EX-99.1 3 dex991.txt FINANCIAL STATEMENTS -09/30/2001 Exhibit 99.1 Combined Financial Statements National Healthcare Resources, Inc. and Affiliate Nine months ended September 30, 2001 National Healthcare Resources, Inc. and Affiliate Combined Financial Statements Nine months ended September 30, 2001 (Unaudited) Contents Combined Balance Sheet ..................................................... 1 Combined Statement of Operations ........................................... 2 Combined Statement of Cash Flows ........................................... 3 Notes to Combined Financial Statements ..................................... 4 National Healthcare Resources, Inc. and Affiliate Combined Balance Sheet (Unaudited) September 30, 2001
Assets Current assets: Cash $ 3,381,243 Fees receivable, net of allowance for doubtful accounts of $3,044,973 20,617,944 Prepaid expenses 1,414,702 Income taxes receivable and prepaid income taxes 558,773 Deferred income taxes 296,000 ------------- Total current assets 26,268,662 Fixed assets, net 20,669,892 Excess of purchase price over net tangible assets acquired, net 78,612,872 Security deposits and other assets, net 485,177 ------------- Total assets $ 126,036,603 ============= Liabilities and shareholders' equity Current liabilities: Accounts payable and accrued liabilities $ 19,199,632 Revolving credit facility 56,983,968 Interest payable 616,005 ------------- Total current liabilities 76,799,605 Deferred income taxes 534,000 Other liabilities 1,101,235 Fair value of interest rate derivative 2,320,943 Commitments and contingencies Redeemable common stock: Class A convertible, redeemable common stock, $.01 par value, 125,000 shares authorized, issued and outstanding (liquidation preference of $12,500,000) 12,452,312 Class B convertible, redeemable common stock, $.01 par value, 70,000 shares authorized, issued and outstanding (liquidation preference of $7,000,000) 6,983,834 Class C non-voting, redeemable common stock, $.01 par value, 50,000 shares authorized, issued and outstanding (liquidation preference of $6,958,348) 6,358,586 Class E convertible, redeemable common stock, $.01 par value, 210,000 shares authorized, 183,228 shares issued and outstanding (liquidation preference of $18,322,800) 18,235,202 Class F convertible, redeemable non-voting common stock, $.01 par value, 210,000 shares authorized, 26,772 shares issued and outstanding (liquidation preference of $2,677,200) 2,664,456 Common shareholders' equity: Common stock, $.01 par value; 20,000,000 shares authorized, 4,208,732 shares issued and outstanding 42,087 Non-voting common stock, $.01 par value, 3,474,286 shares authorized, no shares issued and outstanding -- Common stock, no par value, 200 shares authorized, 1 share issued and outstanding 10 Additional paid-in capital 10,609,608 Accumulated deficit (12,065,275) ------------- Total common shareholders' equity (1,413,570) ------------- Total liabilities and common shareholders' equity $ 126,036,603 =============
See accompanying notes. 1 National Healthcare Resources, Inc. and Affiliate Combined Statement of Operations (Unaudited)
Nine months ended September 30, 2001 2000 ------------------------------ Revenues Professional services $ 56,932,500 $ 57,159,055 Claims management 42,182,938 39,119,658 Provider networks 12,126,372 10,272,904 ------------------------------ Total revenues 111,241,810 106,551,617 Operating expenses Cost of services 51,666,164 48,414,187 Salaries and benefits 25,583,551 24,087,238 Outside services 2,332,677 746,064 Other operating expenses 14,840,236 12,589,555 Selling and administrative expenses 9,949,466 10,150,953 Depreciation and amortization of fixed assets 5,764,894 3,752,384 Amortization of intangible assets 2,113,258 1,862,645 ------------------------------ Total operating expenses 112,250,246 101,603,026 ------------------------------ (1,008,436) 4,948,591 Other income (expense): Interest income 163,522 218,508 Interest expense (3,803,237) (3,513,532) Loss on change in fair value of interest rate derivative (1,281,297) (456,401) ------------------------------ Net other expense (4,921,012) (3,751,425) ------------------------------ Loss before income tax benefit (5,929,448) 1,197,166 Income tax benefit (938,235) 826,007 ------------------------------ Net loss (4,991,213) 371,159 Accretion of Class A common stock to redemption value 9,537 9,537 Accretion of Class B common stock to redemption value 2,553 2,553 Accretion of Class C common stock to redemption value 121,002 113,048 Accretion of Class D common stock to redemption value -- 225,900 Accretion of Class E common stock to redemption value 35,836 35,836 Accretion of Class F common stock to redemption value 5,213 5,213 Class C common stock dividends 375,003 375,003 ------------------------------ Net loss applicable to common shareholders $ (5,540,357) $ (395,931) ==============================
See accompanying notes. 2 National Healthcare Resources, Inc. and Affiliate Combined Statement of Cash Flows (Unaudited)
Nine months ended September 30, 2001 2000 ---------------------------- Cash flow from operating activities Net income (loss) $ (4,991,213) $ 371,159 Adjustments to reconcile net income to cash flows provided by operating activities: Loss on change in fair value of interest rate derivative 1,281,297 456,401 Depreciation and amortization 7,513,304 5,400,180 Loss on disposition of software 900,000 Amortization of deferred financing cost 364,848 214,849 Provision for doubtful accounts 1,526,465 307,234 Changes in operating assets and liabilities, net of effects of acquisitions: Fees receivable (1,376,875) (5,810,198) Prepaid expenses 69,589 (521,552) Income taxes receivable and prepaid income taxes (1,383,074) (701,715) Accounts payable and accrued liabilities 6,295,868 1,058,308 Other liabilities 1,885 1,057,191 Interest payable 41,001 112,607 ---------------------------- Cash flows provided by operating activities 10,243,095 1,944,464 Cash flow from investing activities Purchase of Baseline, Resolve and CRT -- (2,890,410) Fixed assets purchased (9,857,042) (8,437,432) Other assets (34,584) 16,286 ---------------------------- Cash flows used in investing activities (9,891,626) (11,311,556) Cash flow from financing activities Payment of note payable -- (214,207) Proceeds from credit facility -- 8,000,000 Payment to the former holders of Class D stock (3,800,000) -- Deferred financing and other costs (330,613) -- Payment of long-term obligations (37,855) (99,874) ---------------------------- Cash flows provided by (used in) financing activities (4,168,468) 7,685,919 ---------------------------- Decrease in cash (3,816,999) (1,681,173) Cash at beginning of year 7,198,242 9,863,676 ---------------------------- Cash at end of period $ 3,381,243 $ 8,182,503 ============================ Supplemental disclosure of cash flow information Cash paid for income taxes, net of refunds received $ 536,000 $ 1,528,000 ============================ Cash paid for interest $ 3,762,000 $ 3,186,000 ============================ See accompanying notes
3 National Healthcare Resources, Inc. and Affiliate Notes to Combined Financial Statements September 30, 2001 1. Basis of Presentation The combined balance sheet as of September 30, 2001, the combined statement of operations for the nine months ended September 30, 2001, and the combined statement of cash flows for the nine months ended September 30, 2001 have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at September 30, 2001 and for all periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. It is suggested that these financial statements be read in conjunction with the combined financial statements and notes thereto included in the Company's combined financial statements for the year ended December 31, 2000. The results of operations for the nine months ended September 30, 2001 are not necessarily indicative of the results that may be expected for the full year. 2. Derivatives On January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivatives and Hedging Activities", as amended, which requires that all derivatives be recorded on the balance sheet at fair value. If the derivative is a hedge that is eligible for special accounting, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. Upon adoption on January 1, 2001, the cumulative transition adjustment was insignificant. To manage interest rate risk, the Company has entered into an interest rate swap and option arrangement (the "Derivative") to reduce its exposures to movements in interest rates. The Derivative has been designated as a cash flow hedge, however, it does not qualify for hedge accounting in accordance with SFAS 133. Accordingly, the Derivative is adjusted to fair value through earnings. At September 30, 2001, the Company had a Derivative outstanding with a notional amount of $23,583,968. The fair value of the Derivative at September 30, 2001 and December 31, 2000 was a liability of $2,320,943 and $1,039,646, respectively. For the nine months ended September 30, 2001, the Company recorded a loss on the change in the fair value of the interest rate Derivative of $1,281,297. 3. Debt On May 31, 2001 the revolving credit facility was amended to reduce the amount available under the facility, change the financial ratio covenants, extend the maturity date and modify the repayment terms. The amount currently available under the facility, which includes the revolving loans and letters of credit, is $61,000,000. The maturity date was extended to March 31, 2002. Under the amended repayment terms, if the Company receives gross cash proceeds from the issuance of any debt or equity securities of less than $25 million, the Company shall prepay the revolving loans such that the facility shall be permanently reduced to $50 million. If the Company receives gross cash proceed from the issuance of any debt or equity securities of $25 million or more, the Company shall prepay the revolving loans such that the facility shall be permanently reduced to $48 million. 4. Subsequent Events On November 20, 2001, Concentra Inc., a related party through ownership, acquired all of the outstanding shares of capital stock of the Company in a transaction valued at $141.8 million. Under the terms of the transaction, Concentra Inc. issued approximately $83.0 million of its common stock and approximately $1 million in cash to the Company's shareholders in exchange for all of the outstanding shares of common stock of the Company. 4 Concurrent with this transaction, Concentra Inc. contributed the capital stock to Concentra Operating Corporation's capital and repaid $57.8 million of the Company's indebtedness. 5