acquisition. 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. (D) The adjustment to selling, general and administrative expenses consists of: (i) reductions to acquired companies' historical amounts of compensation for owners and certain employee benefits for the difference between such historical amounts and amounts specified in post-acquisition employment contracts for such individuals and continuing benefit programs, and (ii) the adjustment to amortization of excess of cost over net assets acquired over a 30-year period arising from the excess of cost over fair value of net assets of the acquired companies, as if such companies were acquired as of July 1, 1994. (E) The adjustment reflects the additional interest expense that would have been incurred had the consideration in the form of long-term debt and convertible debentures for the acquisitions been issued on July 1, 1994. The convertible debentures bear interest at annual rates from 7% to 8% and are payable through 1997. (F) The adjustment to interest expense reflects the retirement of certain outstanding debt of NCS and Uni-Care by applying a portion of the estimated net proceeds of NCS' initial public offering and the conversion of certain convertible subordinated debentures, as if such transactions had occurred on July 1, 1994. (G) Shares used in the computation of pro forma net income per share, as adjusted, gives effect to the issuance of 682,300 shares of Class A Common Stock in connection with the conversion of convertible subordinated debentures, the issuance and sale of 4,476,000 shares of Class A Common Stock in connection with NCS' initial public offering in February 1996 and the issuance of 34,483 shares of Class A Common Stock in connection with the acquisition of Uni-Care. The dilutive effect of all options outstanding was calculated using the treasury stock method. 25 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: July 29, 1996 4 -----END PRIVACY-ENHANCED MESSAGE-----