<PAGE> 1
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 (Date of earliest event reported): February 11, 2000
ACCREDO HEALTH, INCORPORATED
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 000-25769 62-1642871
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation) Identification Number)
</TABLE>
1640 Century Center Pkwy
Suite 101
Memphis, Tennessee 38134
(Address of principal executive offices) (Zip Code)
(901) 385-3688
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 2. ACQUISITION
On December 3, 1999, Accredo Health, Incorporated (the
"Company"), through its wholly-owned subsidiary Hemophilia Health Services,
Inc., acquired all of the outstanding stock of Sunrise Health Management, Inc.
("Sunrise") from its shareholders Margo Grbinich-Hunt and Mark B. Epstein
pursuant to a Stock Purchase Agreement dated effective as of December 1, 1999
(the "Acquisition"). The amended aggregate purchase price paid for Sunrise,
pursuant to the Stock Purchase Agreement and the final November 1999 balance
sheet of Sunrise, is approximately $13.7 million plus a potential earn-out
payment of up to $1.0 million if certain financial goals are achieved by
Sunrise during the six-month period ending May 31, 2000.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The Company is filing this amendment for the purpose of
including the required financial statements and pro forma financial information
with respect to the Acquisition in accordance with the requirements of Form 8-K
as provided by Item 7(a)(4).
(a) Financial Statements of Business Acquired
The required audited financial statements of Sunrise
Health Management, Inc. at June 30, 1999 and for the
year then ended, the unaudited condensed balance
sheet at September 30, 1999 and condensed statements
of income and cash flows for the three months ended
September 30, 1999 and 1998 are incorporated by
reference to Exhibit 99.1 attached hereto.
(b) Pro Forma Financial Information
The required pro forma condensed financial
statements of the Company and its subsidiaries,
giving effect to the Acquisition as if it had
occurred on September 30, 1999, as to the balance
sheet, and July 1, 1998, as to the income statement,
are incorporated by reference to Exhibit 99.1
attached hereto.
(c) Exhibits:
2.1 Stock Purchase Agreement, dated December 1,
1999, among Margo Grbinich-Hunt, Mark B.
Epstein, Hemophilia Health Services, Inc.
and Sunrise Health Management, Inc.,
incorporated herein by reference to the
Company's Current Report on Form 8-K, filed
December 16, 1999, Commission File No.
000-25769.
23.1 Consent of Ernst & Young LLP.
99.1 Financial Information.
<PAGE> 3
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.
ACCREDO HEALTH, INCORPORATED
By: /s/ Joel R. Kimbrough
Joel R. Kimbrough
Chief Financial Officer
Date: February 11, 2000
<PAGE> 4
EXHIBIT INDEX
TO
CURRENT REPORT ON FORM 8-K/A
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
2.1 Stock Purchase Agreement, dated December 1, 1999,
among Margo Grbinich-Hunt, Mark B. Epstein,
Hemophilia Health Services, Inc. and Sunrise Health
Management, Inc., incorporated herein by reference
to the Company's Current Report on Form 8-K, filed
December 16, 1999, Commission File No. 000-25769.
23.1 Consent of Ernst & Young LLP.
99.1 Financial Information.
</TABLE>
<PAGE> 1
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No 333-76399) pertaining to the Nova Holdings, Inc. and its Subsidiaries
Stock Option and Restricted Purchase Plan, as amended and restated, the Accredo
Health, Incorporated 1999 Employee Stock Purchase Plan and the Accredo Health,
Incorporated Long-Term Incentive Plan of our report dated November 19, 1999,
with respect to the financial statements of Sunrise Health Management, Inc. for
the year ended June 30, 1999, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Memphis, Tennessee
February 11, 2000
<PAGE> 1
EXHIBIT 99.1
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SUNRISE HEALTH MANAGEMENT, INC.
Report of Independent Auditors .................................................................................... 1
Balance Sheet ..................................................................................................... 2
Statement of Income ............................................................................................... 3
Statement of Stockholders' Equity ................................................................................. 4
Statement of Cash Flows ........................................................................................... 5
Notes to Financial Statements ..................................................................................... 6
Condensed Balance Sheet at September 30, 1999 (Unaudited) ......................................................... 10
Condensed Statements of Income for the Three Months Ended September 30, 1999 and 1998(Unaudited) .................. 11
Condensed Statements of Cash Flows for the Three Months Ended September 30, 1999 and 1998(Unaudited) .......... 12
Notes to Condensed Financial Statements (Unaudited) ............................................................... 13
ACCREDO HEALTH, INCORPORATED
Pro Forma Condensed Consolidated Financial Statements ............................................................. 14
Pro Forma Condensed Consolidated Balance Sheet at September 30, 1999 (Unaudited) .................................. 15
Pro Forma Condensed Consolidated Statement of Income For the Year Ended June 30, 1999 (Unaudited) ................. 16
Pro Forma Condensed Consolidated Statement of Income For the Three Months Ended September 30, 1999 (Unaudited) .... 17
Notes to Pro Forma Condensed Consolidated Financial Statements (Unaudited) ........................................ 18
</TABLE>
<PAGE> 2
Report of Independent Auditors
Board of Directors
Sunrise Health Management, Inc.
We have audited the accompanying balance sheet of Sunrise Health Management,
Inc. (the Company) as of June 30, 1999, and the related statements of income,
stockholders' equity, and cash flows for the year 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 audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audit 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 audit provides 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 Sunrise Health Management,
Inc. at June 30, 1999, and the results of its operations and its cash flows for
the year then ended in conformity with accounting principles generally accepted
in the United States.
/s/Ernst & Young LLP
Memphis, Tennessee
November 19, 1999
1
<PAGE> 3
Sunrise Health Management, Inc.
Balance Sheet
June 30, 1999
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 19,363
Receivables:
Patient accounts 1,679,194
Allowance for doubtful accounts (79,352)
------------
1,599,842
Other 662
------------
1,600,504
Inventories 264,084
------------
Total current assets 1,883,951
Property and equipment, net of accumulated depreciation of $87,152 87,084
Other assets 4,896
------------
Total assets $ 1,975,931
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 861,770
Bank revolving line of credit 214,000
Accrued expenses 38,001
Current portion of notes payable 7,078
------------
Total current liabilities 1,120,849
Long-term notes payable 13,195
Stockholders' equity:
Common stock $0.01 par value; 1,250,000 shares authorized; 892,915
shares issued and outstanding 8,929
Additional paid-in capital 330,001
Retained earnings 502,957
------------
Total stockholders' equity 841,887
Total liabilities and stockholders' equity $ 1,975,931
============
</TABLE>
See accompanying notes.
2
<PAGE> 4
Sunrise Health Management, Inc.
Statement of Income
Year ended June 30, 1999
<TABLE>
<S> <C>
Net patient service revenues $ 7,631,187
Expenses:
Cost of services 3,988,819
General and administrative 1,382,893
Bad debts 98,872
Depreciation and amortization 35,822
------------
Total operating expenses 5,506,406
------------
Operating income 2,124,781
Other expense (income):
Interest expense 13,990
Interest income (3,840)
Other income (2,424)
------------
7,726
------------
Net income $ 2,117,055
============
</TABLE>
See accompanying notes.
3
<PAGE> 5
Sunrise Health Management, Inc.
Statement of Stockholders' Equity
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at July 1, 1998 889,443 $8,894 $326,647 $ 1,128,530 $ 1,464,071
------- ------ -------- ----------- -----------
Net income -- -- -- 2,117,055 2,117,055
Distributions to stockholders -- -- -- (2,742,628) (2,742,628)
Issuance of common stock 3,472 35 3,354 -- 3,389
------- ------ -------- ----------- -----------
Balance at June 30, 1999 892,915 $8,929 $330,001 $ 502,957 $ 841,887
======= ====== ======== =========== ===========
</TABLE>
See accompanying notes.
4
<PAGE> 6
Sunrise Health Management, Inc.
Statement of Cash Flows
Year ended June 30, 1999
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income $ 2,117,055
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 35,822
Provisions for losses on patient accounts receivables 98,872
Changes in operating assets and liabilities:
Patient accounts receivable (133,929)
Inventories 221,544
Other assets (2,280)
Accounts payable and accrued expenses 473,173
------------
Net cash provided by operating activities 2,810,257
INVESTING ACTIVITIES
Purchases of property and equipment (49,902)
------------
Net cash used in investing activities (49,902)
FINANCING ACTIVITIES
Proceeds from bank line of credit 192,000
Repayment of notes payable (288,038)
Distributions to stockholders (2,742,628)
Issuance of common stock 3,389
------------
Net cash used in financing activities (2,835,277)
Decrease in cash and cash equivalents (74,922)
Cash and cash equivalents at beginning of year 94,285
============
Cash and cash equivalents at end of year $ 19,363
============
SUPPLEMENTARY CASH FLOW DISCLOSURES
Cash paid for interest $ 13,990
============
</TABLE>
See accompanying notes.
5
<PAGE> 7
Sunrise Health Management, Inc.
Notes to Financial Statements
Year ended June 30, 1999
1. DESCRIPTION OF BUSINESS
Sunrise Health Management, Inc. (the "Company"), is a specialty pharmacy that
provides alternate-site, home-based therapies to patients with chronic
diseases. The Company specializes in the provision of intravenous
immunoglobulin (IVIG) to patients suffering from a variety of immunodeficient
and autoimmune disorders. The Company also provides blood clotting factor and
other related pharmacy services to patients with hemophilia and provides
certain other specialized home infusion therapy services. The Company operates
in Georgia, Florida, Alabama and South Carolina.
2. SIGNIFICANT ACCOUNTING POLICIES
CASH EQUIVALENTS
The Company considers all highly liquid investments with an initial maturity of
three months or less to be cash equivalents.
CONCENTRATIONS OF CREDIT RISK
The Company's primary concentration of credit risk is patient accounts
receivable, which consists of amounts owed by various governmental agencies,
insurance companies and private patients. The Company manages the receivables
by regularly reviewing its accounts and contracts and by providing appropriate
allowances for uncollectible amounts. Significant concentrations of patient
accounts receivable are as follows at June 30, 1999:
Medicaid 14%
Medicare 8%
Concentration of credit risk relating to accounts receivable is limited to some
extent by the diversity and number of patients and payors and the geographic
dispersion of the Company's operations. The Company grants credit without
collateral to its patients.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
6
<PAGE> 8
Sunrise Health Management, Inc.
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Provisions for depreciation are
computed primarily by the straight-line method based on the estimated useful
lives of the related assets.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of receivables, accounts payable, revolving line of credit
and notes payable approximates fair value of these financial instruments at
June 30, 1999.
STOCK-BASED COMPENSATION
The Company has a Non-qualified Stock Option Plan (the "Plan") under which
options for a maximum of 175,000 shares of common stock may be granted to
employees for a period not to exceed 10 years at a price not less than fair
market value on the date of grant. As of June 30, 1999, there were 8,862
options outstanding. The Plan provisions state that all outstanding options may
be exercised upon the occurrence of the sale of the Company (See Note 8).
As allowed under the provisions of Financial Accounting Standard (FAS) No. 123,
Accounting for Stock-Based Compensation, the Company applies the provisions of
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations to account for its stock option plan.
The pro forma income disclosures called for by FAS No. 123 would not differ
materially from the amount reported on the statement of income.
REVENUE RECOGNITION
Net patient service revenues are reported at the net amounts billed to
patients, third-party payors and others in the period the services are
rendered. The Company has agreements with certain third-party payors that
provide for payments to the Company at amounts discounted from its established
rates.
Approximately 19% of gross patient service revenues for the year ended June 30,
1999, is from participation in the Medicare and state-sponsored Medicaid
programs.
COMPREHENSIVE INCOME
The Company had no items of other comprehensive income during fiscal 1999;
accordingly, comprehensive income equals net income.
7
<PAGE> 9
Sunrise Health Management, Inc.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
Estimates are used primarily in recording the allowance for doubtful accounts.
3. NOTES PAYABLE
The Company's revolving line of credit agreement allows for borrowings up to
$750,000 and expires May 31, 2000. Amounts outstanding under the line of credit
bear interest at rates varying from 8% to 10%, with an effective rate of 8% at
June 30, 1999. Borrowings on the line of credit are secured by assets of the
Company and personal assets of the Company's majority stockholders.
The Company's other notes payable consists of bank notes bearing interest at
8.75% and 9.67%. The notes are secured by furniture and equipment of the
Company and require monthly payments through October 2002.
Future maturities of notes payable, by year and in the aggregate, consist of
the following at June 30, 1999:
2000 $ 7,078
2001 5,309
2002 5,822
2003 2,064
==========
$ 20,273
==========
4. OPERATING LEASES
The Company leases office space and equipment under various operating leases.
Rent expense for all operating leases was approximately $52,000 for the year
ended June 30, 1999.
Future minimum lease payments, by year and in the aggregate, under
noncancelable operating leases with initial terms of one year or more are as
follows at June 30, 1999:
2000 $ 42,000
2001 29,000
2002 4,000
==========
$ 75,000
==========
8
<PAGE> 10
Sunrise Health Management, Inc.
Notes to Financial Statements (continued)
5. INCOME TAXES
The Company, with the consent of its stockholders, has elected to be an S
Corporation under the Internal Revenue Code and applicable Georgia State law.
Instead of the Company's paying federal corporate income taxes, the
stockholders are taxed individually on the Company's taxable income. Therefore,
no provision for federal or state income taxes has been made.
6. 401(K) PLAN
The Company sponsors a defined contribution plan (the "Plan") for employees who
have completed one year of service. The Company may, at its discretion, make
employer matching contributions to the Plan. However, no employer matching
contributions were made to the Plan during the year ended June 30, 1999.
7. YEAR 2000 READINESS (UNAUDITED)
The Company has modified certain portions of its software, hardware and patient
care equipment so that its systems and equipment will function properly with
respect to dates in the Year 2000 and thereafter. Costs specifically associated
with modifying software and equipment have been expensed as incurred and have
not had a significant effect on the Company's operations. The Company has
completed the Year 2000 project.
The Company is vulnerable to certain third parties' failures to mitigate Year
2000 issues. The Company has identified its critical vendor relationships and
has contacted each such vendor and has inquired directly as to the status of
that vendor's Year 2000 readiness. Based on this process, the Company
anticipates that all crucial vendors will achieve year 2000 compliance.
However, there can be no assurance that all such third parties have provided
accurate and complete information, or that all of their systems in fact will
achieve full Year 2000 compliance. Therefore, the Company cannot provide
assurances that the Company will not be adversely affected by the Year 2000
date change.
8. SUBSEQUENT EVENT
The Company has entered into negotiations to sell all the capital stock to
Accredo Health, Incorporated.
9
<PAGE> 11
Sunrise Health Management, Inc.
Condensed Balance Sheet (Unaudited)
September 30, 1999
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 35,630
Receivables:
Patient accounts 1,777,956
Allowance for doubtful accounts (123,283)
------------
1,654,673
Other 662
------------
1,655,335
Inventories 470,430
------------
Total current assets 2,161,395
Property and equipment, net of accumulated depreciation of $93,209 83,819
Other assets 4,871
------------
Total assets $ 2,250,085
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 615,116
Bank revolving line of credit 647,000
Accrued expenses 38,731
Current portion of notes payable 7,078
------------
Total current liabilities 1,307,925
Long-term notes payable 11,009
Stockholders' equity:
Common stock $0.01 par value; 1,250,000 shares authorized; 892,915
shares issued and outstanding 8,929
Additional paid-in capital 330,001
Retained earnings 592,221
------------
Total stockholders' equity 931,151
Total liabilities and stockholders' equity $ 2,250,085
============
</TABLE>
See accompanying notes to condensed interim financial statements.
10
<PAGE> 12
Sunrise Health Management, Inc.
Condensed Statements of Income (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1999 1998
---- ----
<S> <C> <C>
Net patient service revenues $ 2,272,005 $ 1,852,167
Expenses:
Cost of services 1,185,913 923,043
General and administrative 431,416 316,224
Bad debts 27,960 46,692
Depreciation and amortization 6,081 3,874
----------- -----------
Total operating expenses 1,651,370 1,289,833
----------- -----------
Operating income 620,635 562,334
Other expense (income):
Interest expense 2,371 5,016
Interest income (348) (2,283)
Other income (222) --
----------- -----------
1,801 2,733
----------- -----------
Net income $ 618,834 $ 559,601
=========== ===========
</TABLE>
See accompanying notes to condensed interim financial statements.
11
<PAGE> 13
Sunrise Health Management, Inc.
Condensed Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1999 1998
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 618,834 $ 559,601
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 6,081 3,874
Provisions for losses on patient accounts receivables 43,931 46,692
Changes in operating assets and liabilities:
Patient accounts receivable (98,762) 7,786
Inventories (206,346) 140,776
Accounts payable and accrued expenses (245,924) 275,546
----------- -----------
Net cash provided by operating activities 117,814 1,034,275
INVESTING ACTIVITIES
Purchases of property and equipment (2,791) (12,563)
----------- -----------
Net cash used in investing activities (2,791) (12,563)
FINANCING ACTIVITIES
Proceeds from (repayments of) bank line of credit 433,000 (302,000)
Repayment of notes payable (2,186) (2,082)
Distributions to stockholders (529,570) (614,355)
----------- -----------
Net cash used in financing activities (98,756) (918,437)
Increase in cash and cash equivalents 16,267 103,275
Cash and cash equivalents at beginning of period 19,363 94,285
=========== ===========
Cash and cash equivalents at end of period $ 35,630 $ 197,560
=========== ===========
</TABLE>
See accompanying notes to condensed interim financial statements.
12
<PAGE> 14
Sunrise Health Management, Inc.
Notes to Condensed Interim Financial Statements (Unaudited)
BASIS OF PRESENTATION
The accompanying unaudited condensed balance sheet as of September 30, 1999 and
the related unaudited condensed statements of income and cash flows for the
three months ended September 30, 1999 and 1998 (interim financial statements)
of Sunrise Health Management, Inc. have been prepared in accordance with
generally accepted accounting principles for interim financial information and
instructions to Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation of the interim results have been included.
The interim unaudited condensed financial statements should be read in
conjunction with the audited June 30, 1999 financial statements included
herein. The results of the three months ended September 30, 1999 may not be
indicative of the operating results expected for the year ended June 30, 2000.
SUBSEQUENT EVENT
The company was acquired by Hemophilia Health Services, Inc., a wholly-owned
subsidiary of Accredo Health, Inc., effective on December 1, 1999.
13
<PAGE> 15
Accredo Health, Incorporated
Pro Forma Condensed Financial Statements (Unaudited)
On December 3, 1999, Accredo Health, Incorporated (the "Company"), through its
wholly-owned subsidiary Hemophilia Health Services, Inc., acquired all of the
outstanding stock of Sunrise Health Management, Inc. ("Sunrise") pursuant to a
Stock Purchase Agreement dated effective as of December 1, 1999 (the
"Acquisition").
The following unaudited pro forma condensed consolidated balance sheet as of
September 30, 1999, gives effect to the Acquisition as if such transaction had
been completed as of September 30, 1999. The following unaudited pro forma
condensed consolidated statements of income for the year ended June 30, 1999
and the three months ended September 30, 1999, give effect to the acquisition
as if such transaction had been completed as of July 1, 1998.
The unaudited pro forma condensed consolidated financial information presented
herein does not purport to represent the results the Company would have
obtained had the transaction, in fact, occurred at the beginning of the period
presented or to project the Company's results of operations in any future
period. The pro forma adjustments are based upon preliminary estimates,
available information and certain assumptions that management deems appropriate
and are not necessarily indicative of the results that may be expected in the
future. The unaudited pro forma condensed consolidated financial statements
should be read in conjunction with the audited consolidated financial
statements of the Company included in its Annual Report on Form 10-K for the
year ended June 30, 1999, the unaudited condensed consolidated financial
statements of the Company included in its Quarterly Report on Form 10-Q for the
period ended September 30, 1999, and the financial statements of Sunrise
included elsewhere in this Current Report on Form 8-K/A.
14
<PAGE> 16
Accredo Health, Incorporated
Pro Forma Condensed Consolidated Balance Sheet (Unaudited)
September 30, 1999
(In Thousands)
<TABLE>
<CAPTION>
Historical
Sunrise
Accredo Health Pro Forma Pro Forma
ASSETS Health, Inc. Management Adjustments Consolidated
----------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 5,169 $ 35 $ 14,500 (a)
(226)(b)
(14,089)(c) $ 5,389
Patient accounts receivable 58,424 1,778 60,202
Allowance for doubtful accounts (5,558) (123) (5,681)
---------- ---------- ----------
52,866 1,655 54,521
Due from affiliates 2,275 -- 2,275
Other 6,027 1 6,028
Inventories 21,997 470 22,467
Prepaid and other current assets 371 -- 371
Deferred income taxes 1,993 -- 1,993
---------- ---------- ---------- ----------
Total current assets 90,698 2,161 185 93,044
Property and equipment, net 3,285 84 3,369
Other assets:
Joint venture investments 4,033 -- 4,033
Goodwill and other intangible assets, net 49,696 -- 13,158 (c) 62,854
Other -- 5 5
---------- ---------- ---------- ----------
Total assets $ 147,712 $ 2,250 $ 13,343 $ 163,305
========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 53,330 $ 615 $ -- $ 53,945
Bank revolving line of credit -- 647 (226)(b) 421
Current portion of notes payable -- 7 7
Accrued expenses 4,606 39 4,645
Income taxes payable 1,743 -- 1,743
---------- ---------- ----------
Total current liabilities 59,679 1,308 (233) 60,761
Long-term notes payable 20,500 11 14,500 (a) 35,011
Deferred income taxes 908 -- 908
Stockholders' equity:
Common stock, $0.01 par value; 30,000,000
shares authorized; 9,154,887 shares issued
and outstanding 92 9 (9)(c) 92
Additional paid-in capital 63,896 330 (330)(c) 63,896
Retained earnings 2,637 592 (592)(c) 2,637
---------- ---------- ---------- ----------
Total stockholders' equity 66,625 66,625 931 (931)
---------- ---------- ---------- ----------
Total liabilities and stockholders' equity $ 147,712 $ 2,250 $ 13,343 $ 163,305
========== ========== ========== ==========
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
15
<PAGE> 17
Accredo Health, Incorporated
Pro Forma Condensed Consolidated Statement of Income (Unaudited)
For the Year Ended June 30, 1999
(In Thousands)
<TABLE>
<CAPTION>
(d)
Pro Forma Historical
Historical (Unaudited) Sunrise
Accredo Accredo Health Pro Forma Pro Forma
Health, Inc Health, Inc Management Adjustments Consolidated
----------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net patient service revenue $ 244,158 $ 244,158 $ 7,631 $ -- $ 251,789
Other revenue 12,277 12,277 2 12,279
Equity in net income of joint ventures 1,919 1,919 -- 1,919
---------- ----------- ---------- ---------- -----------
Total revenue 258,354 258,354 7,633 265,987
Cost of services 220,517 220,517 3,988 224,505
---------- ----------- ---------- ---------- -----------
Gross profit 37,837 37,837 3,645 41,482
General and administrative expenses 17,637 17,637 1,383 19,020
Bad debts 4,739 4,739 99 4,838
Depreciation and amortization 3,911 3,911 36 492 (e) 4,439
---------- ----------- ---------- ---------- -----------
Income from operations 11,550 11,550 2,127 (492) 13,185
Interest expense, net 3,165 1,707 10 1,184 (f) 2,901
---------- ----------- ---------- ---------- -----------
Income before income taxes and
extraordinary item 8,385 9,843 2,117 (1,676) 10,284
Provision for income taxes 4,003 4,547 -- 168 (g) 4,715
---------- ----------- ---------- ---------- -----------
Net income before extraordinary item $ 4,382 $ 5,296 $ 2,117 $ (1,844) $ 5,569
========== =========== ========== ========= ===========
Earnings per common share
Basic $ 0.46 $ 0.39 $ 0.41
Diluted $ 0.42 $ 0.36 $ 0.38
Weighted average number of shares
Basic 9,501,806 13,610,367 13,610,367
Diluted 10,431,945 14,540,507 14,540,507
</TABLE>
Earnings per share has been computed reflecting the upcoming three-for-two
stock split (See Subsequent Event Note below).
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
16
<PAGE> 18
Accredo Health, Incorporated
Pro Forma Condensed Consolidated Statement of Income (Unaudited)
For the Three Months Ended September 30, 1999
(In Thousands)
<TABLE>
<CAPTION>
Historical
Historical Sunrise
Accredo Health Pro Forma Pro Forma
Health, Inc. Management Adjustments Consolidated
----------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Net patient service revenue $ 72,684 $ 2,272 $ -- $ 74,956
Other revenue 3,569 -- 3,569
Equity in net income of joint ventures 618 -- 618
----------- ---------- ---------- -----------
Total revenue 76,871 2,272 79,143
Cost of services 65,992 1,186 67,178
----------- ---------- ---------- -----------
Gross profit 10,879 1,086 11,965
General and administrative expenses 5,246 431 5,677
Bad debts 1,363 28 1,391
Depreciation and amortization 645 6 123(e) 774
----------- ---------- ---------- -----------
Income from operations 3,625 621 (123) 4,123
Interest expense, net 352 2 285(f) 639
----------- ---------- ---------- -----------
Income before income taxes 3,273 619 (408) 3,484
Provision for income taxes 1,305 -- 80(g) 1,385
----------- ---------- ---------- -----------
Net income $ 1,968 $ 619 $ (488) $ 2,099
=========== ========== ========== ===========
Earnings per common share
Basic $ 0.14 $ 0.15
Diluted $ 0.13 $ 0.14
Weighted average number of shares
Basic 13,650,341 13,650,341
Diluted 14,685,723 14,685,723
</TABLE>
Earnings per share has been computed reflecting the upcoming three-for-two
stock split (See Subsequent Event Note below).
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
17
<PAGE> 19
Accredo Health, Incorporated
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
Balance sheet pro forma adjustments:
(a) Adjustment to reflect the borrowing by Accredo Health, Incorporated of
$14,500,000 to finance the acquisition of Sunrise Health Management,
Inc.
(b) Adjustment to reflect the use of proceeds to pay down $226,000 of
Sunrise's revolving line of credit.
(c) Adjustment to reflect the portion of the purchase price assigned to
goodwill and other intangible assets, which represents the excess of
the cost over the fair value of the net assets, acquired.
Income statement pro forma adjustments:
(d) The pro forma consolidated statement of operations of Accredo Health,
Incorporated for the year ended June 30, 1999, gives effect to the
sale of common stock in the Company's initial public offering and the
application of the net proceeds thereof to the prepayment in full of
all principal and accrued interest on the Company's outstanding Senior
Subordinated Notes, the redemption of all outstanding shares of Series
A Preferred Stock, including all accrued dividends thereon, and the
reduction of $7,000,000 in the balance of the Company's outstanding
line of credit, as if all such transactions had been completed as of
July 1, 1998.
The pro forma results included the elimination of interest expense
(including original issue discount amortization) associated with the
prepayment of the Senior Subordinated Notes and the reduction of the
line of credit with a portion of the net proceeds of the offering, and
the elimination of the related income tax benefit based on the
combined federal and state statutory rate of 37.3%.
This pro forma consolidated information should be read in conjunction
with the audited consolidated financial statements of the Company
included in its Annual Report on Form 10-K for the year ended June 30,
1999.
(e) Adjustment to reflect the increase in amortization expense relating to
the goodwill and other intangible assets recorded for the Acquisition
under the purchase method. The Company preliminarily recorded
$11,987,000 in goodwill, $500,000 in non-compete agreements, $646,000
in acquired patient population and $70,000 in acquired workforce.
These assets are being amortized using the straight-line method over
their estimated useful lives of 40 years for goodwill, 10 years for
non-compete agreements, and 5 years for acquired patient population
and workforce.
(f) Adjustment to reflect the additional interest expense related to the
debt used to finance the acquisition.
(g) Adjustment to reflect (i) the income tax expense of Sunrise as if
Sunrise was taxed as a C corporation rather than an S corporation
during the period and (ii) the income tax benefit related to the
additional amortization and interest expense as a result of the
acquisition. A combined federal and state tax rate of 38% was used for
the pro forma adjustment for the year ended June 30, 1999 and for the
three months ended September 30, 1999.
Subsequent event:
On January 31, 2000, the Company announced a three-for-two stock split in the
form of a 50% stock dividend for shareholders of record on February 11, 2000.
Shareholders will receive one additional share of common stock on February 21,
2000 for every two shares held on the record date. The Company has computed the
earnings per share for the pro forma income statements for the year ended June
30, 1999 and the three months ended September 30, 1999 on a post-split basis.
18
