<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: January 17, 1997
----------------
(Date of earliest event reported)
AMERICAN MEDSERVE CORPORATION
-----------------------------
(Exact name of Registrant as specified in its charter)
Delaware 000-21515 36-3925637
- ------------------------------- ---------------- -------------------
(State or other jurisdiction of (Commission file (I.R.S. employer
incorporation or organization) number) identification no.)
184 Shuman Blvd., Suite 200, Naperville, Illinois 60563
------------------------------------------------- -----
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (630) 717-2904
---------------
<PAGE>
The undersigned Registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report on Form 8-K dated
January 17, 1997 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 HMIS, Inc.
by the Registrant.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
HMIS, Inc. Financial Statements
Independent Auditors' Report
Balance Sheets as of December 31, 1993, 1994 and 1995 and September 30,
1996 (unaudited)
Statements of Income and Retained Earnings for the years ended December 31,
1993, 1994 and 1995 and the nine months ended September 30, 1996
(unaudited)
Statements of Cash Flows for the years ended December 31, 1993, 1994 and
1995 and the nine months ended September 30, 1996 (unaudited)
Notes to Financial Statements
(b) Pro Forma Financial Information.
Pro Forma Consolidated Balance Sheet as of December 31, 1996
Pro Forma Consolidated Statements of Operations for the years ended
December 31, 1995 and 1996
(c) Exhibits.*
Exhibit No. Description
- ----------- -----------
2.1 Asset Purchase Agreement by and among HMIS, Inc., the Stockholders of
HMIS, Inc. and HMIS Acquisition Co., dated as of January 15, 1997. **
* Previously filed.
** The Registrant agrees by this filing to supplementally furnish a copy
of the schedules of this Agreement to the Commission upon request.
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.
AMERICAN MEDSERVE
CORPORATION
By: /s/ Charles R. Wallace
-----------------------
Charles R. Wallace
Vice President - Finance and
Chief Financial Officer
Date: March 27, 1997
<PAGE>
HMIS, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
<PAGE>
CONTENTS
Page
Independent Auditors' Report 3
Financial Statements
Balance Sheets 4 - 5
Statements of Income and Retained Earnings 6
Statements of Cash Flows 7
Notes to Financial Statements 8 - 10
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
HMIS, Inc.
We have audited the accompanying balance sheets of HMIS, Inc., a Maryland
corporation, as of December 31, 1995, 1994 and 1993 and the related statements
of income, retained earnings and cash flows for the years then ended. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audits provide 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 HMIS, Inc. at December 31,
1995, 1994 and 1993 and the results of its operations and its cash flows for the
years then ended, in conformity with generally accepted accounting principles.
STURGILL & ASSOCIATES
Westminster, Maryland
March 4, 1997
<PAGE>
HMIS, Inc.
Balance Sheets
December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Assets
September 30,
1993 1994 1995 1996
---------- ---------- ---------- -------------
(unaudited)
<S> <C> <C> <C> <C>
Current assets
Cash and cash equivalents $1,031,080 $1,159,504 $1,751,282 $ 986,236
Marketable securities 2,283 2,283 2,283 2,283
Accounts receivable - net of allowance
for contractual agreements 1,746,399 2,290,522 1,981,181 3,845,525
Miscellaneous receivables 83,220 73,595 95,073 38,757
Inventories 569,581 583,729 614,593 739,593
Prepaid expenses 13,136 16,764 21,744 19,053
---------- ---------- ---------- ----------
Total current assets 3,445,699 4,126,397 4,466,156 5,631,447
---------- ---------- ---------- ----------
Long-term accounts receivable - - 356,847 356,847
---------- ---------- ---------- ----------
Property and equipment - at cost:
Autos 231,250 236,917 252,110 355,958
Leasehold improvements 142,020 142,020 150,020 152,214
Equipment 267,284 317,684 357,286 427,085
---------- ---------- ---------- ----------
640,554 696,621 759,416 935,257
Less: accumulated depreciation 327,645 318,413 437,484 509,250
---------- ---------- ---------- ----------
Total property and equipment 312,909 378,208 321,932 426,007
---------- ---------- ---------- ----------
Other assets 9,392 32,029 25,470 75,565
---------- ---------- ---------- ----------
Total assets $3,768,000 $4,536,634 $5,170,405 $6,489,866
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes.
4
<PAGE>
Liabilities and Stockholders' Equity
<TABLE>
<CAPTION>
September 30,
1993 1994 1995 1996
-------- -------- --------- -------------
(unaudited)
<S> <C> <C> <C> <C>
Current liabilities
Accounts payable $ 277,782 $ 298,855 $ 290,135 $ 824,005
Accrued expenses 11,841 65,307 64,820 50,037
Demand notes payable 600,000 600,000 600,000 600,000
---------- ---------- ---------- ----------
Total current
liabilities 889,623 964,162 954,955 1,474,042
---------- ---------- ---------- ----------
Stockholders' equity
Common stock, 1,000
shares authorized
at $10 par value;
130 shares issued
and outstanding 1,300 1,300 1,300 1,300
Retained earnings 2,877,077 3,571,172 4,214,150 5,014,524
---------- ---------- ---------- ----------
Total stockholders'
equity 2,878,377 3,572,472 4,215,450 5,015,824
---------- ---------- ---------- ----------
Total liabilities and
stockholders' equity $3,768,000 $4,536,634 $5,170,405 $6,489,866
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes.
5
<PAGE>
HMIS, Inc.
Statements of Income and Retained Earnings
For the Years Ended
December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
For the nine
months ended
September 30,
1993 1994 1995 1996
------------ ----------- ----------- -------------
(unaudited)
<S> <C> <C> <C> <C>
Sales $ 7,870,896 $ 9,384,774 $ 9,717,320 $ 7,696,164
Cost of sales 6,301,201 7,154,172 7,375,901 6,242,548
----------- ----------- ----------- -----------
Gross profit 1,569,695 2,230,602 2,341,419 1,453,616
Operating expenses 1,057,612 1,501,751 1,482,355 715,802
----------- ----------- ----------- -----------
Operating profit 512,083 728,851 859,064 737,814
Other income 18,640 39,674 86,789 64,831
----------- ----------- ----------- -----------
Income before other
expenses 530,723 768,525 945,853 802,645
Other expenses 3,910 3,001 2,875 2,270
----------- ----------- ----------- -----------
Net income 526,813 $ 765,524 $ 942,978 800,375
Retained earnings - beginning
of year 2,350,264 2,877,077 3,571,172 4,214,150
Less: dividends paid - 71,429 300,000 -
----------- ----------- ----------- -----------
Retained earnings - end of
year $ 2,877,077 $ 3,571,172 $ 4,214,150 $ 5,014,525
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See accompanying notes.
6
<PAGE>
HMIS, Inc.
Statements of Cash Flows
For the Years Ended
December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
For the nine
months ended
September 30,
1993 1994 1995 1996
---------- ---------- ---------- ------------
(unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net income $ 526,813 $ 765,524 $ 942,978 $ 800,375
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation and amortization 86,493 114,353 119,071 71,765
Loss from disposal of property
and equipment 10,758 14,250 - -
Decrease(increase) in accounts
receivable (263,933) (544,123) 309,341 (1,864,344)
(Increase) decrease in other
receivables 11,437 9,625 (378,325) 56,317
Increase in inventory (55,503) (14,148) (30,864) (125,000)
Decrease(increase) in prepaid
expenses 3,188 (3,628) (4,980) 2,691
Decrease(increase) in other assets (5,077) 4,827 - (50,095)
(Decrease) increase in accounts
payable and accrued expenses 54,019 74,539 (9,207) 519,087
Decrease (increase) in cash
surrender value - officers life
insurance - (27,464) 6,559 -
---------- ---------- ---------- -----------
Net cash provided by operating
activities 368,195 393,755 954,573 (589,204)
---------- ---------- ---------- -----------
Investing activities
Purchases of property and
equipment (102,582) (193,902) (62,795) (186,439)
Proceeds from sale of property
and equipment 13,523 - - 10,597
---------- ---------- ---------- -----------
Net cash used in investing
activities (89,059) (193,902) (62,795) (175,842)
---------- ---------- ---------- -----------
Financing activities
Dividends paid - (71,429) (300,000) -
Payments of long-term debt (72,474) - - -
---------- ---------- ---------- -----------
Net cash used in
financing activities (72,474) (71,429) (300,000) -
---------- ---------- ---------- -----------
Net increase in cash 206,662 128,424 591,778 (765,046)
Cash and cash equivalents -
beginning of year 824,418 1,031,080 1,159,504 1,751,282
---------- ---------- ---------- -----------
Cash and cash equivalents -
end of year $1,031,080 $1,159,504 $1,751,282 $ 986,236
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
Supplemental Disclosures:
Interest paid $54,000 $56,837 $54,000 $36,200
</TABLE>
See accompanying notes.
7
<PAGE>
HMIS, Inc.
Notes to Financial Statements
December 31, 1995, 1994 and 1993
Note 1 - Description of Business
HMIS, Inc. (the Company), is a Maryland Corporation engaged in
the sales of prescription drugs to institutions and individuals.
The Company also, through its All-Care division, rents and sells
specialized medical equipment and supplies.
On January 17, 1997, the Company signed an agreement to sell
substantially all of its assets and liabilities to AMC Regional
Holdings, Inc., a wholly owned subsidiary of American Medserve
Corporation. The sales proceeds will exceed the book value of
the net assets sold.
The accompanying unaudited financial statements reflect, in the
opinion of management, all adjustments, consisting of only
normal and recurring adjustments, necessary for a fair
presentation of the financial position at September 30, 1996,
and the results of operations for the nine month period ended
September 30, 1996. The results of operations for the nine
month period ended September 30, 1996 are not necessarily
indicative of the results to be expected for the full year.
Note 2 - Significant Accounting Policies
CASH AND CASH EQUIVALENTS - include all highly liquid debt
instruments purchased with a maturity of three months or less.
ACCOUNTS RECEIVABLES - are shown net of the allowance for
contractual agreements.
INVENTORY - is valued at the lower of cost or market using the
first-in, first-out method.
FIXED ASSETS - are stated at cost and are depreciated over their
useful lives using an accelerated method.
MANAGEMENT ESTIMATES - used in preparing the financial statements
affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported
revenues and expenses.
Note 3 - Cash and cash equivalents
The Company's cash and cash equivalents on deposit with its bank
exceed the federally insured limit of $100,000 at December 31,
1995, 1994 and 1993.
8
<PAGE>
Note 4 - Allowance for Contractual Agreements
At December 31, 1995, 1994 and 1993 the allowance for contractual
agreements was $56,444, $61,735 and $42,322, respectively.
Note 5 - Long-term Accounts Receivable
The long-term receivable represents amounts due from a single
customer. In March, 1997 the Company converted the long-term
accounts receivable to an uncollateralized note for $622,708,
which amount also includes subsequent sales less collections.
Monthly payments of $5,950, including interest at 8% per annum,
are to begin in April, 1997.
Note 6 - Demand Notes Payable
The demand notes payable are loans from officers. They are due
on demand, and bear interest at 9% per annum.
Note 7 - Income Taxes
The Company elected, effective January 1, 1987, to be treated as
an "S" Corporation under Section 1362(a) of the Internal Revenue
Code and as such does not pay any Federal or Maryland income
taxes.
Note 8 - Operating Leases
At December 31, 1995 the minimum rent to be paid under all
non-cancelable leases was as follows for the years ended
December 31:
1996 $77,055
1997 $62,055
1998 $ 5,171
Rent expense for the years ended December 31, 1995, 1994 and 1993
was $118,567, $112,562 and $88,012, respectively.
9
<PAGE>
Note 8 - Operating Leases (cont'd)
In January 1997, the Company consolidated its operating
facilities and administrative headquarters into a new location.
In conjunction with the new lease the Company was relieved of the
lease obligations above for 1997 and 1998. The Company's new
lease obligations which run trough January 31, 2002 are as
follows for the years ended December 31,:
1997 $138,280
1998 150,852
1999 150,852
2000 159,838
2001 160,650
2002 13,388
-------
Total payments $773,860
-------
-------
Note 9 - Concentrations of Risk
The Company purchases significantly all of its inventory for
resale from one major supplier. Although there are a limited
number of suppliers, management believes that arrangements could
be made with other suppliers to provide similar products with
comparable terms. A change in suppliers, however, could cause a
delay in filling customer orders and a possible loss in sales,
which could adversely affect operating results.
Seven major customers account for a significant portion of the
Company's sales. A loss of one or more of these customers could
adversely affect operating results.
During 1996 and 1997, Medicaid delayed processing payments of
claims that it owed to many of these customers for amounts due in
1996 and 1997. These delays have adversely affected the timing
of the Company's collections from these customers.
10
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited Pro Forma Consolidated Balance Sheet
as of December 31, 1996 and Consolidated Statement of
Operations for the years ended December 31, 1995 and 1996
are based on historical consolidated financial statements of
American Medserve Corporation ("the Company"). The
consolidated Balance Sheet is adjusted to give effect to the
HMIS, Inc. acquisition completed on January 17, 1997 as if
this event occurred on January 1, 1996. The Pro Forma
Consolidated Statements of Operations are adjusted to give
effect to the significant acquisitions completed subsequent
to December 31, 1995 and prior to January 17, 1997, and to
the Company's initial public offering of 6,160,550 shares of
Common Stock in November and December 1996 and the use of a
portion of the proceeds therefrom to repay interest-bearing
indebtedness as if such events had occurred on January 1,
1995. The Pro Forma Consolidated Statements of Operations
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 January 1, 1995. These Pro Forma
Consolidated Financial Statements are based on the
assumptions set forth in the notes to such statements.
<PAGE>
AMERICAN MEDSERVE CORPORATION
PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
Historical HMIS, Inc. Pro Forma
---------- ----------- ----------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 17,382 ($10,750) $ 6,632
Accounts receivable, net 20,768 3,517 24,285
Due from related parties 2,036 - 2,036
Inventories 7,708 763 8,471
Income taxes receivable 975 - 975
Prepaid expenses and other 1,999 77 2,076
-------- -------- --------
Total current assets 50,868 (6,393) 44,475
Equipment, net 5,509 562 6,071
Excess of cost over net assets acquired, net 54,174 6,750 60,924
Deferred financing costs, net 1,897 - 1,897
Deferred income taxes - - -
Other assets 850 - 850
-------- -------- --------
Total assets $113,298 $ 919 $114,217
-------- -------- --------
-------- -------- --------
Current liabilities:
Accounts payable $ 6,635 $ 895 $ 7,530
Current portion of long-term debt 2,844 - 2,844
Accrued expenses 2,672 24 2,696
Current obligations under capital leases 223 - 223
-------- -------- --------
Total current liabilities 12,374 919 13,293
Long-term debt, less current portion 5,800 - 5,800
Long-term obligations under capital
leases, less current portion 287 - 287
Minority interest 1,197 - 1,197
Deferred income taxes 641 - 641
Stockholders' equity:
Common stock and paid-in-capital 95,611 - 95,611
Retained earnings (deficit) (2,183) - (2,183)
Notes receivable from stockholders (429) - (429)
-------- -------- --------
Total stockholders' equity 92,999 - 92,999
-------- -------- --------
Total liabilities and stockholders' equity $113,298 $919 $114,217
-------- -------- --------
-------- -------- --------
</TABLE>
<PAGE>
AMERICAN MEDSERVE CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
Good Pro forma adjustments
Completed Samaritan ----------------------
Historical Acquisitions (A) Consolidation (B) Acquisitions Offering Pro forma
---------- ---------------- ----------------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues $44,049 $51,218 $25,293 $- $- $120,560
Cost of revenues 31,464 36,205 20,098 - - 87,767
------- ------- ------- ------- ------- --------
Gross profit 12,585 15,013 5,195 - - 32,793
Selling, general and administrative
expenses 10,029 14,488 5,332 (644)(C) - 29,205
Operating income 2,556 525 (137) 644 - 3,588
Other expense (income):
Interest expense 1,762 691 474 1,081 (D) (3,578)(F) 430
Other, net (312) (215) (17) - - (544)
Minority interest 32 - (157) (30) (13) (168)
------- ------- ------- ------- ------- --------
1,482 476 300 1,051 (3,591) (282)
Income (loss) before income taxes and
extraordinary item 1,074 49 (437) (407) 3,591 3,870
Provision for income taxes 669 88 (280) (143)(E) 1,432 (G) 1,766
------- ------- ------- ------- ------- --------
Income (loss) before extraordinary item $405 ($39) ($157) ($264) $2,159 $2,104
------- ------- ------- ------- ------- --------
------- ------- ------- ------- ------- --------
Pro forma income per share before
extraordinary item $0.18
--------
--------
Shares used in computation 12,000
--------
--------
</TABLE>
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(A) The historical statement of operations data for the Completed Acquisitions
for the year ended December 31, 1995 represents the results of operations
of such companies from January 1, 1995 to the earlier of their respective
dates of acquisition or December 31, 1995. 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.
(B) On April 30, 1996, the Company acquired a 40% equity interest in Good
Samaritan Supply Services, Inc. ("Good Samaritan"). On November 18, 1996
the Company acquired an additional 10.1% equity interest in Good Samaritan.
The statement of operations data for the Good Samaritan Consolidation for
the year ended December 31, 1995 represent the results of operations of
Good Samaritan for the period from January 1, 1995 to December 31, 1995,
including the pro forma results of operations giving effect to acquisitions
by Good Samaritan in June 1996 and October 1996, as if the Company owned
50.1% of the outstanding common stock of Good Samaritan on January 1, 1995.
(C) The adjustment to selling, general and administrative expenses consists of
(1) an increase in amortization of excess of cost over net assets acquired
of the Completed Acquisitions over a 40-year period, as if such companies
were acquired on January 1, 1995 ($467,000), (2) reductions to historical
amounts related to compensation, employee benefits and other owner/operator
expenses for certain Completed Acquisitions that will not be incurred by
the Company after the acquisitions were completed ($1,174,000), (3) the
elimination of a management fee to an affiliate of the Company's principal
stockholder ($50,000) and (4) an increase in amortization of goodwill
initially recorded in connection with the conversion of minority interest
in certain subsidiaries to Common Stock of the Company ($113,000).
(D) The adjustment to interest expense reflects (1) additional interest expense
that would have been incurred had the consideration in the form of debt
related to the Company's acquisitions been incurred on January 1, 1995
($1,215,000), and (2) a reduction in interest expense for Good Samaritan
had the Company's initial investment in Good Samaritan occurred on January
1, 1995 and had the proceeds from such investment been used by Good
Samaritan to reduce its outstanding debt ($134,000). The interest expense
related to additional long-term debt incurred by the Company in connection
with the acquisitions is based on an average interest rate of 9.00%, which
approximates the borrowing rate in effect for the respective periods.
(E) Certain of the companies included in the Completed Acquisitions were
treated as S corporations for income tax purposes and, accordingly, did not
record any federal or state income taxes. In addition, the historical
results of operations for an acquired company, included as a Completed
Acquisition, did not include an income tax provision because the company
was in a net operating loss carryforward position. The adjustment to
income tax provision reflects (1) an income tax provision as if the S
corporations had been subject to federal and state taxes at an estimated
effective tax rate of 40% ($847,000), (2) an income tax benefit using an
estimated effective tax rate of 40% on pro forma adjustments (C) and (D)
above ($130,000), and (3) an adjustment to reflect an income tax benefit
for the operating loss of an acquired company, at an estimated effective
tax rate of 40% ($860,000).
(F) The adjustment to interest expense reflects the retirement of certain
long-term debt of the Company by applying a portion of the estimated net
proceeds of the initial public offering ($46.1 million) as if such
transaction had occurred on January 1, 1995.
(G) The adjustment to the income tax provision reflects an estimated effective
tax rate of 40% on pro forma adjustment (F) above.
<PAGE>
AMERICAN MEDSERVE CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
Good Pro forma adjustments
Completed Samaritan ----------------------
Historical Acquisitions (B) Consolidation (C) Acquisitions Offering Pro forma
---------- ---------------- ----------------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues $82,027 $26,887 $24,610 $- $- $133,524
Cost of revenues 58,807 18,132 19,945 - - 96,884
-------- -------- ------- ------ ------ --------
Gross profit 23,220 8,755 4,665 - - 36,640
Selling, general and administrative
expenses 19,605 8,348 4,851 (859)(D) - 31,945
Nonrecurring charges 3,019 (A) - - - - 3,019
-------- -------- ------- ------ ------ --------
Operating income 596 407 (186) 859 - 1,676
Other expense (income):
Interest expense 2,741 442 452 240 (E) (3,445)(G) 430
Other, net (84) (246) (26) - - (356)
Minority interest (89) - (341) (19) (17) (466)
-------- -------- ------- ------ ------ --------
2,568 196 85 221 (3,462) (392)
Income (loss) before income taxes and
extraordinary item (1,972) 211 (271) 638 3,462 2,068
Provision for income taxes 162 6 71 436 (F) 1,379 (H) 2,054
-------- -------- ------- ------ ------ --------
Income (loss) before extraordinary item ($2,134) $205 ($342) $202 $2,083 $14
-------- -------- ------- ------ ------ --------
-------- -------- ------- ------ ------ --------
Pro forma income per share before
extraordinary item $0.00
--------
--------
Shares used in computation 12,000
--------
--------
</TABLE>
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(A) Represents (1) a noncash, nonrecurring charge of $2.5 million (with no tax
benefit) related to (a) the sale of 310,208 shares of Common Stock of the
Company to certain directors and officers at a price less than the
initial public offering price of the Common Stock on November 13, 1996,
and (b) the conversion of options to purchase shares of common stock of
certain subsidiaries into options to purchase 146,635 shares of Common
Stock of the Company at a weighted average exercise price less than the
initial public offering price of the Common Stock on November 13, 1996,
(2) a charge of $287,500 ($173,000 net of tax) related to the termination
of a professional services agreement with an affiliate of the Company's
principal stockholder and (3) a charge of $245,000 ($146,000 net of tax)
related to special bonuses paid to management in connection with the
Company's initial public offering.
(B) The historical statement of income data for the Completed Acquisitions for
the year ended December 31, 1996 represents the results of operations of
such companies from January 1, 1996 to the earlier of their respective
dates of acquisition or December 31, 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.
(C) On April 30, 1996, the Company acquired a 40% equity interest in Good
Samaritan Supply Services, Inc. ("Good Samaritan"). On November 18, 1996
the Company acquired an additional 10.1% equity interest in Good Samaritan.
The statement of operations data for the Good Samaritan Consolidation for
the year ended December 31, 1996 represent the results of operations of
Good Samaritan for the period from January 1, 1996 to November 17, 1996,
including the pro forma results of operations giving effect to acquisitions
by Good Samaritan in June 1996 and October 1996, as if the Company owned
50.1% of the outstanding common stock of Good Samaritan on January 1, 1996.
(D) The adjustment to selling, general and administrative expenses consists of
(1) an increase in amortization of excess of cost over net assets acquired
of the Completed Acquisitions over a 40-year period, as if such companies
were acquired on January 1, 1996 ($222,000), (2) reductions to historical
amounts related to compensation, employee benefits and other owner/operator
expenses for certain Completed Acquisitions that will not be incurred by
the Company after the acquisitions were completed ($1,136,000), (3) the
elimination of a management fee to an affiliate of the Company's principal
stockholder ($58,000) and (4) an increase in amortization of goodwill
initially recorded in connection with the conversion of minority interest
in certain subsidiaries to Common Stock of the Company ($113,000).
(E) The adjustment to interest expense reflects (1) additional interest expense
that would have been incurred had the consideration in the form of debt
related to the Company's acquisitions been incurred on January 1, 1996
($338,000), and (2) a reduction in interest expense for Good Samaritan
had the Company's initial investment in Good Samaritan occurred on January
1, 1996 and had the proceeds from such investment been used by Good
Samaritan to reduce its outstanding debt ($98,000). The interest expense
related to additional long-term debt incurred by the Company in connection
with the acquisitions is based on an average interest rate of 9.00%, which
approximates the borrowing rate in effect for the respective periods.
(F) Certain of the companies included in the Completed Acquisitions were
treated as S corporations for income tax purposes and, accordingly, did not
record any federal or state income taxes. In addition, the historical
results of operations for an acquired company, included as a Completed
Acquisition, did not include an income tax provision because the company
was in a net operating loss carryforward position. The adjustment to
income tax provision reflects (1) an income tax provision as if the S
corporations had been subject to federal and state taxes at an estimated
effective tax rate of 40% ($323,000), (2) an income tax provision using an
estimated effective tax rate of 40% on pro forma adjustments (D) and (E)
above ($293,000), and (3) an adjustment to reflect an income tax benefit
for the operating loss of an acquired company, at an estimated effective
tax rate of 40% ($180,000).
(G) The adjustment to interest expense reflects the retirement of certain
long-term debt of the Company by applying a portion of the estimated net
proceeds of the initial public offering ($46.1 million) as if such
transaction had occurred on January 1, 1996.
<PAGE>
(H) The adjustment to the income tax provision reflects an estimated effective
tax rate of 40% on pro forma adjustment (G) above.
