<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 31, 1996
Commission File Number- 0-27602
-------
NCS HealthCare, Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware No. 34-1816187
- ------------------------------- ------------------------------------
(State or other jurisdiction of (IRS employer identification number)
incorporation or organization)
3201 Enterprise Parkway, Suite 220, Beachwood, Ohio 44122
- ----------------------------------------------------------
(Address of principal executive offices and zip code)
(216) 514-3350
- ----------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant:
1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and
2) has been subject to such filing requirement for the past 90 days.
Yes X No __
Common Stock Outstanding
- ------------------------
Indicate the number of shares outstanding of each of the Issuers' classes of
common stock, as of the latest practical date.
Class A Common Stock, $ .01 par value -- 10,799,386 shares as of February 7,
1997
Class B Common Stock, $ .01 par value -- 6,362,020 shares as of February 7,
1997
1
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NCS HEALTHCARE, INC.
AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. Financial Information:
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets-
December 31, 1996 and June 30, 1996 3
Condensed Consolidated Statements of Income-
Three and six months ended-
December 31, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows-
Six months ended-
December 31, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements - December 31, 1996 6
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 8
Part II. Other Information:
Item 2. Changes in Securities 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
</TABLE>
2
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS
NCS HEALTHCARE, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
(Unaudited) (Note A)
December 31, June 30,
ASSETS 1996 1996
------------ --------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $100,017 $ 21,460
Accounts receivable, less allowances 44,810 27,762
Inventories 15,734 7,487
Other 3,696 2,484
-------- --------
Total current assets 164,257 59,193
Property and equipment, at cost
net of accumulated depreciation and amortization 15,730 10,283
Goodwill, less accumulated amortization 96,024 39,101
Other assets 2,573 2,091
-------- --------
Total assets $278,584 $110,668
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 11,368 $ 4,968
Payable for acquisitions 9,665 --
Accrued expenses and other liabilities 13,025 5,889
-------- --------
Total current liabilities 34,058 10,857
Long-term debt 5,360 1,961
Convertible subordinated debentures 6,549 6,549
Other 474 201
Stockholders' Equity:
Preferred stock, par value $ .01 per share, 1,000,000
shares authorized; none issued -- --
Common stock, par value $ .01 per share:
Class A - 50,000,000 shares authorized; 10,473,131
and 5,560,492 shares issued and outstanding at
December 31, 1996 and June 30, 1996, respectively 105 56
Class B - 20,000,000 shares authorized; 6,379,100
and 6,603,228 shares issued and outstanding at
December 31, 1996 and June 30, 1996, respectively 64 66
Paid-in capital 221,104 84,907
Retained earnings 10,870 6,071
-------- --------
Total stockholders' equity 232,143 91,100
-------- --------
Total liabilities and stockholders' equity $278,584 $110,668
======== ========
<FN>
Note A: The balance sheet at June 30, 1996 has been derived from the audited
financial statements at that date, but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
NCS HEALTHCARE, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
------------------------ -------------------------
1996 1995 1996 1995
------------------------ -------------------------
<S> <C> <C> <C> <C>
Revenues $ 59,323 $27,599 $102,365 $ 50,027
Cost of revenues 44,292 19,774 76,146 35,986
-------- ------- -------- --------
Gross profit 15,031 7,825 26,219 14,041
Selling, general and administrative expenses 11,175 5,729 18,829 10,428
Special compensation (1) -- -- -- 2,811
-------- ------- -------- --------
Operating income 3,856 2,096 7,390 802
Interest expense (income), net (1,256) 874 (1,133) 1,381
-------- ------- -------- --------
Income (loss) before income taxes 5,112 1,222 8,523 (579)
Income tax expense (benefit) 2,223 497 3,724 (255)
-------- ------- -------- --------
Net income (loss) $ 2,889 $ 725 $ 4,799 $ (324)
======== ======= ======== ========
Net income (loss) per share $ 0.17 $ 0.10 $ 0.32 $ (0.05)
======== ======= ======== ========
Shares used in the computation 17,016 6,949 14,805 6,941
<FN>
(1) Represents a one-time, non-recurring charge in connection with the
termination of compensation arrangements with the prior owners of certain
acquired businesses which had the effect of reducing net income per share by
$0.23 for the six months ended December 31, 1995.
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
NCS HEALTHCARE, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
------------------------
1996 1995
------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 4,799 $ (324)
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Special compensation -- 2,811
Depreciation and amortization 3,103 1,315
--------- --------
7,902 3,802
Changes in assets and liabilities, net of effects of
assets and liabilities acquired:
Accounts receivable, net (5,715) (4,333)
Accrued expenses and other liabilities 4,115 (3,269)
Other, net (2,808) (338)
--------- --------
Net cash provided by (used in) operating activities 3,494 (4,138)
INVESTING ACTIVITIES
Purchases of businesses (52,009) (12,125)
Capital expenditures for property and equipment, net (3,386) (1,861)
Other (1,418) (1,242)
--------- --------
Net cash used in investing activities (56,813) (15,228)
FINANCING ACTIVITIES
Proceeds from issuance of common stock 123,626 1,794
Proceeds from convertible subordinated debentures -- 12,925
Repayment of long-term debt (1,996) (3,760)
Borrowings on line-of-credit 7,095 27,010
Payments on line-of-credit (7,095) (17,400)
Proceeds from issuance of long-term debt 10,246 --
--------- --------
Net cash provided by financing activities 131,876 20,569
--------- --------
Net increase in cash and cash equivalents 78,557 1,203
Cash and cash equivalents at beginning of period 21,460 286
--------- --------
Cash and cash equivalents at end of period $ 100,017 $ 1,489
========= ========
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
5
<PAGE> 6
NCS HEALTHCARE, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(UNAUDITED)
1. The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the six month period ended December 31,
1996 are not necessarily indicative of the results that may be expected
for the year ending June 30, 1997. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Registrant's Form 10 - K for the year ended June 30, 1996 (File No. 0 -
27602).
2. On February 14, 1996, the Company issued 4,476,000 shares of Class A
Common Stock at $16.50 per share in connection with an initial public
offering. A portion of the net proceeds from the stock issuance were used
to repay approximately $27,000,000 of outstanding indebtedness under
long-term and short-term borrowings.
On October 4, 1996, the Company completed a public offering of 4,235,000
shares of Class A Common Stock at $31 per share. The offering raised
approximately $123,600,000 (net of underwriting discounts and expenses).
A portion of the net proceeds from the stock issuance was used to repay
approximately $7,000,000 of outstanding indebtedness under short-term
borrowings.
3. During the six months ended December 31, 1996, the Company completed
acquisitions of Advanced Rx Services, Inc. in Northfield, New Jersey,
IPAC Pharmacy, Inc. in Portland, Oregon, Medical Arts Pharmacy in Grand
Rapids, Michigan, Northside Pharmacy Inc. and Thrifty Medical Supply,
Inc. in Oklahoma City, Oklahoma, Thrifty Medical of Tulsa L.L.C. in
Tulsa, Oklahoma, Hudson Pharmacy of Wichita, Inc. in Wichita, Kansas, IV
- Pen Care Inc. in Fort Wayne, Indiana, Pharmacy Corporation of America -
Wilsonville division, in Wilsonville, Oregon, I.V. Care of East Central
Indiana, in Muncie, Indiana, Spectrum Health Services, Inc. in Tampa,
Florida, Clinical Health Systems in Vancouver, Washington, J & K Newsom,
Inc. in Cloverdale, Indiana, H.M.S. Production, Inc. in Dearborn Heights,
Michigan, DeMoss Rexall Drugs, Inc. in Princeton, Indiana, First
Pharmacy, Inc. in Flint, Michigan, Pharma-Care, Inc. in Flushing,
Michigan, Pharmacy Acquisition Corporation in Philadelphia, Pennsylvania,
PNS Pharmacy in Muncy, Pennsylvania and Beck's Nursing Home in Eldorado,
Illinois. The aggregate purchase price for these businesses was
$64,628,000 consisting of $50,741,000 in cash, $1,268,000 of debt and
$12,619,000 of Class A Common Stock of the Company.
During fiscal 1996, the Company completed acquisitions of Corinthian
Healthcare Systems, Inc., located in Indianapolis, Indiana, The
Apothecary, Inc. in Scranton, Pennsylvania, DeMoss Rexall Drugs, Inc., in
Evansville, Indiana, Care Plus Pharmacy in Decatur, Illinois, Uni-Care
Health Services Inc. in Londonderry, New Hampshire, Uni-Care Health
Services of Maine in Wells, Maine, and Family Care Nursing Home Service,
Inc. and Care Unlimited, Inc. in Herrin, Illinois. The aggregate purchase
price for these businesses was $29,744,000 consisting of $19,983,000 in
cash, $7,925,000 of convertible debentures and $1,836,000 of Class A
Common Stock of the Company.
Subsequent to December 31, 1996, the Company completed acquisitions of
Davis Pharmacy in Golconda, Illinois, Allcare Pharmacy in Arkadelphia,
Arkansas, Long Term Care Pharmacy Services in East Greenwich, Rhode
Island, Health Mart Pharmacy in Albany, Oregon and Eakles Drug Store,
Inc. in Hagerstown, Maryland. The aggregate purchase price for these
businesses was $12,824,000 consisting of $7,824,000 in cash and
$5,000,000 of Class A Common Stock of the Company.
6
<PAGE> 7
Unaudited pro forma data, as though the Company had completed its initial
and secondary public offerings and had purchased each of these
businesses as of July 1, 1995, are set forth below:
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
December 31, 1996 December 31, 1995
----------------- -----------------
(In thousands, except per share information)
<S> <C> <C>
Revenues $140,112 $126,287
Net income (A) $ 5,415 $ 703
Net income per common share (A) $ 0.37 $ 0.10
</TABLE>
(A) The pro forma results of operations of the Company for the six
months ended December 31, 1995, include a one-time, non-recurring
charge of $2,811,000 in connection with the termination of
compensation arrangements with the prior owners of certain
acquired businesses which had the effect of reducing the net
income per share by $0.23.
4. During January 1997, the Company acquired Rescot Systems Group, Inc.
(Rescot) for $3,500,000 of Class A Common Stock of the Company. Rescot is
a software company that provides information systems to institutional
pharmacies. The results of Rescot have not been included in the pro forma
results above.
7
<PAGE> 8
NCS HEALTHCARE, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
THREE AND SIX MONTHS ENDED DECEMBER 31, 1996
Results of Operations
Revenues for the three months ended December 31, 1996 increased 114.9% to
$59,323,000 from $27,599,000 recorded in the comparable period in fiscal 1996.
For the six months ended December 31, 1996, revenues increased 104.6% to
$102,365,000 from $50,027,000 recorded in the comparable period in fiscal 1996.
The increase in quarter and year to date revenues over comparable prior year
periods is primarily attributed to two factors; the Company's acquisition
program and internal growth. Total revenues for the six months ended December
31, 1996 include the acquisitions of Advanced Rx Services, Inc. in July, 1996,
IPAC Pharmacy, Inc., Medical Arts Pharmacy, Northside Pharmacy Inc., Thrifty
Medical Supply, Inc., and Thrifty Medical of Tulsa L.L.C. in August, 1996,
Hudson Pharmacy of Wichita, Inc., in September, 1996, IV - Pen Care Inc.,
Pharmacy Corporation of America - Wilsonville division, I.V. Care of East
Central Indiana and Spectrum Health Services, Inc. in October 1996, Clinical
Health Systems and J & K Newsom, Inc. in November, 1996, and H.M.S. Production,
Inc., DeMoss Rexall Drugs, Inc., First Pharmacy, Inc., Pharma-Care Inc.,
Pharmacy Acquisition Corporation, PNS Pharmacy and Beck's Nursing Home in
December, 1996. In addition, fiscal 1996 acquisitions have had a full period of
operations included as part of the fiscal 1997 year to date consolidated
operating results. Those fiscal 1996 acquisitions include Corinthian Healthcare
Systems, Inc., acquired in September, 1995, The Apothecary, Inc., acquired in
November, 1995, DeMoss Rexall Drugs, Inc., acquired in December, 1995, Care Plus
Pharmacy acquired in April, 1996, Uni-Care Health Services Inc. and Uni-Care
Health Services of Maine acquired in May, 1996, and Family Care Nursing Home
Service, Inc. and Care Unlimited, Inc. acquired in June, 1996. The total number
of beds serviced by the Company as of December 31, 1996 increased 106% to
100,000 beds, from 48,500 beds at December 31, 1995.
The Company's existing operations continued to produce internal growth through
marketing efforts to new and existing clients, increased drug utilization of
long-term care facility residents, and the growth and integration of new and
existing products and services.
Cost of revenues for the three months ended December 31, 1996 increased 124.0%
to $44,292,000, from $19,774,000 recorded in the comparable period in fiscal
1996. For the six months ended December 31, 1996, cost of revenues increased
111.6% to $76,146,000 from $35,986,000 recorded in the comparable period in
fiscal 1996. Cost of revenues as a percentage of revenues for the three and six
month periods ended December 31, 1996 was 74.7% and 74.4%, respectively,
compared to 71.6% and 71.9% for the comparable periods during the prior fiscal
year.
The increase in cost of revenues as a percentage of revenues was primarily the
result of two factors; acquisitions and a change in the State of Pennsylvania
Medicaid reimbursement rates. First, at the time of acquisition, the gross
margins of the acquired companies are typically lower than the Company as a
whole. This is the result of several factors, including less advantageous
purchasing terms, lack of formulary management and higher production costs.
Second, during the second quarter of fiscal 1996, the State of Pennsylvania
changed the reimbursement methodology under the State Medicaid program which
resulted in a lower reimbursement percentage for Company sites located in
Pennsylvania.
Selling, general and administrative expenses as a percentage of revenues were
18.8% and 18.4% for the three and six month periods ended December 31, 1996,
compared to 20.8% and 20.8% during the comparable periods in fiscal 1996. The
percentage decreases are the result of operational efficiencies and continuing
efforts to leverage corporate overhead over a larger revenue base. The increase
in selling, general, and administrative expenses in absolute dollars is mainly
attributable to acquisitions completed during the current fiscal year.
8
<PAGE> 9
Special compensation of $2,811,000 for the six months ended December 31, 1995
represents a one-time, non-recurring charge resulting from the termination of
compensation and performance incentive arrangements with the prior owners of
certain acquired businesses.
As a result of interest income of $1,673,000 and $1,714,000, interest expense,
net of interest income, decreased to $(1,256,000) and $(1,133,000) for the three
and six months ended December 31, 1996, from $874,000 and $1,381,000 during the
comparable periods in the prior fiscal year. These decreases are primarily
attributed to the reduction of long-term debt with funds from the initial public
offering completed on February 14, 1996 and interest income earned on funds from
a public offering completed on October 4, 1996.
Liquidity and Capital Resources
Net cash provided by operating activities was $3,494,000 for the six months
ended December 31, 1996, as compared to net cash used by operating activities of
$4,138,000 during the comparable period in fiscal 1996. Net cash provided by
operating activities increased from the comparable period in fiscal 1996 due to
increased profitability and an increase in accrued expenses and other
liabilities. The increase in accrued expenses and other liabilities resulted
primarily from an increase in income taxes payable, an increase in trade
accounts payable and the timing of payment of certain accruals. These cash flow
increases were offset by increases in accounts receivable and inventory during
the period.
Net cash used in investing activities increased to $56,813,000 during the six
months ended December 31, 1996, as compared to $15,228,000 during the comparable
period in fiscal 1996. This is primarily the result of fiscal 1997 acquisitions,
as well as an increase in capital expenditures. Significant capital expenditures
during the six months ended December 31, 1996 included computer and information
systems equipment, computer software, furniture and fixtures at a new facility
in Eastlake, Ohio, leasehold improvements and medication carts for new and
existing customers.
Net cash provided by financing activities increased to $131,876,000 during the
six months ended December 31, 1996, from $20,569,000 during the comparable
period in fiscal 1996. The increase is primarily the result of funds received
from a secondary public offering completed on October 4, 1996.
The Company believes that its cash and available sources of capital are
sufficient to meet its normal operating requirements and acquisition needs
through June 30, 1998.
9
<PAGE> 10
ITEM 2. CHANGES IN SECURITIES
The following information is furnished as to all equity securities of the
Company sold during the second fiscal quarter that were not registered under the
Securities Act of 1933, as amended (the "Securities Act").
(A) On October 1, 1996 the Company issued 6,298 shares of its Class A Common
Stock to two stockholders in connection with the acquisition of certain
assets of IV - Pen Care, Inc. Exemption from registration is claimed under
Section 4(2) of the Securities Act.
(B) On November 1, 1996 the Company issued 64,621 shares of its Class A Common
Stock to five stockholders in connection with the acquisition of certain
assets of Clinical Health Systems. Exemption from registration is claimed
under Section 4(2) of the Securities Act.
(C) On December 3, 1996 the Company issued 1,802 shares of its Class A Common
Stock to two stockholders in connection with the acquisition of assets
of Tele-Rx Pharmacy Services, Inc. Exemption from registration is
claimed under Section 4(2) of the Securities Act.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Numbers Exhibit
------- -------
11 Computation of Earnings Per Common Share
15 Independent Accountants' Review Report
27 Financial Data Schedule
(b) Reports on Form 8-K:
(1) On October 15, 1996 the Company amended its Current Report
on Form 8-K dated August 1, 1996, relating to the
acquisition of IPAC Pharmacy, Inc.
(2) On October 21, 1996 the Company amended its Current Report
on Form 8-K dated August 13, 1996, relating to the
acquisition of Thrifty Medical of Tulsa, L.L.C.,
Northside Pharmacy, Inc., and Thrifty Medical Supply,
Inc.
(3) On November 1, 1996 the Company filed a Current Report on
Form 8-K dated November 1, 1996, pursuant to Item 5 of
Form 8-K, relating to the acquisition of Clinical
Health Systems.
10
<PAGE> 11
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.
<TABLE>
NCS HealthCare, Inc.
(Registrant)
<S> <C>
Date: February 14, 1997 By /s/ Kevin B. Shaw
----------------------------------------
Kevin B. Shaw
President, Chief Executive Officer and Director
(Principal Executive Officer)
Date: February 14, 1997 By /s/ Jeffrey R. Steinhilber
----------------------------------------
Jeffrey R. Steinhilber
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
</TABLE>
11
<PAGE> 1
EXHIBIT 11
NCS HEALTHCARE, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
--------------------- --------------------
1996 1995 1996 1995
--------------------- --------------------
<S> <C> <C> <C> <C>
Net income (loss) used in calculation of primary
earnings per share $ 2,889 $ 725 $ 4,799 $ (324)
Add impact of assumed conversion of
subordinated debentures 71 124 142 170
------- ------ ------- -------
Net income (loss) used in calculation of fully
diluted earnings per share $ 2,960 $ 849 $ 4,941 $ (154)
======= ====== ======= =======
Weighted average common shares outstanding 16,829 6,177 14,618 6,082
Net effect of dilutive stock options -- Note A 187 772 187 859
------- ------ ------- -------
Shares used in calculation of primary earnings
per share 17,016 6,949 14,805 6,941
Add impact of assumed conversion of
subordinated debentures 649 1,035 649 728
------- ------ ------- -------
Shares used in calculation of fully diluted
earnings per share 17,665 7,984 15,454 7,669
======= ====== ======= =======
Primary net income (loss) per share $ 0.17 $ 0.10 $ 0.32 $ (0.05)
======= ====== ======= =======
Fully diluted net income (loss) per share--
Note B $ 0.17 $ 0.11 $ 0.32 $ (0.02)
======= ====== ======= =======
<FN>
NOTE A -- Stock options granted within a twelve-month period
preceding the Company's initial public offering in February
1996 are included as if they were outstanding for all periods
presented. The dilutive effect of all options outstanding was
calculated using the treasury stock method.
NOTE B -- Fully dilutive net income (loss) per share has not been
presented in the Condensed Consolidated Statements of Income
because the effect is either immaterial or anti-dilutive.
</TABLE>
12
<PAGE> 1
EXHIBIT 15
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors and Stockholders
NCS HealthCare, Inc. and Subsidiaries
We have reviewed the accompanying condensed consolidated balance sheet of NCS
HealthCare, Inc. and subsidiaries (the Company) as of December 31, 1996, and the
related condensed consolidated statements of income for the three-month and
six-month periods ended December 31, 1996 and 1995, and the condensed
consolidated statements of cash flows for the six-month periods ended December
31, 1996 and 1995. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical review procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements
referred to above for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of NCS HealthCare, Inc. and
subsidiaries as of June 30, 1996, and the consolidated statements of income,
stockholders' equity and cash flows for the year then ended, not presented
herein, and in our report dated August 2, 1996, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of June 30, 1996 is fairly stated, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.
Cleveland, Ohio /s/ Ernst & Young LLP
February 14, 1997
13
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001004990
<NAME> N/A
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 100,117
<SECURITIES> 0
<RECEIVABLES> 54,691
<ALLOWANCES> 9,881
<INVENTORY> 15,734
<CURRENT-ASSETS> 164,257
<PP&E> 30,262
<DEPRECIATION> 14,533
<TOTAL-ASSETS> 278,584
<CURRENT-LIABILITIES> 34,058
<BONDS> 11,909
<COMMON> 169
0
0
<OTHER-SE> 231,974
<TOTAL-LIABILITY-AND-EQUITY> 278,584
<SALES> 102,365
<TOTAL-REVENUES> 102,365
<CGS> 76,146
<TOTAL-COSTS> 76,146
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 337
<INTEREST-EXPENSE> 582
<INCOME-PRETAX> 8,523
<INCOME-TAX> 3,724
<INCOME-CONTINUING> 4,799
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,799
<EPS-PRIMARY> .32
<EPS-DILUTED> .32
</TABLE>
