<PAGE> 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 1, 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
--------------
<PAGE> 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 1, 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 IPAC by the
Registrant.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
IPAC Pharmacy, Inc. Financial Statements
Report of Independent Auditors
Balance Sheet at July 31, 1996
Statement of Operations for the period from October 1, 1995 to July 31,
1996
Statement of Cash Flows for the period from October 1, 1995 to
July 31, 1996
Notes to Financial Statements
(b) PRO FORMA FINANCIAL INFORMATION.
Pro Forma Consolidated Balance Sheet
Pro Forma Consolidated Statement of Income
(c) EXHIBITS.
<TABLE>
<CAPTION>
Sequential
Exhibit No. Description Page No.
- ----------- ----------- --------
<S> <C> <C>
2.1 Asset Purchase Agreement, dated as of July 31, 1996, by *
and among NCS HealthCare, Inc., a Delaware corporation, NCS
HealthCare of Oregon, Inc., an Ohio corporation, IPAC
Pharmacy, Inc., an Oregon corporation and Prestige Care, Inc.,
a Washington corporation (without schedules).
99.1 Non-Compete Agreement, dated as of July 31, 1996, by and *
between NCS HealthCare of Oregon, Inc., an Ohio corporation,
and Phillip G. Fogg.
99.2 Non-Compete Agreement, dated as of July 31, 1996, by and *
between NCS HealthCare of Oregon, Inc., an Ohio corporation,
and Charles Maples.
- ----------------------------
<FN>
* Previously filed.
</TABLE>
2
<PAGE> 3
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 14, 1996
3
<PAGE> 4
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders of
NCS HealthCare, Inc.
We have audited the accompanying balance sheet of IPAC Pharmacy, Inc. (the
Company) as of July 31, 1996, and the related statements of operations and cash
flows for the period from October 1, 1995 to July 31, 1996 (date of acquisition
by NCS HealthCare, Inc.). These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of IPAC Pharmacy, Inc. at July
31, 1996, and the results of its operations and its cash flows for the period
from October 1, 1995 to July 31, 1996, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Cleveland, Ohio
August 20, 1996
<PAGE> 5
IPAC PHARMACY, INC.
BALANCE SHEET
JULY 31, 1996
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS
Cash and cash equivalents...................................................... $ 670
Accounts receivable, less allowance for doubtful accounts of $225,000.......... 1,869,076
Inventories.................................................................... 783,426
Deferred income taxes.......................................................... 95,719
----------
Total current assets................................................... 2,748,891
PROPERTY AND EQUIPMENT
Fixtures and equipment......................................................... 919,103
Building and improvements...................................................... 221,537
----------
1,140,640
Less accumulated depreciation.................................................. 577,053
----------
563,587
OTHER ASSETS
Lease deposits................................................................. 9,761
Organizational costs, less accumulated amortization of $21,660................. 42,744
Goodwill, less accumulated amortization of $612,782............................ 5,140,849
Noncompete covenant, less accumulated amortization of $61,254.................. 288,746
----------
5,482,100
----------
TOTAL ASSETS..................................................................... $8,794,578
=========
</TABLE>
See accompanying notes
<PAGE> 6
IPAC PHARMACY, INC.
BALANCE SHEET
JULY 31, 1996
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<S> <C>
CURRENT LIABILITIES
Accounts payable............................................................... $ 301,053
Accrued payroll................................................................ 190,981
Income taxes payable........................................................... 238,600
Accrued expenses and other..................................................... 301,922
Current portion of long-term debt.............................................. 473,422
----------
Total current liabilities.............................................. 1,505,978
Long-term debt, excluding current portion........................................ 3,081,998
STOCKHOLDER'S EQUITY
Common stock................................................................... 100
Additional paid-in capital..................................................... 2,824,935
Retained earnings.............................................................. 1,381,567
----------
4,206,602
----------
Total liabilities and stockholder's equity....................................... $8,794,578
=========
</TABLE>
See accompanying notes
<PAGE> 7
IPAC PHARMACY, INC.
STATEMENT OF OPERATIONS
OCTOBER 1, 1995 TO JULY 31, 1996
<TABLE>
<S> <C>
Revenues........................................................................ $11,523,515
Cost of revenues................................................................ 6,362,342
-----------
Gross profit.................................................................... 5,161,173
Selling, general and administrative expenses.................................... 4,673,059
-----------
Operating income................................................................ 488,114
Interest income................................................................. 3,792
Interest expense................................................................ 346,965
-----------
Income before income taxes...................................................... 144,941
Income tax expense.............................................................. 170,300
-----------
NET LOSS........................................................................ $ (25,359)
==========
</TABLE>
See accompanying notes
<PAGE> 8
IPAC PHARMACY, INC.
STATEMENT OF CASH FLOWS
OCTOBER 1, 1995 TO JULY 31, 1996
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net loss......................................................................... $ (25,359)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization............................................. 499,063
Provision for doubtful accounts........................................... 256,669
Deferred income taxes..................................................... (68,300)
Changes in assets and liabilities:
Accounts receivable.................................................... (213,906)
Inventories............................................................ (27,888)
Accounts payable....................................................... (83,039)
Accrued payroll........................................................ (207,092)
Income taxes payable................................................... 238,600
Accrued expenses and other............................................. 32,761
---------
Net cash provided by operating activities........................................ 401,509
INVESTING ACTIVITIES
Capital expenditures for property and equipment.................................. (167,434)
---------
Net cash used in investing activities............................................ (167,434)
FINANCING ACTIVITIES
Proceeds from borrowings on line of credit....................................... 170,500
Payments on line of credit....................................................... (173,000)
Repayments of debt............................................................... (388,892)
---------
Net cash used in financing activities............................................ (391,392)
---------
Net decrease in cash and cash equivalents........................................ (157,317)
Cash and cash equivalents at beginning of period................................. 157,987
---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD....................................... $ 670
=========
Interest Paid.................................................................... $ 352,387
=========
Taxes Paid....................................................................... $ 0
=========
</TABLE>
See accompanying notes
<PAGE> 9
IPAC PHARMACY, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
IPAC Pharmacy, Inc. (the Company) operates in one business segment
providing a broad range of healthcare services primarily to long-term care,
assisted living facilities and other institutional settings. The Company
provides pharmacy, pharmacy consulting, infusion therapies and respiratory
services.
On July 31, 1996 substantially all of the Company's assets were sold to NCS
HealthCare, Inc.
REVENUE RECOGNITION
Revenue is recognized when products or services are provided to the
customer. A significant portion of the Company's revenues from sales of
pharmaceutical and medical products are reimbursable from third-party payors
(principally Medicaid and Medicare). The Company 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.
CASH EQUIVALENTS
The Company 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.
ACCOUNTS RECEIVABLE
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 and historical collection experiences.
INVENTORIES
Inventories consist primarily of purchased pharmaceuticals and medical
supplies and are stated at the lower of cost, determined using the first-in,
first-out (FIFO) method, or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation on property and
equipment is computed using the straight-line method for all property and
equipment over the estimated useful lives of the assets (primarily 5 to 10
years).
GOODWILL AND OTHER INTANGIBLES
The Company has classified as goodwill the cost in excess of fair value of
the net assets acquired in purchase transactions. Goodwill is being amortized
over 15-year periods using the straight-line method.
The carrying value of goodwill is evaluated if circumstances indicate a
possible impairment in value. If undiscounted cash flows over the remaining
amortization period indicate that goodwill may not be recoverable, the carrying
value of goodwill will be reduced by the estimated shortfall of cash flows on a
discounted basis.
The Company's organizational costs and noncompete covenant costs are being
amortized over 5 years using the straight-line method.
<PAGE> 10
IPAC PHARMACY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
INCOME TAXES
The Company 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 tax assets and liabilities 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 tax asset or liability is expected to be
realized or settled.
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:
<TABLE>
<CAPTION>
JULY 31, 1996
-------------
<S> <C>
Notes payable--7.5% to prime rate plus 2% or 10% if
greater................................................ $ 3,401,968
Notes payable--to related parties, non-interest
bearing................................................ 153,452
----------
3,555,420
Current maturities....................................... 473,422
----------
$ 3,081,998
==========
</TABLE>
The future maturities of long-term debt are as follows:
<TABLE>
<S> <C>
Fiscal Years Ending July 31:
1997................................................... $ 473,422
1998................................................... 305,336
1999................................................... 339,330
2000................................................... 367,609
2001................................................... 402,905
----------
$1,888,602
==========
</TABLE>
3. LINE OF CREDIT
The Company had a $150,000 line-of-credit (collateralized by certain
Company assets) which was terminated on July 31, 1996. Interest was charged on
borrowings at prime plus 2% (10.75% at July 31, 1996) and was payable monthly.
<PAGE> 11
IPAC PHARMACY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAX EXPENSE
Income tax expense for the period from October 1, 1995 to July 31, 1996
consists of:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
-------- -------- --------
<S> <C> <C> <C>
Federal........................................... $217,100 $(54,600) $162,500
State............................................. 21,500 (13,700) 7,800
-------- -------- --------
$238,600 $(68,300) $170,300
======== ======== ========
</TABLE>
The Company's deferred income tax asset is primarily due to the temporary
effect of the allowance for doubtful accounts and accrued vacation.
The differences between the statutory federal income tax rate of 34% and
the effective income tax rate of 117% is due primarily to goodwill amortization.
5. OPERATING LEASES
The Company is obligated under several operating leases primarily for real
estate, machinery and office equipment. Future minimum lease payments under
noncancelable operating leases as of July 31, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING SEPTEMBER 30 AMOUNT
- ------------------------- ----------
<S> <C>
1996 $ 37,980
1997 227,882
1998 197,010
1999 159,752
2000 146,198
Thereafter 1,193,250
----------
$1,962,072
==========
</TABLE>
Rent expense for the period from October 1, 1995 to July 31, 1996 was
$177,027, which includes amounts with a related party (see Note 6).
6. RELATED PARTY TRANSACTIONS
The Company has a note payable due December 31, 2004 that accrues interest
at the greater of prime rate plus 2% or 10%, if to a limited partnership, of
which an officer of the Company is a partner. Interest expense relating to this
note approximated $181,691 for the period from October 1, 1995 to July 31, 1996.
The Company's accounts receivable at July 31, 1996 include $225,889 of
customer balances due from the sole shareholder of the company, Prestige Care,
Inc.
<PAGE> 12
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
incurred 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 the 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
<TABLE>
<CAPTION>
HISTORICAL
NCS HEALTHCARE OFFERING PRO FORMA
AND ACQUIRED PRO FORMA AS
SUBSIDIARIES COMPANIES(A) PRO FORMA ADJUSTMENTS(B) ADJUSTED
-------------- ------------ --------- -------------- ---------
<S> <C> <C> <C> <C> <C>
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 expenses 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
======== ======== ======== ======== ========
<FN>
- ---------------
(1) See accompanying Notes to Pro Forma Consolidated Balance Sheet.
</TABLE>
<PAGE> 13
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:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
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
========
</TABLE>
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.
<PAGE> 14
PRO FORMA CONSOLIDATED STATEMENT OF INCOME (1)
YEAR ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------
NCS HEALTHCARE
AND ACQUIRED PRO FORMA PRO
SUBSIDIARIES COMPANIES(B) ADJUSTMENTS FORMA
-------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
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
======== ==========
<FN>
- ---------------
(1) See accompanying Notes to Pro Forma Consolidated Statement of Income
</TABLE>
<PAGE> 15
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:
<TABLE>
<CAPTION>
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
-------- ---------- ----------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
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
======= ======== ======= ======= ======= =======
<FN>
(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.
</TABLE>
