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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 8-K/A-1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: January 30, 1998
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(Date of earliest event reported)
NCS HEALTHCARE, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 0-027602 34-1816187
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(State or other jurisdiction (Commission (I.R.S. employer
of incorporation) file number) identification no.)
3201 Enterprise Parkway, Suite 220, Beachwood, Ohio 44122
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 514-3350
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NCS HealthCare, Inc. hereby amends the following items, financial
statements, exhibits or other portions of its Current Report on Form 8-K dated
January 30, 1998 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
substantially all of the assets primarily used in the operation of the
institutional pharmacy business of Thrift Drug, Inc. and Fay's Incorporated by
the Company.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(c) Exhibits
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Exhibit No. Description
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23.1 Consent of Ernst & Young LLP
99.1 Financial Statements of Businesses Acquired.
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Report of Independent Auditors
Combined Statement of Assets Acquired and Liabilities Assumed as
of January 30, 1998
Combined Statement of Revenues and Direct Expenses for the Year
Ended January 30, 1998
Notes to Combined Statements for the Year Ended January 30, 1998
99.2 Unaudited Pro Forma Financial Information.
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Pro Forma Condensed Consolidated Balance Sheet as of December 31,
1997
Notes to Pro Forma Condensed Consolidated Balance Sheet
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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/ Gerald D. Stethem
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Gerald D. Stethem
Chief Financial Officer
Date: April 17, 1998
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EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
(Form S-8, No. 333-49417; Form S-3/A No. 333-29565 and Form S-3/A No. 333-35551)
of NCS HealthCare, Inc. of our report dated March 31, 1998 with respect to the
combined statement of assets acquired and liabilities assumed of Thrift Drug,
Inc. and Fay's, Incorporated as of January 30, 1998, and the related combined
statement of revenues and direct expenses for the year then ended included in
the Company's Form 8-K/A-1 dated January 30, 1998.
/s/ Ernst & Young LLP
Cleveland, Ohio
April 15, 1998
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Exhibit 99.1
Report of Independent Auditors
To the Board of Directors and Stockholders of
NCS HealthCare, Inc.
We have audited the accompanying combined statement of assets acquired and
liabilities assumed of Thrift Drug, Inc. ("Thrift") and Fay's, Incorporated
("Fay's") as of January 30, 1998, and the related combined statement of revenues
and direct expenses for the year then ended. These statements are the
responsibility of Thrift's and Fay's management. Our responsibility is to
express an opinion on these 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 combined statement of assets acquired and
liabilities assumed and the related combined statement of revenues and direct
expenses are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the combined
statement of assets acquired and liabilities assumed of Thrift and Fay's and the
related combined statement of revenues and direct expenses. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the combined
statement of assets acquired and liabilities assumed of Thrift and Fay's and the
related combined statement of revenues and direct expenses. We believe that our
audit provides a reasonable basis for our opinion.
The accompanying combined statement of assets acquired and liabilities assumed
of Thrift and Fay's and the related combined statement of revenues and direct
expenses were prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission for inclusion in NCS
HealthCare, Inc.'s Form 8-K/A-1 as described in Note 1 and are not intended to
be a complete presentation of the financial position and results of operations
of Thrift or Fay's.
In our opinion, the accompanying combined statements referred to above present
fairly, in all material respects, the combined assets acquired and liabilities
assumed of Thrift and Fay's as of January 30, 1998, and the related combined
revenues and direct expenses for the year ended January 30, 1998, in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
March 31, 1998
F-1
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Thrift Drug, Inc. and Fay's Incorporated
Combined Statement of Assets Acquired and Liabilities Assumed
January 30, 1998
<TABLE>
<CAPTION>
<S> <C>
ASSETS ACQUIRED
Current assets:
Accounts receivable, less allowance of $984,000 $13,075,543
Inventory 5,363,594
Other current assets 191,297
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18,630,434
Net property, plant and equipment 4,201,047
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TOTAL ASSETS ACQUIRED 22,831,481
LIABILITIES ASSUMED
Current liabilities:
Accrued vacation payable 505,371
Other current liabilities 22,711
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TOTAL LIABILITIES ASSUMED 528,082
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TOTAL ASSETS ACQUIRED AND LIABILITIES ASSUMED, NET $22,303,399
===========
</TABLE>
See accompanying notes.
F-2
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Thrift Drug, Inc. and Fay's Incorporated
Combined Statement of Revenues and Direct Expenses
For the Year Ended January 30, 1998
<TABLE>
<CAPTION>
<S> <C>
Revenues $76,930,953
Direct expenses:
Cost of revenues 49,769,745
Salaries and benefits 10,317,461
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EXCESS OF REVENUES OVER DIRECT EXPENSES $16,843,747
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</TABLE>
See accompanying notes.
F-3
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Thrift Drug, Inc. and Fay's, Incorporated
Notes to Combined Statements
Year Ended January 30, 1998
1. SALE OF CERTAIN ASSETS AND BASIS OF PRESENTATION
SALE OF CERTAIN ASSETS
On January 30, 1998, NCS HealthCare ("NCS") acquired all of the assets primarily
used in the operation of the institutional pharmacy business of Thrift Drug,
Inc., ("Thrift") and Fay's, Incorporated ("Fay's"), pursuant to the terms of an
Asset Purchase Agreement dated December 29, 1997 (the "Agreement"). Thrift and
Fay's institutional pharmacy businesses are engaged, among other things, in the
business of providing pharmaceuticals, drugs, biologicals, medical devices, and
other health or medical supplies and related services to correctional
facilities, nursing homes, other institutional care facilities and individuals
residing in such facilities. Thrift and Fay's operate in Pennsylvania, North
Carolina and New York.
BASIS OF PRESENTATION
The accompanying combined statement of assets acquired and liabilities assumed
of Thrift and Fay's and the related combined statement of revenues and direct
expenses were prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission for inclusion in NCS's
Form 8-K/A-1 requirements and are not intended to be a complete presentation of
the financial position and results of operations of Thrift and Fay's. Prior to
the purchase, these assets were an integral part of Thrift and Fay's
institutional pharmacy businesses, and did not constitute separate legal or
reporting entities for which separate financial statements or allocations of
corporate overhead costs or other corporate level activities such as cash
management and financing were prepared. In addition, operating, investing and
financing cash flow activities was not prepared. These assets and results of
operations were included in the consolidated financial statements of their
parent company, J. C. Penney Company.
Due to the omission of various operating overhead and other corporate level
expenses and anticipated changes in the business upon integration with NCS, the
statements presented are not indicative of the financial condition or results of
operations of Thrift and Fay's going forward.
F-4
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Thrift Drug, Inc. and Fay's, Incorporated
Notes to Combined Statements--Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Revenue is recognized when products or services are provided to the customer. A
significant portion of Thrift and Fay's revenues from sales of pharmaceutical
and related products are reimbursable from Medicaid and Medicare programs.
Thrift and Fay's monitor their receivables from these reimbursement sources and
reports such revenues at the net realizable amount expected to be received from
these third-party payors.
DIRECT EXPENSES
Direct expenses include the cost of products sold and salaries and benefits of
Thrift and Fay's personnel to process and distribute products sold. No amounts
have been allocated for insurance, interest, depreciation, provision for bad
debts, income taxes or any selling, general or administrative costs.
BASIS OF ACCOUNTING
These statements have been prepared on the accrual basis of accounting in
conformity with generally accepted accounting principles.
INVENTORIES
Inventories of Thrift and Fay's consist primarily of purchased pharmaceuticals
and medical supplies and are stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT
Property and equipment are stated at cost. Depreciation on property, plant and
equipment is computed using the straight-line method over the estimated useful
lives of the assets are as follows:
<TABLE>
<S> <C>
Software and computer equipment 3 - 5 years
Machinery and equipment 10 years
Furniture and fixtures 10 years
</TABLE>
USE OF ESTIMATES
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 at the date of the
financial statements and the reported amounts of revenues and direct expenses
during the reported period. Actual results could differ from those estimates.
F-5
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EXHIBIT 99.2
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited Pro Forma Condensed Consolidated Balance Sheet of NCS
HealthCare, Inc. (the "Company") as of December 31, 1997 gives effect to the
acquisition of substantially all of the assets primarily used in the operation
of the institutional pharmacy business of Thrift Drug, Inc. and Fay's
Incorporated (the "Sellers") as if it had occurred as of December 31, 1997.
The combined balance sheet of the acquired companies is based on the historical
financial information of the acquired companies as of the acquisition closing
date adjusted for purchase accounting adjustments. The acquisition was accounted
for under the purchase method of accounting. The total purchase price was
allocated to the assets and liabilities acquired based on their estimated fair
values at the date of acquisition. The excess of cost over the fair value of the
net assets acquired was recorded as goodwill. The allocation of the purchase
price may be adjusted to the extent that actual amounts differ from current
estimates. The Company does not expect that any adjustments would have a
material impact on the pro forma information.
The pro forma information has been prepared by the Company based on the
consolidated balance sheet of the Company included in the December 31, 1997 Form
10-Q and the Combined Statement of Assets Acquired and Liabilities Assumed of
the Sellers included herein. The pro forma information is presented for
illustration purposes only and does not purport to be indicative of the combined
financial condition at December 31, 1997.
NCS HEALTHCARE, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (1)
UNAUDITED
DECEMBER 31, 1997
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
Historical
------------------------- Pro Forma Pro Forma
NCS HealthCare Sellers Adjustments Adjusted
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<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 49,012 $ -- $(25,715)(b) $ 23,297
Accounts receivable, less allowances 95,571 13,076 -- 108,647
Inventories 29,496 5,364 -- 34,860
Other 8,851 190 -- 9,041
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Total current assets 182,930 18,630 (25,715) 175,845
Property, plant and equipment, net 31,050 4,201 (2,280)(a) 32,971
Goodwill, less accumulated amortization 201,359 -- 63,692(a) 265,051
Other assets 16,329 -- -- 16,329
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Total assets $431,668 $ 22,831 $ 35,697 $490,196
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Line of credit $ -- $ -- $ 58,000(b) $ 58,000
Accounts payable 17,619 -- -- 17,619
Accrued expenses and other liabilities 29,434 528 -- 29,962
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Total current liabilities 47,053 528 58,000 105,581
Long-term debt 8,760 -- -- 8,760
Convertible subordinated debentures 102,753 -- -- 102,753
Other 591 -- -- 591
Stockholders Equity:
Preferred stock, par value $.01 per share
Common stock, par value $.01 per share
Class A 123 -- -- 123
Class B 69 -- -- 69
Paid-in capital 247,323 -- -- 247,323
Retained earnings 24,996 -- -- 24,996
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Total stockholders' equity 272,511 -- -- 272,511
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Total liabilities and stockholders' equity $431,668 $ 528 $ 58,000 $490,196
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</TABLE>
(1) See accompanying Notes to Pro Forma Condensed Consolidated Balance Sheet
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NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(a) On January 30, 1998, NCS HealthCare, Inc. (the "Company") completed
the acquisition of substantially all of the assets primarily used in the
operation of the institutional pharmacy business of Thrift Drug, Inc. and
Fay's Incorporated (the "Sellers") for a cash purchase price of
$83,715,000. The acquisition was accounted for under the purchase method of
accounting. The total purchase price was allocated to the assets and
liabilities acquired based on their estimated fair values at the date of
acquisition. The excess of the acquitision cost over the fair value of the
net assets acquired was recorded as goodwill. For purposes of the unaudited
pro forma balance sheet, the acquisition and related purchase accounting is
assumed to have been recorded as of December 31, 1997.
(b) On the closing date, the Company drew down $58,000,000 from its
$135,000,000 credit facility to fund the cash purchase price of the
acquisition. The remainder of the purchase price was paid from available
funds.
