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U N I T E D S T A T E S
S E C U R I T I E S A N D E X C H A N G E
C O M M I S S I O N
W A S H I N G T O N, D C 2 0 5 4 9
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 1, 1999
NOVACARE, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 1-10875 13-3247827
(State or other jurisdiction of (Commission file number) (I.R.S. Employer Identification No.)
incorporation)
1016 W. NINTH AVENUE, KING OF PRUSSIA, PA 19406
(Address of principal executive office) (Zip code)
</TABLE>
Registrant's telephone number: (610) 992-7200
(Former name, former address and former fiscal year,
if changed since last report.)
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NOVACARE, INC. AND SUBSIDIARIES
NovaCare, Inc., (the "Registrant" or the "Company") is amending its form
8-K filed July 14, 1999 to revise certain disclosures included in Item 7(b). Pro
Forma Financial Information and deletion of unaudited Pro Forma Condensed
Consolidated Statements Operations for the fiscal years ended June 30, 1997 and
1996 and for the nine months ended March 31, 1998. This amendment also includes
the elimination of the pro forma adjustments for support costs previously
assigned to the Long-term Care Services business and changes to the resultant
income tax expense.
ITEM 7(b). PRO FORMA FINANCIAL INFORMATION.
The following unaudited Pro Forma Condensed Consolidated Statements of
Operations for the fiscal year ended June 30, 1998 and the nine months ended
March 31, 1999 and unaudited Pro Forma Consolidated Balance Sheet as of March
31, 1999 are based on the historical consolidated financial statements of the
Registrant adjusted to reflect the dispositions of the Registrant's Long-term
Care Services business and Orthotic & Prosthetic business ("O&P"). The Pro Forma
Condensed Consolidated Statements of Operations have been prepared assuming the
above disposition occurred as of the beginning of the respective periods
presented and the Pro Forma Condensed Consolidated Balance Sheet has been
prepared assuming that the dispositions occurred as of March 31, 1999.
The Pro Forma Financial Information does not purport to present what
the Registrant's results of operations or financial position would have been had
the dispositions occurred as of the beginning of the respective periods or March
31, 1999, as the case may be, or to project the Registrant's results of
operations or financial position for any future period or date, nor does it give
effect to any matters other than those described in the notes thereto.
The Pro Forma Financial Information should be read in conjunction with
the Registrant's Consolidated Financial Statements.
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NOVACARE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
RESULTS FOR THE
NINE MONTHS PRO FORMA PRO FORMA PRO FORMA PRO FORMA
ENDED ADJUSTMENTS FOR AS ADJUSTMENTS FOR AS
MARCH 31, 1999 THE SALE OF LTC ADJUSTED THE SALE OF O&P ADJUSTED
---------------- --------------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C>
NET REVENUES ................................ $ 1,398,830 $317,417 (a) $ 1,081,413 $209,442 (c) $ 871,971
COST OF SERVICES ............................ 1,183,863 257,824 (a) 926,039 155,753 (c) 770,286
----------- -------- ----------- -------- -----------
GROSS PROFIT ........................... 214,967 59,593 155,374 53,689 101,685
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES ................... 158,223 34,311 (a) 123,912 8,915 (c) 114,997
PROVISION FOR UNCOLLECTIBLE
ACCOUNTS .................................. 23,439 5,105 (a) 18,334 4,177 (c) 14,157
AMORTIZATION OF EXCESS COST
OF NET ASSETS ACQUIRED .................... 18,789 1,730 (a) 17,059 5,538 (c) 11,521
PROVISION FOR RESTRUCTURE ................... 129,747 98,647 (a) 31,100 -- 31,100
----------- -------- ----------- -------- -----------
INCOME (LOSS) FROM OPERATIONS .......... (115,231) (80,200) (35,031) 35,059 (70,090)
GAIN FROM ISSUANCE OF
SUBSIDIARY STOCK .......................... 1,506 -- 1,506 -- 1,506
INVESTMENT INCOME ........................... 423 94 (a) 329 -- 329
INTEREST EXPENSE ............................ (28,373) -- (28,373) (2,209)(c) (26,164)
MINORITY INTEREST ........................... (2,355) -- (2,355) (137)(c) (2,218)
----------- -------- ----------- -------- -----------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME
TAXES ................................. (144,030) (80,106) (63,924) 32,713 (96,637)
INCOME TAXES ................................ (19,163) (6,756)(b) (12,407) 14,812 (d) (27,219)
----------- -------- ----------- -------- -----------
INCOME (LOSS) FROM CONTINUING
OPERATIONS ........................... $ (124,867) $(73,350) $ (51,517) $ 17,901 $ (69,418)
=========== ======== =========== ======== ===========
INCOME (LOSS) FROM CONTINUING
OPERATIONS PER SHARE:
BASIC .................................. $ (1.99) $ (.82) $ (1.11)
=========== =========== ===========
ASSUMING DILUTION ...................... $ (1.99) $ (.82) $ (1.11)
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING:
BASIC .................................. 62,738 62,738 62,738
=========== =========== ===========
ASSUMING DILUTION ...................... 62,738 62,738 62,738
=========== =========== ===========
</TABLE>
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NOVACARE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
RESULTS FOR THE PRO FORMA PRO FORMA PRO FORMA PRO FORMA
YEAR ENDED ADJUSTMENTS FOR AS ADJUSTMENTS FOR AS
JUNE 30, 1998 THE SALE OF LTC ADJUSTED THE SALE OF O&P ADJUSTED
--------------- ---------------- ----------- ----------------- ----------
<S> <C> <C> <C> <C> <C>
NET REVENUES............................ $1,671,925 $634,354 (a) $1,037,571 $251,732 (c) $785,839
COST OF SERVICES........................ 1,317,266 459,848 (a) 857,418 186,171 (c) 671,247
---------- -------- ---------- -------- --------
GROSS PROFIT...................... 354,659 174,506 180,153 65,561 114,592
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES............... 199,293 55,291 (a) 144,002 13,468 (c) 130,534
PROVISION FOR UNCOLLECTIBLE
ACCOUNTS.............................. 21,907 3,620 (a) 18,287 4,840 (c) 13,447
AMORTIZATION OF EXCESS COST
OF NET ASSETS ACQUIRED................ 20,269 2,304 (a) 17,965 6,437 (c) 11,528
PROVISION FOR RESTRUCTURE............... 23,500 23,500 (a) -- -- --
---------- -------- ---------- -------- --------
INCOME (LOSS) FROM OPERATIONS...... 89,690 89,791 (101) 40,816 (40,917)
GAIN FROM ISSUANCE OF
SUBSIDIARY STOCK...................... 38,805 -- 38,805 -- 38,805
INVESTMENT INCOME....................... 830 236 (a) 594 29 (c) 565
INTEREST EXPENSE........................ (28,285) -- (28,285) (2,961)(c) (25,324)
MINORITY INTEREST....................... (1,494) -- (1,494) (135)(c) (1,359)
---------- -------- ---------- -------- --------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME
TAXES............................ 99,546 90,027 9,519 37,749 (28,230)
INCOME TAXES............................ 41,631 30,309 (b) 11,322 15,067 (d) (3,745)
---------- -------- ---------- -------- --------
INCOME (LOSS) FROM CONTINUING
OPERATIONS....................... $ 57,915 $ 59,718 $ (1,803) $ 22,682 $(24,485)
========== ======== ========== ======== ========
INCOME (LOSS) FROM CONTINUING
OPERATIONS
PER SHARE:
BASIC.............................. $ .94 $ (.03) $ (.40)
========== =========== ========
ASSUMING DILUTION.................. $ .91 $ (.03) $ (.39)
========== =========== ========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING:
BASIC.............................. 61,742 61,742 61,742
========== =========== =======
ASSUMING DILUTION.................. 63,584 63,584 63,584
========== =========== =======
</TABLE>
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NOVACARE, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(a) To eliminate results of operations of the Long-term Care Services
business for the entire period. The hospital contracting business,
which is immaterial, previously classified in the Company's Long-term
Care Services segment disclosure was not transferred as part of the
sale.
(b) To reflect the adjustment to income tax expense based on Long-term Care
Services' ratio of income before income taxes plus permanent
differences to the Company's consolidated income before income taxes
plus permanent differences multiplied by the Company's income tax
expense.
(c) To eliminate results of operations of the O&P business for the entire
period.
(d) To reflect the adjustment to income tax expense based on O&P's ratio of
income before income taxes plus permanent differences to the Company's
consolidated income before income taxes plus permanent differences
multiplied by the Company's consolidated income tax expense.
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NOVACARE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA PRO FORMA PRO FORMA
AS OF ADJUSTMENTS FOR AS ADJUSTMENTS FOR AS
MARCH 31, 1999 THE SALE OF LTC ADJUSTED THE SALE OF O&P ADJUSTED
-------------- --------------- -------- --------------- --------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS ..... $ 23,804 $ -- $ 23,804 $ (1,150)(d) $ 74,977
52,323(e)
ACCOUNTS RECEIVABLE ........... 301,369 (93,877)(b) 207,492 (66,086)(d) 141,406
INVENTORIES ................... 45,135 -- 45,135 (45,135)(d) --
INCOME TAX RECEIVABLE ......... 27,869 (60)(b) 27,809 (67)(d) 16,192
(11,550)(e)
DEFERRED INCOME TAXES ......... 14,580 -- 14,580 (783)(d) 13,797
OTHER CURRENT ASSETS .......... 27,771 (4,121)(b) 23,650 (6,262)(d) 32,388
15,000 (e)
NET ASSETS OF DISCONTINUED
OPERATIONS ................. -- 82,944 (c) 82,944 -- 82,944
----------- ----------- ----------- ----------- -----------
TOTAL CURRENT ASSETS ....... 440,528 (15,114) 425,414 (63,710) 361,704
PROPERTY AND EQUIPMENT, NET ..... 64,541 (1,572)(b) 62,969 (13,869)(d) 49,100
EXCESS COST OF NET ASSETS
ACQUIRED, NET ................... 719,592 -- 719,592 (258,033)(d) 461,559
INVESTMENTS IN JOINT VENTURES ... 15,203 -- 15,203 -- 15,203
OTHER ASSETS, NET ............... 49,965 (17,720)(b) 32,245 (1,752)(d) 27,568
(2,925)(e)
----------- ----------- ----------- ----------- -----------
$ 1,289,829 $ (34,406) $ 1,255,423 $ (340,289) $ 915,134
=========== =========== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES:
CURRENT PORTION OF FINANCING
ARRANGEMENTS ............... $ 540,696 $ 30,000(a) $ 570,696 $ (13,164)(d) $ 220,532
(337,000)(e)
ACCOUNTS PAYABLE AND ACCRUED
EXPENSES ................... 160,796 (28,653)(b) 132,143 (22,373)(d) 116,045
6,275 (e)
----------- ----------- ----------- ----------- -----------
TOTAL CURRENT LIABILITIES . 701,492 1,347 702,839 (366,262) 336,577
FINANCING ARRANGEMENTS, NET OF
CURRENT PORTION .............. 55,267 -- 55,267 (27,513)(d) 27,754
DEFERRED INCOME TAXES ........... 41,684 -- 41,684 (3,478)(d) 38,206
OTHER ........................... 6,200 -- 6,200 (414)(d) 5,786
----------- ----------- ----------- ----------- -----------
TOTAL LIABILITIES ......... 804,643 1,347 805,990 (397,667) 408,323
----------- ----------- ----------- ----------- -----------
MINORITY INTEREST ............... 27,501 -- 27,501 (80)(d) 27,421
COMMITMENTS AND CONTINGENCIES ... -- -- -- -- --
SHAREHOLDERS' EQUITY:
COMMON STOCK .................. 684 -- 684 -- 684
ADDITIONAL PAID-IN CAPITAL .... 274,285 -- 274,285 -- 274,285
RETAINED EARNINGS ............. 225,388 (30,000)(a) 189,635 57,458 (e) 247,093
(5,753)(b)
----------- ----------- ----------- ----------- -----------
500,357 (35,753) 464,604 57,458 522,062
LESS: COMMON STOCK IN
TREASURY ................. (42,672) -- (42,672) -- (42,672)
----------- ----------- ----------- ----------- -----------
TOTAL SHAREHOLDERS'
EQUITY ............. 457,685 (35,753) 421,932 57,458 479,390
----------- ----------- ----------- ----------- -----------
$ 1,289,829 $ (34,406) $ 1,255,423 $ (340,289) $ 915,134
=========== =========== =========== =========== ===========
</TABLE>
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NOVACARE, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(a) Adjustment to reflect the Company's liability and related loss as a
result of the $30,000 working capital guarantee provided to the
purchaser of the Long-term Care Services business. This loss will be
reported in discontinued operations in the Company's June 30, 1999
financial statements and all prior periods will be restated to reflect
this presentation.
(b) Adjustments to reflect the elimination of the Long-term Care Services
assets and liabilities classified as Net Assets of Discontinued
Operations. As a result of the sale of the Long-term Care Services
business (the "Transaction") and the exit from Selected Long-term Care
Services Markets (the "Selected Markets Exit"), the Company classified
all of the accounts receivable, net of allowance, to which the Company
was entitled, certain other assets retained by the Company and current
liabilities assumed by the Company as a result of the Transaction and
accounts receivable, net of allowance, and liabilities attributable to
the Selected Markets Exit as Net Assets of Discontinued Operations.
Assets and liabilities transferred as a result of the Transaction have
been eliminated and a loss of $5,753 recorded. The aggregate loss of
$35,753, $30,000 from the working capital guarantee and $5,753 from the
assets and liabilities transferred, will be reported as discontinued
operations in the Company's fiscal year 1999 financial statements.
The hospital contracting business, which is immaterial, previously
classified in the Company's Long-Term Care Services segment disclosure
was not transferred as part of the sale.
(c) Net Assets of Discontinued Operations consist of the following:
<TABLE>
<CAPTION>
Selected Markets
Exit Transaction Total
---------------- ----------- --------
<S> <C> <C> <C>
Accounts receivable, net of
allowances ....................... $ 41,907 $ 51,970 $ 93,877
Other receivables, net of allowances 17,258 462 17,720
Accounts payable and accrued
liabilities ...................... (17,027) (11,626) (28,653)
-------- -------- --------
Net Assets of Discontinued
Operations .................... $ 42,138 $ 40,806 $ 82,944
======== ======== ========
</TABLE>
(d) Adjustments to reflect the elimination of the O&P assets and
liabilities that were transferred to the purchaser as a result of the
sale of O&P.
(e) Adjustments reflect: (i) the estimated gain of $57,458, net of
estimated taxes of $11,550 and estimated transaction costs of $9,200
and (ii) estimated net proceeds from the sale of O&P of $404,323, of
which $337,000 have been applied to Company's outstanding line of
credit, $15,000 are assumed to be held in escrow and $52,323 have been
included in cash and cash equivalents.
The gain on the sale of O&P will be recognized as income from
continuing operations in the Company's fiscal year 2000 financial
statements.
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NOVACARE, INC. AND SUBSIDIARIES
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.
NOVACARE, INC.
(Registrant)
August 13 , 1999 By/s/ Robert E. Healy, Jr.
---------------------------------
Robert E. Healy, Jr.,
Senior Vice President,
Finance & Administration and
Chief Financial Officer
August 13 , 1999 By/s/ Barry E. Smith
-----------------------------------
Barry E. Smith,
Vice President,
Controller and
Chief Accounting Officer
8
