UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A-1
AMENDMENT NO. 1 TO CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) NOVEMBER 1, 1999
OMEGA WORLDWIDE, INC.
---------------------
(Exact name of registrant as specified in its charter)
MARYLAND 38-3382537
-------- ----------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File No.) Identification No.)
900 VICTORS WAY, SUITE 345, ANN ARBOR, MI 48108
- ----------------------------------------- -----
(Address of principal executive officers) (Zip Code)
Registrant's Telephone Number, including area code (734) 887-0300
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
Item 2 Acquisition or Disposition of Assets.
Omega Worldwide, Inc. (the "Company") announced on November 1, 1999 that its
wholly owned subsidiary, Idun Health Care Ltd., acquired the common stock of all
of the operating subsidiaries of Tamaris, plc ("Tamaris"), a nursing home
operating company in the United Kingdom. The 48 subsidiaries acquired from
Tamaris ("the Acquired Companies") operate 119 nursing homes located in England,
Scotland and Northern Ireland. The Company's $4.7 million purchase price
consisted of cash of $1.8 million and the reassignment of shares in Tamaris
acquired in market transactions for a total of $2.9 million. Transaction costs
are estimated at $500,000. The Acquired Companies have tangible net assets of
$9.8 million which exceeded the purchase consideration by $4.6 million, which
excess reduced the carrying value of tangible fixed assets acquired, through
negative goodwill.
The following unaudited pro forma combined condensed financial statements were
prepared to illustrate the estimated effects of Idun's acquisition of
the Acquired Companies accounted for under the purchase method of
accounting. The unaudited pro forma combined condensed balance sheet (filed
herein as Appendix I) combines the Company's September 30, 1999 consolidated
balance sheet with the combined September 30, 1999 balance sheets of the
Acquired Companies, giving effect to the transaction as if it had occurred on
September 30, 1999. The unaudited pro forma combined condensed statements of
income (filed herein as Appendix II) combine the Company's historical results
for the fiscal year ended September 30, 1999 with the pro forma historical
results of the Acquired Companies for the year ended September 30, 1999, giving
effect to the transaction as if it had occurred on October 1, 1998, the first
day of the Company's most recently completed fiscal year.
The unaudited pro forma combined condensed financial statements were prepared
utilizing the accounting principles of the respective entities as outlined in
each entity's historical financial statements. The financial statements of the
Acquired Companies were prepared in accordance with generally accepted
accounting principles in effect in the United Kingdom. The pro forma adjustments
include those necessary to adjust the Acquired Companies' operating results and
financial position to conform with generally accepted accounting principles in
effect in the United States.
The pro forma adjustments are based upon available information and certain
assumptions that the Company believes are reasonable under the circumstances.
The allocation of purchase price may be revised if the Company obtains
additional information concerning valuations. The unaudited pro forma combined
condensed financial statements do not purport to be indicative of the operating
results or financial position that would have been achieved had the purchase
been effected on the date or dates indicated or the results which may be
obtained in the future. Accompanying pro forma combined condensed statements are
based on, and should be read in conjunction with, the audited consolidated
financial statements of the Company included in its Report on Form 10-K for the
year ended September 30, 1999, and the audited financial statements of the
combined Acquired Companies as submitted herewith.
The following are included herein pursuant to Item 7 of Form 8-K (Financial
Statements, Pro Forma Financial Information and Exhibits) as part of amendment
Number 1 to the Company's Form 8-K dated November 1, 1999.
(a) Financial statements of businesses acquired.
Audited Financial Statements
For the Two Years Ended 31 March 1999 and 1998
Page Number
-----------
Definitions and Background F-1
Report of Independent Accountant F-2
Combined Profit and Loss Account (Pro Forma) F-4
Combined Balance Sheet (Pro Forma) F-5
Combined Cash Flow Statement (Pro Forma) F-6
Notes to the Financial Statements F-7
1
<PAGE>
(b) Combined Condensed Pro Forma Financial Information. The following unaudited
pro forma combined condensed financial information of Omega Worldwide, Inc.
is set forth herein.
(1) Appendix I: Unaudited pro forma condensed balance sheet as of
September 30, 1999, including notes thereto.
(2) Appendix II: Unaudited pro forma condensed statement of income for the
year ended September 30, 1999, including notes thereto.
2
<PAGE>
Appendix I
OMEGA WORLDWIDE, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1999
Unaudited
(In Thousands)
<TABLE>
<CAPTION>
Pro Forma Pro Forma Pro Forma
Acquired Entities Adjustments Results
Historical (See Note A) (See Note B) Sept. 30, 1999
<S> <C> <C> <C> <C>
Current Assets
Cash & Short-term Investments $ 5,738 $ 1,523 $ (2,300) (1) $ 4,961
Restricted Cash 389 - - 389
Other 915 13,510 - 14,425
----- ------ ----- ------
Total Current Assets 7,042 15,033 (2,300) 19,775
Tangible Fixed Assets - 17,565 (4,663) (2) 12,902
Investments in Affiliates 55,461 - - 55,461
Other Assets 5,909 13,786 (1,903) (1) 17,792
------ ------ ------ ------
Total Assets $ 68,412 $ 46,384 $ (8,866) $105,930
======== ======== ======== ========
Current Liabilities
Accounts Payable and Accrued Expenses $ 1,177 $ 32,290 $ - $ 33,467
Accrued Income Taxes 1,880 - 281 (1) 2,161
Deferred Revenue 1,215 - - 1,215
----- ------ ---- -----
Total Current Liabilities 4,272 32,290 281 36,843
Long Term Liabilities - 4,290 - 4,290
Shareholders' Equity
Preferred Stock 2,600 - - 2,600
Common Stock 1,227 - - 1,227
Additional Paid in Capital 52,893 - - 52,893
Retained Earnings 8,075 - - 8,075
Net Assets of Acquired Companies - 9,804 (9,804) (2) -
Accumulated Other Comprehensive Income (Loss) (655) - 657 (1) 2
----- ----- ---- -----
Total Shareholders' Equity 64,140 9,804 (9,147) 64,797
------ ----- ------ ------
Total Liabilities and Shareholders' Equity $ 68,412 $ 46,384 $ (8,866) $105,930
======== ======== ======== ========
</TABLE>
Historical balance sheet information is derived from the Company's audited
consolidated balance sheet as of September 30, 1999 as filed with its Form 10-K
for the year ended September 30, 1999.
Note (A) -- Pro forma balance sheet information with respect to the Acquired
Companies as derived from their combined unaudited balance sheet of that date.
Note (B) -- Pro forma adjustments reflect the purchase consideration of the
Acquired Companies as follows:
(1) The purchase price includes cash of $1.8 million, plus estimated
transaction costs of $500,000, plus the original cost of stock
($2.8 million) released, for a total purchase price of $5.1 million.
(2) The fair value of net assets acquired is $9.8 million, which is the
same as the net carrying value of the Acquired Companies as of the
acquisition date. Because the total purchase consideration is less
than the fair value of assets acquired, the negative goodwill of
$4,663,000 reduces the carrying value of long term assets acquired.
3
<PAGE>
Appendix II
OMEGA WORLDWIDE, INC.
COMBINED CONDENSED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1999
Unaudited
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Pro Forma
Pro Forma of Adjustments Pro Forma
Historical Acquired Entities Amount Combined
(See Note A) (See Note B)
<S> <C> <C> <C> <C> <C>
Revenues $14,753 $132,746 $ - $147,499
Direct Cost of Revenues (2,494) (130,226) (3,200) (1) (135,920)
Selling General and Administrative Expenses (5,845) - - (5,845)
------ ----- ----- ------
Operating Income 6,414 2,520 (3,200) 5,734
Equity in Income of Affiliates 1,425 - - 1,425
Interest Expense - (903) - (903)
Other Income/(Loss) 951 (1,907) 1,793 (2) 837
---- ------ ----- ----
Earnings Before Income Taxes 8,790 (290) (1,407) 7,093
Income Tax (Expense) Benefit (2,670) (554) 1,127 (3) (2,097)
------ ---- ----- ------
Income Before Preferred Stock Dividends 6,120 (844) (280) 4,996
Preferred Stock Dividends (208) - - (208)
---- ---- ---- -----
Net Earnings Available to Common Shareholders $ 5,912 $ (844) $ (280) $ 4,788
====== ===== ===== ======
Earnings per Common Share, Basic $0.48 ($0.07) ($0.02) $0.39
Earnings per Common Share, Diluted $0.48 ($0.07) ($0.02) $0.39
Average Shares Outstanding, Basic 12,261 12,261 12,261 12,261
Average Shares Outstanding, Diluted 12,262 12,262 12,262 12,262
</TABLE>
Historical operating results are those of the Company for the year ended
September 30, 1999 as derived from the Company's audited consolidated statement
of operations filed with its Form 10-K for the year ended September 30, 1999.
See Notes (A), (B1), (B2) and (B3) on pages 5 and 6.
4
<PAGE>
OMEGA WORLDWIDE, INC.
NOTES TO APPENDIX II
COMBINED CONDENSED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1999
Note(A) -- Represents the pro forma combined results of the Acquired Companies,
who reported in accordance with generally accepted accounting
principles in the United Kingdom, using a March 31, 1999
fiscal year end. The table below adjusts previously reported
audited information to conform with the Company's year end of
September 30, 1999. The audited combined statements of the Acquired
Companies as of March 31, 1999, included in this filing pursuant to
Item 7 (a), are presented in the left column. Operating results for
the period of six months ended September 30, 1998 are subtracted, and
results for the period of six months ended September 30, 1999 are
added to conform with the Company's year end. The Acquired Companies'
operating results for the period ending September 30, 1999 are then
translated from British Pounds Sterling to U.S. Dollars using the
average exchange rates for the period ($1.63 to(pound)1).
IDUN HEALTH CARE LTD GROUP OF COMPANIES
CONDENSED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1999
Unaudited in UK GAAP
(In Thousands)
<TABLE>
<CAPTION>
Less Plus
Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma
Combined Combined Combined Combined Combined
year ended 6 mos. ended 6 mos. ended year ended year ended 9/30/99
3/31/99 9/30/98 9/30/99 9/30/99 UK GAAP expressed
UK GAAP UK GAAP UK GAAP UK GAAP in U.S. Dollars
Audited (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues (pound) 73,089 (pound) (34,486) (pound) 42,836 (pound) 81,439 $ 132,746
Direct Cost of Revenues (70,220) 32,958 (42,631) (79,893) (130,226)
------- ------ ------- ------- --------
Operating Income 2,869 (1,528) 205 1,546 2,520
Interest Expense (691) 333 (196) (554) (903)
Other Income/(Loss) (544) - (626) (1,170) (1,907)
----- ----- ---- ------ ------
Earnings Before Income Taxes 1,634 (1,195) (617) (178) (290)
Income Tax Expense (647) 307 - (340) (554)
----- ---- ---- ---- ----
Earnings (pound) 987 (pound) (888) (pound) (617) (pound) (518) $ (844)
=== ==== ==== ==== ======
</TABLE>
5
<PAGE>
OMEGA WORLDWIDE, INC.
NOTES TO APPENDIX II
COMBINED CONDENSED PRO FORMA STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED SEPTEMBER 30, 1999
Note (B) -- The following adjustments are made to conform reported operating
results with generally accepted accounting principles in the United States,
giving effect to the transaction as if it had occurred on October 1, 1998.
(1) Represents the net effect of two adjustments:
(a) Rental expense for the Acquired Companies was recorded on a cash basis
as paid in accordance with UK GAAP. Under generally accepted
accounting principles in the United states, rental expense is
recognized on a straight-line basis over the terms of the related
operating lease and includes increases based on minimum predetermined
formulas as specified in each lease. This difference increases
non-cash rent expense by $4,083,000.
(b) The pro forma results of the acquired companies includes $883,000 of
amortization of short leasehold interests. As a result of negative
goodwill stemming from the acquisition, these assets will be written
off.
(2) The adjustment to other income/expense of $1,783,000 consists of the
following:
Non-recurring items included in the pro forma
operating results of the Acquired Companies $1,907,000
Estimated reduction of interest income $(114,000)
---------
Net $1,793,000
==========
The other income/expense items of the Acquired Companies ($1,907,000)
represent non recurring expense items which would not have occurred had the
acquisition taken place on October 1, 1998. These non-recurring items are
more fully described in note 4 of the audited statements of the Acquired
Companies on page F-10. They include the net effect of the following:
(a) A charge for impairment of short leasehold interest assets, which
assets were not included in the opening balance sheet.
(b) Debt forgiveness by former parent company.
(c) Tax cost resulting from the acquisition. This tax cost is included in
the opening balance sheet of the Acquired Companies, and will not
reoccur.
The final component component of this adjustment represents a
$114,000 reduction of the Company's interest income computed on the
purchase price (including estimated transaction costs).
(3) Reflects the tax benefit from adjustment (1) above and the reduced
interest income component described in adjustment (2):
Straight line rents (Item 1a) ($4,083,000)
Amortization (Item 1b) 883,000
Reduction in interest income (114,000)
--------
Reduction in taxable income $3,314,000
----------
Tax Benefit $1,127,000
==========
6
<PAGE>
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.
OMEGA WORLDWIDE, INC.
January 11, 2000 By /s/ Edward C. Noble
-------------------
Edward C. Noble
Chief Financial Officer
7
<PAGE>
IDUN HEALTH CARE LIMITED
PROFORMA FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED 31 MARCH 1999 AND 31 MARCH 1998
CONTENTS PAGE
Definitions and background 1
Report of Independent Accountant 2
Proforma Combined Profit and Loss Account 4
Proforma Combined Balance Sheet 5
Proforma Combined Cash Flow Statement 6
Notes to the Proforma Financial Statements 7
<PAGE>
IDUN HEALTH CARE LIMITED
DEFINITIONS
BACKGROUND
On 29 October 1999, 48 care home operating companies owned by Tamaris
plc ("Tamaris") were acquired by Idun Health Care Limited ("Idun Health
Care")(formerly Mixtop Limited)
Of the 48 companies acquired on 29 October 1999, 39 companies were
wholly owned by Tamaris at 31 March 1998, a further six companies were
incorporated by Tamaris during the year to 31 March 1999, and one
company was incorporated by Tamaris after 31 March 1999, before 29
October 1999.
For the purposes of SEC reporting only, the financial statements of 47
companies have been combined as at 31 March 1999 and 39 companies owned
by Tamaris at 31 March 1998, have been combined for comparative
purposes.
Idun Health Care Limited is a shell company wholly owned by Omega
Worldwide, Inc. ("Omega") for combining the 48 care home operating
companies within one entity. Omega is now the ultimate parent
undertaking of the Group. Idun Health Care was incorporated on 22
October 1999, and commenced trading on 29 October 1999.
"Proforma Financial Statements" The combined
results, and balance sheets of the
Group for the two years ended 31 March
1999.
"Group" The 48 companies acquired by Idun on
29 October 1999 (1998: 39 companies)
"Combination" The combined results and balance sheets
of the group. Idun was not a statutory
entity or parent undertaking at
31 March 1999. Hence, it is not
appropriate to prepare consolidated
financial statements within the normal
meaning of the term.
The financial statements have been
prepared for SEC reporting purposes.
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANT TO THE SHAREHOLDERS OF IDUN
HEALTH CARE LIMITED
To the Shareholders of the Idun Health Care Limited
We have audited the proforma combined balance sheets of the Idun
companies as at 31 March 1999 and 31 March 1998, and the related
proforma combined profit and loss accounts and proforma combined
cashflow statements for the two years ended 31 March 1999, which
together with the accompanying notes constitute the proforma
combined financial statements on pages 3 to 31.
The proforma combined financial statements have been prepared in
accordance with the accounting policies set out in note 1. In
particular, we draw your attention to the basis of the combination
of these proforma combined financial statements.
Directors' responsibilities for the financial statements
The Directors are responsible for preparing the proforma combined
financial statements. In preparing those statements, the directors
are required to:
select suitable accounting policies and then apply them
consistently;
make judgements and estimates that are reasonable and
prudent;
state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the proforma combined financial statements.
The Directors are responsible for keeping proper accounting records,
for safeguarding the assets of the Group and for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
Respective responsibilities of directors and auditors
The Company's Directors are responsible for the preparation of
proforma combined financial statements. It is our responsibility to
form an independent opinion, based on our audit, on those statements
and to report our opinion to you.
Basis of opinion
We conducted our audit in accordance with Auditing Standards
generally accepted in the United Kingdom and the United States. An
audit includes examination, on a test basis, of evidence relevant to
the amounts and disclosures in the proforma combined financial
statements. It also includes an assessment of the significant
estimates and judgements made by the Directors in the preparation of
the proforma combined financial statements, and of whether the
accounting policies are appropriate to the circumstances,
consistently applied and adequately disclosed.
F-2
<PAGE>
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in order
to provide us with sufficient evidence to give reasonable assurance
that the financial statements are free from material misstatement,
whether caused by fraud or other irregularity or error. In forming
our opinion we also evaluated the overall adequacy of the
presentation of information in the financial statements.
Going concern
In forming our opinion, we have considered the adequacy of the
disclosures made in note 1a) of the proforma combined financial
statements concerning the going concern assumption. Immediately
after acquisition, Omega Worldwide, Inc. advanced (pound)8 million
to the Group for the settlement of short term liabilities and
working capital. On the basis of the Directors' current projections,
the Board does not believe that the Group will require more than
(pound)1 million of additional funds for the foreseeable future. It
is the opinion of the Directors of Idun Health Care Limited that the
Group, in order to continue as a going concern, is reliant on the
continued support of Omega Worldwide, Inc., the ultimate controlling
party of the Group. In view of the significance of this uncertainty
we consider it should be drawn to your attention, but our opinion is
not qualified in this respect.
Related party transactions
In forming our opinion, we have considered the disclosures made in
note 29 of the financial statements which sets out those
transactions which the Directors of Idun Health Care Limited have
identified between the Idun companies and related parties. In view
of the significance of these transactions we consider that they
should be drawn to your attention, but our opinion is not qualified
in this respect.
Opinion
In our opinion the proforma combined financial statements have been
properly prepared in accordance with the basis of preparation and
the accounting policies set out in note 1.
United Kingdom accounting standards vary in certain important
respects from accounting principles generally accepted in the United
States. The application of the latter would have affected the
determination of consolidated net profit for the year ended 31 March
1999 and 31 March 1998 and the determination of aggregated
shareholders' equity and aggregated financial position as at 31
March 1999and 31 March 1998 to the extent summarised in note 30 to
the consolidated financial statements.
/s/ Grant Thornton
Grant Thornton
registered auditors
chartered accountants
London
24 DECEMBER 1999
F-3
<PAGE>
IDUN HEALTH CARE LIMITED
PROFORMA COMBINED PROFIT AND LOSS ACCOUNT
FOR THE TWO YEARS ENDED 31 MARCH 1999 AND 1998
<TABLE>
<CAPTION>
Notes 1999 1998
(pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C> <C>
Turnover 2
Continuing operations 69,432 33,938
Acquisitions 3,657 -
----- ------
73,089 33,938
Staff costs 5 (40,520) (18,932)
Depreciation (1,044) (437)
Other operating charges (28,656) (12,985)
-------- -------
Operating profit before
exceptional items 2,869 1,584
Other operating charges:
Exceptional items 4 (544) -
Operating profit 3
Continuing operations 1,617 1,584
Acquisitions 708 -
----- ---- ----- ------
2,325 1,584
Net interest 6 (691) (235)
---- ----
Profit on ordinary
activities before taxation 2 1,634 1,349
Taxation 7 (647) (351)
----- ----
Profit for the financial year 987 998
=== ===
</TABLE>
There were no recognised gains or losses other than the profit for each
financial year.
The accompanying policies and notes form an integral part of these financial
statements.
F-4
<PAGE>
IDUN HEALTH CARE LIMITED
PROFORMA COMBINED BALANCE SHEETS AT 31 MARCH 1999 AND 1998
<TABLE>
<CAPTION>
Notes 1999 1998
(pound)'000 (pound)'000
<S> <C> <C> <C>
Fixed assets
Tangible assets 9 11,845 16,556
Intangible assets 8 100 -
- ----- -----
11,945 16,556
------ ------
Current assets
Debtors: amounts falling due after more than one year 11 7,665 7,639
Debtors 10 6,739 5,986
Cash at bank and on deposit 20 3,895 3,662
----- -----
18,299 17,287
------ ------
Creditors: amounts falling due within one year 12 (17,479) (21,712)
Net current assets 820 (4,425)
Total assets less current liabilities 12,765 12,131
Creditors: amounts falling due after more than one year 13 (5,718) (6,220)
------ ------
Net assets 7,047 5,911
===== =====
Capital and reserves
Called up share capital 17 6,327 6,178
Share premium account 18 875 875
Other reserve 18 (2,189) (2,189)
Profit and loss account 18 2,034 1,047
----- -----
Shareholders' funds 19 7,047 5,911
===== =====
</TABLE>
The financial statements were approved by the Board of Directors on 24
December 1999
James Flaherty /s/ James Flaherty )
)
) Directors
)
Graeme Willis /s/ Graeme Willis )
The accompanying policies and notes form an integral part of these financial
statements.
F-5
<PAGE>
IDUN HEALTH CARE LIMITED
PROFORMA COMBINED CASH FLOW STATEMENTS
FOR THE TWO YEARS ENDED 31 MARCH 1999 AND 1998
<TABLE>
<CAPTION>
Notes 1999 1998
(pound)'000 (pound)'000
<S> <C> <C> <C>
Net cash inflow/(outflow) from operating activities 21 4,737 (4,647)
----- ------
Returns on investments and servicing of finance
Interest paid (873) (459)
Interest element of hire purchase agreements (43) (24)
Interest received 225 248
--- ---
Net cash outflow from returns on
investments and servicing of finance (691) (235)
---- ----
Taxation
Tax paid (238) (40)
---- ---
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (3,752) (2,428)
Receipts from sales of tangible fixed assets (net of expenses) 1,836 -
----- -----
Net cash outflow from capital expenditure
and financial investment (1,916) (2,428)
------ ------
Acquisitions and disposals 25
Net cash taken over on purchase of subsidiary undertaking - 273
Purchase of care home businesses (net of sale receipts) (4,342) (7,097)
------ ------
Net cash outflow from acquisitions and disposals (4,342) (6,824)
------ ------
Financing
Capital element of hire purchase agreements (209) (70)
Receipts from borrowing 2,920 2,495
Repayment of borrowing (473) (22)
Net funding from former holding company 1,074 8,907
----- -----
Net cash inflow from financing 3,312 12,310
----- ------
Increase/(decrease) in cash 22 862 (1,864)
=== ======
</TABLE>
The accompanying accounting policies and notes form an integral part of these
financial statements.
F-6
<PAGE>
IDUN HEALTH CARE LIMITED
NOTES TO THE PROFORMA FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED 31 MARCH 1999 AND 1998
1. ACCOUNTING POLICIES
a) BASIS OF PREPARATION - GOING CONCERN
The Directors have given due consideration to the preparation of the
proforma financial statements on a going concern basis having reviewed
the forecasts for the next 12 months from the date of approval of these
proforma financial statements. Immediately after acquisition, Omega
Worldwide, Inc. advanced (pound)8 million to the Group for settlement
of short term liabilities and working capital. On the basis of the
Directors' current projections, the Board does not believe that the
Group will require more than (pound)1 million of additional funds for
the foreseeable future. It is the opinion of the Directors of Idun
Health Care that the Group in order to continue as a going concern, is
reliant upon the continued support of Omega Group the ultimate
controlling party of the companies.
Immediately following the acquisition, Omega paid (pound)8 million to
settle overdue liabilities of the Group and to provide the Group with
working capital. Omega has given an undertaking to continue to support
the Group for the foreseeable future.
b) ACCOUNTING CONVENTION
The proforma combined financial statements are prepared in accordance
with applicable accounting standards and under the historical cost
convention, except that:
Consolidation adjustments have not been made in respect of investments,
share capital and goodwill on the ground that Idun was not a legal
entity as at 31 March 1999, nor was it the parent undertaking as at 31
March 1999.
c) ACCOUNTING STANDARDS
The proforma financial statements have been prepared in accordance with
applicable accounting standards in the United Kingdom. The Group has
adopted Financial Reporting Standards No's 10 - 14 for the first time.
Other than for goodwill the adoption of these accounting policies has
not lead to a change in accounting treatments used in earlier years.
d) BASIS OF COMBINATION
These proforma financial statements combine the results of 47 companies
as at 31 March 1999 acquired by Idun Health Care Limited on 29 October
1999. For comparative purposes these financial statements combine the
results of the 39 companies owned by Tamaris as at 31 March 1998. There
were no disposals of companies during the two years ended 31 March 1999
and 1998. An additional company acquired by Omega on 29 October 1999
was not incorporated until after 31 March 1999.
The results of undertakings acquired during the year are included from
the date of acquisition. On acquisition of a company, all of the
company's assets and liabilities which exist at the date of acquisition
are recorded at their fair values reflecting their condition at that
date. The effect of transactions between the Idun companies have been
removed. The reserves and share capital of each company have been
aggregated at the balance sheet date. No adjustment to reserves or
issued share capital has been made, except where it is necessary to
remove pre-acquisition results.
e) TANGIBLE FIXED ASSETS
Fixed assets are included at cost less depreciation.
The Group capitalises, as short leasehold interests, the costs
associated with the acquisition of the operating leases of the care
home businesses that comprise the continuing ordinary activities of the
Group.
F-7
<PAGE>
Proceeds of sale and leaseback transactions are shown net of disposal
costs. Consideration paid for the acquisition of a new home includes
costs of acquisition of the home.
ACCOUNTING POLICIES (CONTINUED)
f) DEPRECIATION
Depreciation is provided on the cost or valuation of tangible fixed
assets less estimated residual values over their estimated useful lives
at the following annual rates:
Freehold buildings 50 years
Short leasehold interests period of lease
Plant, fixtures and fittings 5% - 15% on net book value
Motor vehicles 25% on cost
Freehold buildings, short leasehold interests and motor vehicles are
assumed to have nil estimated residual value.
g) GOODWILL
Purchased goodwill is capitalised and is amortised on a straight line
basis over its estimated useful economic life as shown in note 8.
Purchased goodwill first accounted for in accounting periods ending
before 23 December 1998, the implementation date of Financial Reporting
Standard No 10, was eliminated from the financial statements by
immediate write-off on acquisition against reserves. Such goodwill will
be charged or credited to the profit and loss account on the subsequent
disposal of the business to which it relates.
h) HIRE PURCHASE AND LEASING CONTRACTS
Assets held under finance leases and hire purchase contracts are
capitalised in the balance sheet and depreciated over their useful
lives. The interest element of leasing payments represents a constant
proportion of the capital balance outstanding and is charged to the
profit and loss account over the period of the agreement.
All other leases are regarded as operating leases and the payments made
under them are charged to the profit and loss account on a straight
line basis over the lease term.
i) DEFERRED TAXATION
Deferred taxation is provided to take account of timing differences
between the treatment of certain items for accounts purposes and for
taxation purposes, only to the extent it is probable that a liability
or asset will crystallise in the foreseeable future. Unprovided
deferred tax is disclosed as a contingent liability.
Debit balances arising in respect of advance corporation tax on
dividends payable or proposed are carried forward to the extent that
they are expected to be recoverable.
j) PENSION COSTS
No Group or Company pension scheme exists other than the Group Personal
Pension Scheme, which was established on 1 January 1999 for
participation by certain senior employees. Payments to the Scheme or to
an employee's own pension scheme are charged to the profit and loss
account when incurred.
k) TURNOVER
Turnover represents the amount receivable for services provided.
l) SALE AND LEASEBACK TRANSACTIONS
The companies recognise the profit on any sale and leaseback
transactions on completion through operating profit.
F-8
<PAGE>
2. TURNOVER AND PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
The Group's turnover and results before taxation are principally
attributable to one activity, the provision and management of long term
facilities for the elderly and for the physically and mentally
disabled.
Turnover arises solely from activities within the United Kingdom.
The amounts shown for continuing operations include the following in
respect of acquisitions:
1999
(pound)'000
Staff costs 2,187
Depreciation 19
Other operating charges 743
-----
2,949
=====
3. OPERATING PROFIT
Operating profit is stated after charging:
<TABLE>
<CAPTION>
1999 1998
(pound)'000 (pound)'000
<S> <C> <C>
Auditors' remuneration :
Audit services 164 64
Non audit services 157 139
Less amounts capitalised on acquisitions (118) (99)
Operating lease rentals: land and buildings 16,671 7,906
====== =====
</TABLE>
Included within the operating profit is a profit on sale and leaseback
transactions of (pound)532,000.
4. OTHER OPERATING CHARGES : EXCEPTIONAL ITEMS
<TABLE>
<CAPTION>
1999 1998
(pound)'000 (pound)'000
<S> <C> <C>
(i) Impairment of short leasehold interests 10,465 -
(ii) Impairment of freehold care home assets 450 -
(iii) Provision for profit related pay tax liability 1,000 -
(iv) Waiver of amounts owed to Tamaris (11,371) -
------- ----
544 -
======= ====
</TABLE>
F-9
<PAGE>
OTHER OPERATING CHARGES : EXCEPTIONAL ITEMS (CONTINUED)
(i) Impairment of short leasehold interests
The care home operating companies acquired by Idun Health Care Limited
have written down the carrying value of short leasehold interests based
on the cash flow projections of the companies acquired by Idun on 29
October 1999 (see note 9).
(ii) Impairment of freehold care home assets
The Group's freehold care home assets were valued on 8 January 1999 by
Conrad Ritblat at (pound)2,970,000 against a book value of
(pound)3,420,000. The impairment provision represents the corresponding
shortfall.
(iii) Provision of profit related pay tax liability
On 29 October 1999, Idun acquired the share capital of 48 companies
formerly owned by Tamaris plc. The break-up of the Tamaris group has
resulted in an overpayment of profit related pay through the scheme run
by Tamaris for the year ended 31 March 1999. The individual liabilities
fall on each company and are therefore fully provided within these
combined proforma financial statements.
(iv) Waiver of amounts owed to Tamaris by the 48 care home operating
companies
As part of the sale agreement between Idun and Tamaris referred to
above, all inter-company debt between the companies acquired and the
former holding company and its remaining subsidiaries was waived on 29
October 1999.
5. STAFF COSTS
<TABLE>
<CAPTION>
1999 1998
(pound)'000 (pound)'000
<S> <C> <C>
Employee costs including directors' emoluments during the year were:
Salaries and wages 38,117 17,914
Social security costs 2,299 1,018
Pension costs 104 -
------ -------
40,520 18,932
====== ======
Number Number
The average numbers of staff employed during the year were:
Management and administration 237 200
Nursing and ancillary services 5,180 2,413
----- -----
5,417 2,613
===== =====
</TABLE>
F-10
<PAGE>
6. NET INTEREST
<TABLE>
<CAPTION>
1999 1998
(pound)'000 (pound)'000
<S> <C> <C>
Interest payable:
On bank loans and overdrafts 681 253
Hire purchase interest 43 24
Other loan interest 192 206
--- ---
916 483
Interest receivable (225) (248)
---- ----
Net interest payable 691 235
=== ===
</TABLE>
7. TAXATION ON ORDINARY ACTIVITIES
<TABLE>
<CAPTION>
1999 1998
(pound)'000 (pound)'000
<S> <C> <C>
The tax charge is based on the loss for the year and represents:
Corporation tax at 31% (1998 - 31%) 914 351
Overprovision in respect of previous years (267) -
---- ---
647 351
=== ===
</TABLE>
The taxation charge for 1998 was reduced by rollover relief on property
gains, accelerated capital allowances, loss relief and other timing
differences.
F-11
<PAGE>
8. INTANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
Goodwill
(pound)'000
<S> <C>
Cost
Additions 100
---
At 31 March 1999 100
---
Amortisation
Charge for the year -
---
At 31 March 1999 -
---
Net book value
At 31 March 1999 100
===
The goodwill arose on the acquisition of the Buchanan homes by Tamhealth Limited
on 9 December 1998 (see note 24).
</TABLE>
9. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
Freehold Short Plant
land and leasehold fixtures Motor
buildings interests and fittings vehicles Total
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C> <C>
Cost or valuation
At 1 April 1998 4,336 9,859 2,607 414 17,216
Additions 3,489 3,959 1,736 94 9,278
Disposals (1,812) (146) (54) (51) (2,063)
------ ---- --- --- ------
At 31 March 1999 6,013 13,672 4,289 457 24,431
----- ------ ----- --- ------
Depreciation
At 1 April 1998 44 102 453 61 660
Provided in year 38 542 355 109 1,044
Impairment write
down 450 10,465 - - 10,915
Disposals - (4) - (29) (33)
--- --- --- --- ---
At 31 March 1999 532 11,105 808 141 12,586
Net book value at
31 March 1999 5,481 2,567 3,481 316 11,845
===== ===== ===== === ======
Net book value at
31 March 1998 4,292 9,757 2,154 353 16,556
===== ===== ===== === ======
</TABLE>
F-12
<PAGE>
TANGIBLE FIXED ASSETS (CONTINUED) Freehold land of (pound)836,000 is
not depreciated.
Under the new accounting standard Financial Reporting Standard No 11
'Impairment of fixed assets and goodwill', the Directors have reviewed
the carrying value of short leasehold interests for impairment.
For the purpose of review of short leasehold interests the healthcare
business has been split into two income generating units ("IGU"), one
to be those care home businesses where rent may be renegotiated with
the lessor and the other being the remainder of homes in the Group.
The cost of capital of an equally risky investment is defined as the
cost of capital of the parent undertaking.
Based on cash flow projections for these IGU's and assuming that the
cost of capital of an equally risky investment would be 13%, the
directors have concluded that a provision of (pound)10,465,000 is
required for impairment.1
The freehold care home assets were valued on 8 January 1999 by Conrad
Ritblat at (pound)2,970,000 against a book value of (pound)3,420,000.
The impairment provision represents the corresponding shortfall.
The net book value of assets in the table stated above include assets
held under hire purchase agreements, as follows:
Plant
Fixtures Motor
and fittings Vehicles
(pounds) (pounds)
Net book value at 31 March 1999 171 235
=== ===
Net book value at 31 March 1998 101 176
=== ===
Depreciation provided in the year 19 60
=== ===
10. DEBTORS
1999 1998
(pound)'000 (pound)'000
Trade debtors 3,692 3,612
Other debtors 1,980 1,444
Prepayments and accrued income 1,067 930
----- ---
6,739 5,986
====== =====
Prepayments include costs of (pound)38,000 (1998 - (pound)27,000)
incurred on anticipated future care home acquisitions.
F-13
<PAGE>
11. DEBTORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
1999 1998
(pound)'000 (pound)'000
Prepayments 5,351 5,553
Other debtors 2,314 2,086
----- -----
7,665 7,639
===== =====
Prepayments relate to a forward payment of rental costs which will be
written off over the lease period of 30 years.
Other debtors relate to rent security deposits which are not expected
to be recovered within a period of twenty years, as they are recovered
at the end of the lease term.
12. CREDITORS; AMOUNTS FALLING DUE WITHIN ONE YEAR
1999 1998
(pound)'000 (pound)'000
Bank loans and overdrafts 6,046 3,755
Trade creditors 1,771 1,378
Corporation tax 1,197 788
Amounts due to Tamaris - 10,447
Other taxes and social security costs 1,040 780
Hire purchase agreements 120 100
Accruals and deferred income 7,305 4,464
----- -----
17,479 21,712
====== ======
Details of the security provided for bank and other loans and
overdrafts are given in note 15.
Amounts due under hire purchase agreements are secured on the assets to
which they relate.
Further details of the repayment periods of borrowings are given in
note 14.
F-14
<PAGE>
13. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1999 1998
(pound)'000 (pound)'000
<S> <C> <C>
Bank loans 2,477 2,950
Unsecured loan notes 3,000 3,000
Unsecured loan 39 39
Hire purchase agreements 202 231
----- -----
5,718 6,220
===== =====
</TABLE>
Details of the security provided for bank and other loans, overdrafts
and guarantees are given in note 15.
Amounts due under hire purchase agreements are secured on the assets to
which they relate.
Further details of the repayment periods of borrowings are given in
note 14.
14. BORROWINGS AND FINANCIAL INSTRUMENTS
Borrowings
<TABLE>
<CAPTION>
1999 1998
(pound)'000 (pound)'000
<S> <C> <C>
Within one year or on demand
Hire purchase agreements 120 100
Bank loans and overdrafts 6,046 3,755
After one and within two years
Hire purchase agreements 108 136
Bank loans 508 508
After two years and within five years
Hire purchase agreements 94 94
Bank loans 1,084 1,530
Unsecured loan notes 3,000 3,000
Unsecured loan 39 39
After five years
Bank loans 885 913
------ ------
11,884 10,075
====== ======
</TABLE>
F-15
<PAGE>
BORROWINGS AND FINANCIAL INSTRUMENTS (CONTINUED)
Financial instruments
The weighted average interest rate of fixed rate liabilities is 8.9%.
The weighted average period for which interest rates on fixed rate
liabilities are fixed is three years.
There are no financial liabilities on which no interest is paid.
The benchmark rate where applicable, for determining interest payments
for the floating rate financial liabilities is the London Interbank
Offered Rate ("LIBOR").
Borrowing facilities
The Group had no undrawn committed borrowing facilities available at 31
March 1999.
The difference between book value and fair value of Group financial
instruments is not material.
15. SECURED CREDITORS DISCLOSURE
BARCLAYS BANK PLC
i) Barclays Bank had a floating charge over the assets and
business of Lunan House Limited as its security for a loan
facility of(pound)1,280,000. The period remaining for the
repayment of the Loan was 18 years and the loan carried
interest at 2.0% above London Interbank Offered Rate
("LIBOR"). The indebtedness to Barclays at the year end was
(pound)1,225,000.
ii) Barclays Bank had a fixed and floating charge over the assets
and business of Tamaris (QCH) Limited as security for a loan
facility of (pound)2,200,000. The period remaining for the
repayment of the loan was 4 years and carried interest at 2.0%
above LIBOR. Capital repayments were made at a rate of
(pound)110,000 per quarter. The indebtedness to Barclays at
the year end was (pound)1,760,000.
iii) Barclays Bank had a fixed and floating charge over the assets
and business of Tamaris Care Properties Limited as security
for bridging loan facilities of (pound)1,700,000 and
(pound)1,220,000. In addition, cash at bank and on deposit
included (pound)450,000 on Treasurers Deposit which
represented part of the security for the bridging loan of
(pound)1,700,000. Barclays indicated that they were
willing to convert the (pound)1,700,000 facility into a term
loan upon similar terms to the Lunan House loan disclosed
above. The loans carried interest at 2.5% above the
Bank's base lending rate. The indebtedness to Barclays at the
year end was (pound)2,920,000.
F-16
<PAGE>
SECURED CREDITORS DISCLOSURE (CONTINUED)
Clydesdale Bank PLC
i) Tamaris (Scotland) Limited had an overdraft facility of
(pound)250,000 which was repaid prior to the acquisition of
the Company by Idun.
ii) Clydesdale Bank had made available a guarantee facility of up
to (pound)3,080,000 in relation to the unsecured loan notes of
(pound)3,000,000. As at 31 March 1999 the Bank provided a
guarantee of (pound) 2,750,000. This was secured by a cash
deposit of (pound)2,830,000 made with the Bank. It is included
under current assets but was not available for Group use
unless replaced by comparable security.
Both facilities were secured by a fixed and floating charge over the
assets of Tamaris (Scotland) Limited.
16. PROVISION FOR LIABILITIES AND CHARGES
The deferred taxation not provided for in the financial statements is
set out below and is calculated using tax rates of 31% for the Group
(1998 - 31%).
<TABLE>
<CAPTION>
Unprovided
1999 1998
(pound)'000 (pound)'000
<S> <C> <C>
Accelerated capital allowances - 43
Other timing differences - -
--- ---
- 43
Less: Trading losses - (43)
--- ---
- -
==== ===
</TABLE>
No provision has been made for the taxation that arises on the
chargeable profits from the sale of Group properties in 1997, as it is
the Directors' intention to claim roll-over relief on the acquisition
of replacement assets. The estimated amount of tax not provided is
(pound)1,300,000 (1998 - (pound)1,300,000).
17. CALLED UP SHARE CAPITAL
Called up share capital represents the aggregate share capital of 47 of
the companies acquired by Idun.
F-17
<PAGE>
18. SHARE PREMIUM ACCOUNT AND RESERVES
<TABLE>
<CAPTION>
Share
premium Profit and
account Other reserve loss account
(pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C>
At 1 April 1998 875 (2,189) 1,047
Profit for the year - - 987
--- ------ ---
At 31 March 1999 875 (2,189) 2,034
=== ====== =====
</TABLE>
Share premium account represents the aggregate share premium for the 47
companies acquired by Idun.
The Other reserve represents a capital reserve arising on acquisition
of subsidiary companies in previous years.
19. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
1999 1998
(pound)'000 (pound)'000
<S> <C> <C>
Retained profit for the financial year 987 998
New share capital 149 -
--- ---
1,136 998
Shareholders' funds at 1 April 1998 5,911 4,913
----- -----
Shareholders' funds at 31 March 1999 7,047 5,911
===== =====
</TABLE>
20. COMMITMENTS UNDER OPERATING LEASES
The Group have commitments under operating leases in respect of care
home properties for payments of (pound)19,600,000 in the year to 31
March 2000 (1998 - (pound)15,556,000). The leases to which these
amounts relate all expire after more than five years.
F-18
<PAGE>
21. NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES
<TABLE>
<CAPTION>
1999 1998
(pound)'000 (pound)'000
<S> <C> <C>
Operating profit before exceptional items 2,869 1,584
Depreciation charges 1,044 437
Increase in debtors (802) (2,493)
Increase in creditors 1,626 1,378
Lease rental paid in advance - (5,553)
---- ------
Net cash inflow/(outflow) from operating activities 4,737 (4,647)
===== ======
</TABLE>
There is no cash flow effect from exceptional items.
22. RECONCILIATION OF NET CASHFLOW TO MOVEMENT IN DEBT
<TABLE>
<CAPTION>
1999 1998
(pound)'000 (pound)'000
<S> <C> <C>
Increase/(decrease) in cash in the year 862 (1,864)
Cash outflow from financing (2,238) (2,403)
------ ------
Change in net debt resulting from cash flows (1,376) (4,267)
Inception of hire purchase agreements (200) (343)
---- ----
Movement in net debt in the year (1,576) (4,610)
Net debt at 1 April 1998 (6,413) (1,803)
------ ------
Net debt at 31 March 1999 (7,989) (6,413)
====== =====
</TABLE>
F-19
<PAGE>
23. ANALYSIS OF CHANGES IN NET DEBT
<TABLE>
<CAPTION>
At 1 April Non-cash At 31 March
1998 Cash flow items 1999.00
(pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C>
Cash at bank and in hand 832 (217) - 615
Bank overdrafts (3,247) 629 - (2,618)
Deposit guaranteeing loan notes 2,830 - - 2,830
Deposit guaranteeing loan facility - 450 - 450
--- --- --- ---
415 862 - 1,277
Bank loans (3,458) (2,447) - (5,905)
Hire purchase agreements (331) 209 (200) (322)
Loan notes (3,000) - - (3,000)
Other loans (39) - - (39)
--- --- --- ---
(6,413) (1,376) (200) (7,989)
====== ====== ==== ======
</TABLE>
Non-cash items represent the inception of new hire purchase agreements.
24. ACQUISITIONS
During the year the Tamaris plc acquired a number of care home
businesses. Details of the capitalised values of each transaction are
given below. In each case only the business and certain assets and
liabilities were acquired. In these circumstances, it is not practical
to provide details of profits or losses for financial periods before
acquisition. Details of the contribution to and utilisation of Group
cash flow is given at note 25.
F-20
<PAGE>
ACQUISITIONS (CONTINUED)
ST CATHERINE'S NURSING HOME
On 24 June 1998, Tameng Care Limited, then a newly formed wholly owned
subsidiary of Tamaris, acquired the freehold property, related fixed
assets and business of St. Catherine's Nursing Home, Bolton (63 beds),
for (pound)1,675,000 from D R and R E Walker.
Immediately following the acquisition Tameng Care Limited entered into
an agreement with Tamaris Care Properties Limited for the sale of the
freehold property for (pound)1,700,000 and its subsequent lease back on
a 25 year operating lease on normal industry terms. The initial annual
rent payable is (pound)170,000. The acquisition by Tamaris Care
Properties Limited was financed by a bridging facility from Barclays
Bank PLC of (pound)1,700,000.
The assets acquired were as follows:
<TABLE>
<CAPTION>
Book value
and
Fair value
(pound)'000
<S> <C>
Purchase consideration 1,675
Costs of acquisition 43
--
Net assets acquired 1,718
-----
Satisfied by:
Bank loan 1,700
Cash 18
--
1,718
=====
</TABLE>
F-21
<PAGE>
ACQUISITIONS (CONTINUED)
Beach Court Nursing Home
On 6 November 1998, Tamscot Care Limited, then a wholly owned
subsidiary of Tamaris, acquired the freehold property, related fixed
assets and business of Beach Court Nursing Home, Aberdeen (43 beds),
for (pound)1,625,000 from Mr P Marr.
Immediately following the acquisition Tamscot Care Limited entered into
an agreement with Tamaris Care Properties Limited for the sale of the
freehold property for (pound)1,625,000 and its subsequent lease back on
a 25 year operating lease on normal industry terms. The initial annual
rent payable is (pound)162,000. The acquisition by Tamaris Care
Properties Limited was financed by a bridging facility from Barclays
Bank PLC of (pound)1,220,000.
The assets acquired were as follows:
Book value
and
Fair Value
(pound)'000
Purchase consideration 1,625
Costs of acquisition 93
-----
Net assets acquired 1,718
=====
Satisfied by:
Bank loan 1,220
Cash 498
-----
1,718
=====
F-22
<PAGE>
ACQUISITIONS (CONTINUED)
Tamhealth Limited
Tamhealth Limited, then a newly formed wholly owned subsidiary of
Tamaris plc has entered into the following transactions during the
year.
On 8 December 1998, the company acquired the freehold property, related
fixed assets and business of Flowerdown Nursing Home, Winchester (28
beds) for a consideration of (pound)1,303,500 from Lt Colonel A D and
Mrs J I Price, satisfied by cash. The home was simultaneously sold to
and leased back from Healthcare Holdings Limited for (pound)1,385,000
on a 35 year operating lease. The initial annual rent payable is
(pound)145,000.
On 9 December 1998, the company acquired the goodwill and business of
the Buchanan Homes (97 beds), Glasgow from S & A Glass and Buchanan
Properties Limited for a consideration of (pound)100,000.
On 11 December 1998, the company acquired the freehold property,
related fixed assets and business of Rosemount Nursing Home,
Blairgowrie (60 beds) from F & M Henderson Limited for a consideration
of (pound)1,475,000.
The home was simultaneously sold to and leased back from Healthcare
Holdings Limited for (pound)1,650,000 on a 35 year operating lease. The
initial annual rent payable is (pound)173,000.
On 23 December 1998, the company acquired the freehold property,
related fixed assets and business of Garioch Nursing Home, Inverurie
(41 beds) and Woodside Nursing Home, Aberdeen (31 beds) from Garioch
Nursing Home Limited and Woodside House Nursing Home Limited
respectively for a consideration of (pound)1,432,000 and
(pound)1,000,000 respectively, satisfied by cash. The homes were
simultaneously sold to and leased back from Healthcare Holdings Limited
for (pound)2,750,000 on 35 year operating lease. The initial annual
rent payable is (pound)289,000.
On 18 January 1999, the company was granted 35 year operating leases by
Healthcare Holdings Limited in respect of three nursing homes (197
beds), two located in Hertfordshire and one in Kent. The initial annual
rent payable is (pound)714,000.
F-23
<PAGE>
ACQUISITIONS (CONTINUED)
The aggregate assets acquired were as follows:
<TABLE>
<CAPTION>
Book value
and Fair value
(pound)'000
<S> <C>
Purchase consideration 5,311
Sale proceeds, net of costs (5,746)
------
Profit on disposal - credited to profit and loss account (435)
Costs of acquiring leases - capitalised as short leasehold interests 705
---
270
===
Satisfied by:
Cash (net) 270
===
</TABLE>
Hawthorn House Nursing Home
On 19 February 1999, Tamulst Care Limited, then a wholly owned
subsidiary of Tamaris acquired the freehold property, related assets
and business of Hawthorn House Nursing Home, Belfast from the Civil
Service Benevolent Fund for (pound)625,000 payable in cash.
Simultaneously with completion, Tamulst Care Limited entered into a
sale agreement for the property with PHF Securities No 3 Limited
(Principal Healthcare Finance Limited), for (pound)712,000 and its
subsequent leaseback on a 30 year operating lease. The initial annual
rent payable is (pound)71,000.
The assets acquired were as follows:
<TABLE>
<CAPTION>
(pound)'000
<S> <C>
Purchase consideration 625
Sale proceeds (712)
----
(87)
Profit on disposal - credited to profit and loss account
Costs of acquiring lease - capitalised as short leasehold interests 76
--
(11)
===
Satisfied by:
Cash (net) (11)
===
</TABLE>
F-24
<PAGE>
ACQUISITIONS (CONTINUED)
Hallhouse Nursing Home
On 31 March 1999, Lifecare International plc, then and now a wholly
owned subsidiary of Tamaris, acquired the freehold property, related
fixed assets and business of Hallhouse Nursing Home, Aberdeen (47 beds)
from Hallhouse Nursing Home Limited, for (pound)1,550,000.
Simultaneously with completion, Lifecare International plc entered into
a sale agreement for the property with Care Property Holdings Limited,
a Jersey based company, for (pound)1,790,000 and its subsequent
leaseback by Dounemead Limited, then a wholly owned subsidiary of
Tamaris on a 25 year operating lease. The initial annual rent payable
is (pound)179,000.
The costs incurred by Donnemead Limited were (pound)124,000, satisfied
by cash.
25. CASH FLOW FROM ACQUISITIONS
The business undertakings acquired during the year made the following
contribution to and utilisation of Group cash flow.
<TABLE>
<CAPTION>
1999 1998
(pound)'000 (pound)'000
<S> <C> <C>
Net inflow from operating activities 1,710 540
Net outflow from returns on investment and servicing of finance (4) (349)
Net outflow from capital expenditure and financial investment (1,626) (255)
------ ----
(80) (64)
====== =====
</TABLE>
Operating activities excludes central overhead.
26. PENSION CONTRIBUTIONS
Contributions to employees' own pension schemes are accrued and payable
during the term of employment.
A Group Personal Pension Scheme was established on 1 January 1999 for
participation by certain senior employees. The scheme is a defined
contribution scheme. The amount paid into the scheme during the year
was (pound)33,960.
27. CAPITAL COMMITMENTS
The Idun companies had no contracted capital commitments at the year
end of (pound)nil (1998 - (pound)nil).
F-25
<PAGE>
28. CONTINGENT LIABILITIES
The Idun companies have given charges, guarantees or cross guarantees
to lessors and bankers to assist the trading of other Group companies.
Liabilities and commitments covered by these guarantees are disclosed
within notes 15 and 20.
29. RELATED PARTY TRANSACTIONS AND MATERIAL CONTRACTS
Related Party Transactions
There were no transactions with Directors or related parties during the
year other than:
Mr William Fitch
The Directors consider that Mr William Fitch is a related party by
virtue of his being a Director of Tamaris plc until 31 December 1998
and his holding of ordinary shares in Tamaris plc which amounted to
840,006 ordinary shares at 31 March 1999.
Under the terms of a Guarantee dated 16 July 1997, Tamaris and Mr.
Fitch guaranteed the loan made by MeesPierson Corporate Bank to Triasma
Homes Limited for the construction of Westview House Residental Home,
now operated by the Group. The obligations under this Guarantee were
released on 15 September 1999.
Under the terms of an agreement dated 22 May 1998 between Omega and
Automated Ventures, Inc. ("Automated") (a company incorporated in the
British Virgin Islands), Omega agreed to make available to Automated a
loan in the principal amount of (pound)500,000. The loan bears interest
at 10.5%, and is repayable by quarterly instalments up to and including
October 2000. Civicextra Limited, a company incorporated in England and
Wales, and Mr Fitch have guaranteed the loan. The loan was made to
enable Mr Fitch to buy 200,000,000 0.25 pence ordinary shares in
Tamaris from Roseview International Limited ("Roseview"), a company
incorporated in the British Virgin Islands. These shares were
originally subscribed for by Roseview in January 1998.
The balance due from Mr. Fitch to Omega is now (pound)437,500.
Omega
The Directors consider Omega to be a related party by virtue of its
interest in 100% of the shares of the companies and because Mr James
Flaherty, a Director of Idun Health Care Limited, is an officer of
Omega.
During the year Omega paid (pound)867,000 on behalf of Tamaris (QCH)
Limited in respect of professional fees payable in respect of the
acquisition of 37 care home businesses from Quality Care Homes Limited.
During the year, the Group has made payments of (pound)8,545,000 (1998:
(pound)2,919,000) to Principal Healthcare Finance Limited, an
associated company of Omega, which is equivalent to the annual
commitments under its operating leases with that company.
These leases extend to periods up to 30 years.
F-26
<PAGE>
30. RECONCILIATION TO US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(US GAAP)
<TABLE>
<CAPTION>
1999 1998
(pound)'000 (pound)'000
<S> <C> <C>
Net profit after tax per UK GAAP 987 998
Capitalised short leasehold interests (net of impairment provision) (1) 7,189 (4,728)
Waiver of amounts owed to Tamaris plc (2) (10,297) 8,301
Rent payable (net of tax) (3) (1,786) (265)
------- -----
Net (loss)/profit per US GAAP (3,907) 4,306
====== =====
Closing shareholders' equity per UK GAAP 7,047 5,911
Capitalised short leasehold interest (1) (2,567) 9,757
Waiver of amounts owed to Tamaris plc (2) - 10,447
Rent payable (net of tax) (3) (2,051) (265)
Deferred taxation (4) (1,300) (1,300)
----- -----
Closing shareholders' equity per US GAAP 1,129 5,036
===== =====
Changes in shareholders' equity on a US GAAP basis:
Shareholders' equity at beginning of period 5,036 730
Net (loss)/profit (3,907) 4,306
------ -----
Shareholders' equity at the end of period 1,129 5,036
===== =====
</TABLE>
The following are descriptions of US GAAP reconciling items:
(1) Under UK GAAP, the group capitalise, as short leasehold
interests, the costs associated with the acquisition of care
home operating leases that comprise the continuing ordinary
activities of the group. Such costs are amortised over the
period of the lease to which they relate. Under US GAAP, such
costs are expensed in the period incurred.
(2) Under the terms of the sale and purchase agreement between
Idun Health Care Limited and Tamaris plc, Tamaris agreed to
waive all amounts due to it at 29 October 1999 from the 48
companies. Under UK GAAP, the Group write back the balance as
at 31 March 1999 due to Tamaris through the profit and loss
account. Under US GAAP, the balance must be written back in
the period in which the liability has arisen.
(3) Under UK GAAP, rent payable under the care home operating
leases is expensed in the period in which it is incurred.
Under US GAAP, the total rent payable over the lease term is
amortised on a straight line basis through the profit and loss
account, which includes provision for minimum rental
increments.
(4) Under UK GAAP, deferred taxation is provided only to the
extent that a liability or asset will crystallise in the
foreseeable future (partial provision basis). Under US GAAP, a
full provision basis is adopted for both deferred tax
liabilities and assets. Deferred tax assets not expected to be
utilised are reserved for with a valuation allowance.
F-27
<PAGE>
Additional disclosures are as follows:
1. Under UK GAAP returns on investment, servicing of finance,
taxation, dividends paid and financial investment are shown as
separate activities in the consolidated statement of cash
flows. Under US GAAP, changes to such balances are generally
included in operating activities as to returns on investment,
servicing of finances and taxation, with the remaining items
shown as financing activities. Under UK GAAP, capital
expenditure and acquisitions and disposals are shown as
separate activities. Under US GAAP, changes to such balances
are generally included in investing activities. The sum of
cash flows stemming from operating activities, returns on
investment and servicing of finance and taxation under UK GAAP
is the same in all material respects to cash flows from
operating activities under US GAAP.
31. POST BALANCE SHEET EVENTS
On 28 April 1999 Tamaris Care Properties Limited, then a wholly owned
subsidiary of Tamaris, sold Beach Court Nursing Home, Aberdeen, to Care
Home Properties Limited for (pound)1,650,000. The home was subsequently
leased back by Tamscot Care Limited, then a wholly owned subsidiary of
Tamaris, on a 25 year operating lease commencing on 31 March 1999. The
initial annual rent payable is (pound)165,000.
On 11 May 1999 Laudcare Limited, then a wholly owned subsidiary of
Tamaris, exchanged contracts for the acquisition of the Leases of five
Care Homes from Loughbray Limited for a consideration of
(pound)250,000. The five homes comprise modern purpose built
accommodation in Wiltshire and South Gloucestershire and are registered
for 256 residents, comprising 7 Residential, 18 Elderly Mentally Infirm
and 231 Frail Elderly beds. The 25 year leases are with Nursing Home
Properties Limited and the shortest lease has an unexpired term of 22
years. The initial annual rent payable is (pound)902,000.
On 18 May 1999, Lifecare International plc, a wholly owned subsidiary
of Tamaris plc, acquired Havencourt Nursing Home, Stonehaven,
registered for 47 beds plus 5 day care places for frail elderly
residents, for a consideration of (pound)1,555,000 from Mr J E and Mrs
A S Towle. The home was subsequently sold to Carlton Healthcare
Properties Limited, a Jersey based company, for (pound)1,720,000 and
leased back by Ringdane Limited, then a wholly owned subsidiary of
Tamaris plc, on a 30 year operating lease. The initial annual rent
payable is (pound)172,000.
On 14 September 1999 Tamaris (RAM) Limited, then a wholly owned
subsidiary of Tamaris, entered into the leases of the seven homes
previously operated by Grampian Care (Dundee) Limited (now in
administrative receivership). Six of the homes are in Scotland and one
is in Berkshire. They are registered for 325 residents, comprising 132
Elderly Mentally Infirm and 193 Frail Elderly beds. The leases for
which no premiums were paid, are with MM&S (2538) Limited and are for a
period of 30 years on standard industry terms. The initial annual rent
payable is (pound)1,180,000.
F-28
<PAGE>
POST BALANCE SHEET EVENTS (CONTINUED)
Subsequent to the year end the Group carried out the following
transactions in respect of its borrowings:
1 The Barclays Bank plc Treasury Loan of(pound)1,220,000 in
respect of Beach Court Nursing Home was repaid in full on 29
April 1999.
2 In July 1999, Tamaris (Scotland) Limited repaid (pound)
2,750,000 of guaranteed loan notes due to Mr. Peter Marr. The
company utilised a cash deposit of (pound)2,830,000 held at
Clydesdale Bank (see note 15) to make this repayment. The
balance was utilised for working capital purposes.
3 On 29 October 1999 ownership of the 48 care home operating
companies was acquired from Tamaris by Idun Health Care
Limited.
As part of the sale and purchase agreement dated 29 October
1999, Tamaris agreed to waive amounts due to Tamaris from the
48 care home operating companies.
4 During October 1999, the 48 companies received (pound)620,000
from Principal Healthcare Finance Limited, an associated
company of Omega.
5 On acquisition, Omega advanced (pound)8 million to Idun Health
Care Limited as consideration for 4 million ordinary shares of
(pound)1 each, with the balance as a loan. Idun utilised the
funds with the 48 care home operating companies as follows:-
<TABLE>
<CAPTION>
(pound)'000
<S> <C>
Payment of rent arrears 4,100
Security Deposit against various loan facilities of Barclays Bank PLC 1,250
Repayment of an unsecured loan from Principal Healthcare Finance Limited 620
Working capital 2,030
-----
8,000
=====
</TABLE>
In addition, a further sum has been advanced to Idun by Omega in order
to alleviate potential short term cash flow difficulities over the
forthcoming holiday period.
F-29
<PAGE>
POST BALANCE SHEET EVENTS (CONTINUED)
The 48 companies acquired by Idun Health Care are listed below:
The share capital of these companies was held either directly or
indirectly (*) via an intermediate holding company.
Name of company
Healthcare operating companies at 31 March 1998
Belmont Nursing Home Limited, The
Bewick Waverley Limited
Cedarhurst Lodge Limited
Chapelfield View Limited
Chestnut Lodge Limited
Doulton Court Limited
Dounemead Limited Duncare Limited # * Edgewater Lodge Limited Guthrie
Court Limited Keslaw Limited Laudcare Limited Leeland Limited L
Lisnisky Limited Lodge Care PLC Lodge Care Services Limited Lunan House
Limited Maldcare Limited Meadowvale Care Limited
North East Pharmacies Limited*
Osborne Limited
Ringdane Limited
Rosevale Lodge Limited
Saintfield Limited
Tamaris (England) Limited
Tamaris (QCH) Limited
Tamaris (Scotland)Limited #
Tamaris (South East) Limited
Tamaris (Ulster) Limited +
Tammillec Limited
Westview Lodge Limited
Healthcare operating companies incorporated during the year ended
31 March 1999
Atlas Healthcare Limited*
Tamaris Management Services Limited
Tameng Care Limited
Tamhealth Limited
Tamscot Care Limited
Tamulst Care Limited
F-30
<PAGE>
Property Company Incorporated during the year ended 31 March 1999
Tamaris Care Properties Limited
Dormant Companies which traded during the year ended at 31 March 1998,
but were dormant thereafter
Bearehill Limited
Caledonian Care Limited#
Caledonian Care (Turriff) Limited#*
Continental 89 Limited
Continental 92 Limited
Forebank Limited
Laurels Lodge Limited
St Cuthberts Nursing Agency Limited
Dormant company incorporated during the year ended 31 March 1999
Tamcare Limited
In addition to the above, Tamaris (RAM) Limited was incorporated during
the post balance sheet period and represents the additional company
acquired by Omega on 29 October 1999.
All companies were incorporated in England and Wales except where
indicated; # registered in Scotland, + registered in Northern Ireland,
+ registered in the Isle of Man.
F-31
