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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A
AMENDMENT NO. 1
TO FORM 8-K FILED JULY 24, 1996
PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) July 10, 1996
MATRIA HEALTHCARE, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-20619 58-2205984
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
1850 Parkway Place, 12th Floor, Marietta, Georgia 30067
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(Address of principal executive offices) (Zip Code)
(770) 423-4500
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(Registrant's telephone number, including area code)
N/A
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(Former name or former address, if changed since last report)
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The undersigned registrant hereby amends the following items of its
Current Report on Form 8-K, filed July 24, 1996, as set forth in the pages
below:
Item 7. Financial Statements and Exhibits
(b) Proforma Financial Information:
Consolidated Condensed Statement of Earnings (Loss)
Notes to Proforma Consolidated Condensed Statements of Earnings (Loss)
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 hereunto duly authorized.
Matria Healthcare, Inc.
By: /s/ J. Brent Burkey
--------------------------
J. Brent Burkey
Senior Vice President,
General Counsel and Secretary
Date: August 28, 1996
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MATRIA HEALTHCARE, INC.
PRO FORMA CONSOLIDATED CONDENSED FINANCIAL INFORMATION
(UNAUDITED)
The following pro forma consolidated condensed financial information and
explanatory notes are presented to reflect the Merger ("the Merger") of Tokos
Medical Corporation (Delaware) ("Tokos") and Healthdyne, Inc. ("Healthdyne")
with and into Matria Healthcare, Inc. ("Matria") and the acquisition of
National Reproductive Medical Centers, Inc. ("NRMC") ("the Acquisition"). The
Merger and the Acquisition have been accounted for in accordance with the
purchase method of accounting. Under the Agreement and Plan of Merger, each
share of Tokos Common Stock and Healthdyne Common Stock outstanding immediately
prior to consummation of the Merger was exchanged for one share of Matria
Common Stock, par value $0.01 per share. Based upon the outstanding shares of
the respective companies as of March 8, 1996, Tokos shareholders received
approximately 51% of the combined shares of Matria Common Stock. Since Tokos'
shareholders received the larger percentage of Matria Common Stock and since
there is no other evidence that clearly indicates that Healthdyne would be the
acquirer, for accounting purposes Tokos has been deemed to be the acquirer of
Healthdyne. No Pro Forma Consolidated Condensed Balance Sheet has been
presented since the Merger and the Acquisition are reflected in the
Consolidated Condensed Balance Sheet of Matria ("the Company") included in the
Company's Form 10-Q for the six months ended June 30, 1996. The Pro Forma
Consolidated Condensed Statements of Earnings (Loss) for the year ended
December 31,1995 and the six month period ended June 30, 1996 assumes the
Merger and the Acquisition occurred at the beginning of the period presented.
The pro forma adjustments are based upon currently available information
and upon certain assumptions that management of Matria believes are reasonable.
The Merger and the Acquisition were recorded based upon the estimated fair
market value of Healthdyne's and NRMC's net assets at the Merger and
Acquisition dates. The pro forma adjustments were based on an evaluation of
assets, liabilities and circumstances at the Merger and Acquisition dates.
The Pro Forma Consolidated Condensed Financial Statements are not
necessarily indicative of either future results of operations or results that
might have been achieved if the Merger and the Acquisition actually had been
consummated as of the indicated dates. The pro forma financial statements
should be read in conjunction with the historical financial statements of Tokos
and Healthdyne together with related notes thereto incorporated by reference
into the Company's Form 10-K for the year ended December 31, 1995 from the
Company's Report on Form 8-K-A filed on March 29, 1996; the historical
financial statements of the Company together with related notes thereto for the
six month period ended June 30, 1996 included in the Company's report on Form
10-Q; and the historical financial statements of NRMC together with related
notes thereto included in the Company's report on Form 8-K filed on July 24,
1996.
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MATRIA HEALTHCARE, INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (LOSS)
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31, 1995
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Historical Historical Historical Healthdyne NRMC Matria
Tokos Healthdyne NRMC Pro Forma Pro Forma Pro Forma
Adjustments Adjustments
-------- ---------- --------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 87,502 69,627 12,586 - - 169,715
Costs and expenses:
Cost of revenues 69,820 27,804 10,343 (32,550)(7) - 75,417
Selling and administrative 16,423 38,801 1,419 32,550 (7) - 89,193
Provision for doubtful accounts 5,251 4,088 11 - - 9,350
Amortization of goodwill and other
intangibles 1,235 192 - 29,592 (2) 2,807(8) 36,492
1,666 (3)
1,000 (4)
Restructuring costs 2,456 - - - - 2,456
Settlement of litigation 4,300 - - - - 4,300
-------- ------- ------ ------- ------ -------
99,485 70,885 11,773 32,258 2,807 217,208
-------- ------- ------ ------- ------ -------
Operating earnings (loss) (11,983) (1,258) 813 (32,258) (2,807) (47,493)
Interest income (expense), net 339 1,923 (55) - (465)(9) 1,742
Other income (expense), net - (738) - - - (738)
-------- ------- ------ ------- ------ -------
Earnings (loss ) from continuing operations
before income tax expense (benefit) (11,644) (73) 758 (32,258) (3,272) (46,489)
Income tax expense (benefit) 150 (863) 9 - - (704)
-------- ------- ------ ------- ------ -------
Net earnings (loss) from continuing operations $(11,794) 790 749 (32,258) (3,272) (45,785)
======== ======= ====== ======= ====== =======
Net earnings (loss) per common share
and common share equivalent $ (.68) (1.30)
======== =======
Weighted average number of common shares
and common share equivalents 17,396 17,007 780 35,183(10)
======== ======= ====== =======
</TABLE>
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MATRIA HEALTHCARE, INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (LOSS)
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Matria Healthdyne NRMC
Six Months Two Months Five Months Healthdyne NRMC
Ended Ended Ended Pro Forma Pro Forma Matria
June 30, 96 February 29, 96 May 31, 96 Adjustments Adjustments Pro Forma
----------- ---------------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 60,338 10,913 6,013 - - 77,264
Costs and expenses:
Cost of revenues 26,041 4,288 3,628 - - 33,957
Selling and administrative 34,034 6,436 1,948 - - 42,418
Provision for doubtful accounts 3,553 655 234 - - 4,442
Amortization of goodwill and other intangibles 11,698 36 - 4,964(2) 1,170(8) 18,314
278(3)
168(4)
Restructuring costs 15,025 - - - - 15,025
-------- ------ ----- ------ ------ -------
90,351 11,415 5,810 5,410 1,170 114,156
-------- ------ ----- ------ ------ -------
Operating earnings (loss) (30,013) (502) 203 (5,410) (1,170) (36,892)
Interest income (expense), net 395 201 5 - (233)(9) 368
Other income (expense), net (39) 18 (2) - - (23)
-------- ------ ----- ------ ------ -------
Earnings (loss ) from continuing operations
before income tax expense (benefit) (29,657) (283) 206 (5,410) (1,403) (36,547)
Income tax expense (benefit) - - - - - -
-------- ------ ----- ------ ------ -------
Net earnings (loss) from continuing operations $(29,657) (283) 206 (5,410) (1,403) (36,547)
======== ====== ===== ====== ====== =======
Net earnings (loss) per common share
and common share equivalent $ (1.04) (1.03)
======== =======
Weighted average number of common shares
and common share equivalents 28,505 6,245 780 35,530(10)
======== ====== ====== =======
</TABLE>
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MATRIA HEALTHCARE, INC.
NOTES TO PRO FORMA CONDENSED
STATEMENTS OF EARNINGS (LOSS)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The Healthdyne/Tokos Merger
(1) On March 8, 1996 Tokos and Healthdyne merged with and into Matria, with
Tokos being deemed to be the acquirer. The purchase price of Healthdyne
was based upon the number of shares of Healthdyne Common Stock (including
options to purchase shares of Healthdyne Common Stock) outstanding on the
date of the Merger was consummated and the average trading value of Tokos
Common Stock for two trading days immediately prior to and two trading
days immediately after the announcement date of the Merger, October 3,
1995. The fair value of the net tangible assets of Healthdyne includes
$9,350 of additional accrued liabilities for estimated severance payments
and other obligations resulting from the Merger. Included in this amount
is $1,350 related to severance for approximately one hundred twenty-five
Healthdyne non-executive employees that will be involuntarily terminated
as a result of the Merger, $7,800 of payments expected as a result of the
Merger under executive severance agreements and $200 facilities costs for
patient service centers specifically identified to be closed. The
employees terminated or to be terminated are primarily personnel in sales
and field administration positions located in various geographic regions
throughout the country. The employees were notified of termination on or
shortly after consummation of the Merger. The type and amount of
benefits and a plan of termination have been established. All known
issues have been resolved, but changes (such as increases in the number
of terminated executives or employees) or new issues could increase such
costs. If the ultimate amount of cost incurred is less than the amount
recorded as a liability and this adjustment is determined within one year
of the consummation date, the purchase price will be reduced accordingly.
If the ultimate amount of cost exceeds the amount recorded as a
liability and this adjustment is determined within one year of the
consummation date, the purchase price will be increased; thereafter, any
costs exceeding the amount recorded as a liability will be recorded as an
expense in the period in which the adjustment is determined.
An analysis of the purchase price is as follows:
<TABLE>
<S> <C>
Healthdyne shares outstanding at March 8, 1996 17,007
Tokos value per share $ 10.31
--------
Value of outstanding stock $175,342
Value of Healthdyne stock options, net of
proceeds from exercise 7,652
Transaction costs 3,700
--------
Purchase price of Healthdyne 186,694
Less - estimated fair value of net
tangible assets acquired 29,774
--------
Excess purchase price $156,920
========
</TABLE>
The fair value of the net tangible assets was determined as follows:
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- Cash and short-term investments are at current net realizable values.
- Accounts receivable and payable are at book value since receivables
are expected to be recovered and payables are expected to be settled,
within sixty days.
- Inventories, which are primarily patient supplies, are at book value
since these inventories turnover in two to three months.
- Property and equipment are at a net book value since net book value
approximates fair value.
- Goodwill and deferred taxes have been eliminated in accordance with
generally accepted accounting principles.
Excess purchase price has been allocated to intangibles as follows:
<TABLE>
<S> <C>
Internally developed software $ 5,000
Executive non-compete agreements 3,000
Goodwill 148,920
--------
$156,920
========
</TABLE>
At the date of each balance sheet, Matria assesses the recoverability of
its goodwill by determining whether the remaining goodwill balance is
expected to be recoverable through the undiscounted future operating cash
flows of the acquired operations. The amount of impairment, if any, is
measured based on projected discounted future operating cash flows using a
discount rate reflecting the Company's average cost of funds.
Pursuant to SAB 74, the adoption of SFAS 121 is not expected to have a
material impact on the financial position or results of operations of
Matria.
(2) Reflects additional amortization of goodwill using the straight-line
method over five years.
(3) Reflects amortization of intangibles relating to internally developed
software over a period of three years.
(4) Reflects amortization of intangibles relating to non-compete agreements
over the three year term of the agreements.
(5) The Pro Forma Consolidated Condensed Statements of Earnings (Loss) do not
include anticipated cost savings of approximately $30,000 expected to be
realized in connection with the Merger. Reductions of patient service
center expense in
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overlapping geographic locations, and synergies in staff and functional
areas provide expense reduction opportunities.
(6) The Pro Forma Consolidated Condensed Statements of Earnings (Loss) for
the six month period ended June 30, 1996 reflect non-recurring
restructuring costs of $15,025 that are expected to be incurred by Matria
as a result of the Merger. These charges are in addition to the $9,350 of
accrued liabilities of the acquired company, Healthdyne, discussed in Note
1 above. The estimated restructuring costs consist of the following:
<TABLE>
<S> <C>
Personnel $ 4,100
Facilities 2,500
Equipment 5,300
Other Merger expenses 3,125
-------
$15,025
=======
</TABLE>
Personnel related costs reflect $923 of executive and $3,177 of
non-executive severance costs for approximately two hundred seventy-five
Tokos employees to be involuntarily terminated. Facilities costs consist
of lease termination costs and other facilities-related exit costs arising
from the closing of duplicate patient service centers and consolidation of
two corporate headquarters. Equipment costs consist primarily of computer
and patient service equipment to be written off due to incompatibility
with the nursing station software that has been selected to be used by
Matria and other computer hardware and software that will be obsolete by
adoption of new systems. The reserve for these charges was established on
the consummation date in compliance with Emerging Issues Task Force No.
94-3 and 95-3 and was charged to operations in the quarter the Merger was
consummated.
The estimate of staff reduction totaling approximately two hundred
seventy-five, comes from the elimination of duplicate sales force, patient
service centers and duplicate staff and administrative support functions.
The contemplated time frame for completion of these reductions is six to
twelve months from closing.
Matria will incur certain additional costs in order to effect the
consolidation of the two companies and achieve the anticipated cost
savings referred to in Notes 5 and 6 above during 1996. The costs of
duplicate local, regional and corporate activities (which may be
substantial) will be charged to operations in future periods when incurred
and have not been accrued as restructuring costs or additional accrued
liabilities resulting from the Merger.
(7) Reflects reclassifications of certain operating costs of Tokos from cost
of revenues to selling and administrative expenses to be consistent with
the presentation used by Healthdyne and adopted by Matria. Historically,
Healthdyne has classified certain operating costs that are not directly
related to patient care as "selling and administrative expenses" in the
consolidated statements of earnings. These costs include field sales and
sales administration costs, patient service center facility and
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administration costs and have not been classified as cost of revenues
since these costs are related to personnel whose function is sales and who
have limited, if any, patient care responsibilities. Patient service
center facility and administrative costs have not been classified as
"costs of revenues" since both patient care and selling and administrative
functions are conducted from these centers, and an allocation of such
costs between the functions is not considered material. Insurance
benefit verification is considered a part of the credit and collection
function, and therefore, these costs are classified as "selling and
administrative expenses." Amounts reclassified for Tokos include field
sales, field sales management and administrative costs, patient service
center facility and administration costs, insurance benefit verification
costs and other management and administration costs not associated with
patient service centers and represent approximately 15.5%, 11.0%, 1.5% and
6.5%, respectively, of 1995 revenues.
The Acquisition of NRMC
(8) In March 1995 Healthdyne made a $1,250 cash payment to acquire a 15%
ownership interest in NRMC, a multi-site provider of infertility treatment
services. Effective June 1, 1996 the Company purchased the remaining 85%
ownership interest in NRMC. Total acquisition costs of $14,207 included
the issuance of 780 shares of the Company's Common Stock valued at $8.50
per share ($6,627), assumption of NRMC common stock options and the
substitution of options to purchase 61 of the Company's Common Stock
valued at $8.50 per share ($515) payment of $6,740 payment in cash to
former NRMC shareholders (including $1,250 payment for the initial 15%
investment) and $325 of transaction costs.
The purchase price of NRMC was allocated based on estimated fair values at
acquisition. The excess of purchase price over the fair values of the net
assets acquired was $14,034 and is being amortized on a straight-line
basis over 5 years.
(9) Reflects the loss of interest income at an annual rate of $8.5% on the
$5,447 of cash paid to NRMC shareholders.
(10) Reflects the weighted average number of shares and common share
equivalents of Tokos Common Stock at December 31, 1995 and of Matria
Common Stock at June 30, 1996 plus the actual number of shares of
Healthdyne Common Stock outstanding on the effective date of the Merger,
the conversion of each such share into one share of Matria Common Stock
and the issuance of Matria shares to NRMC shareholders.
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The weighted average number of shares outstanding used in the computation
of pro forma net loss per share consists of the following:
<TABLE>
<CAPTION>
Six Months
Year Ended Ended
December 31, 1996 June 30, 1996
<S> <C> <C>
Historical weighted average number of shares
of Tokos outstanding 17,396 28,505
Issuance of Matria shares to
Healthdyne shareholders 17,007 6,245
Issuance of Matria shares to
NRMC shareholders 780 780
------ ------
Pro Forma weighted average shares 35,183 35,530
====== ======
</TABLE>
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