<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
COMMISSION FILE NUMBER 1-10875
NAHC, INC. (FORMERLY NOVACARE, INC.).
(Exact name of registrant as specified in its charter)
DELAWARE 13-3247827
(State of incorporation) (I.R.S. Employer Identification No.)
1018 W. NINTH AVENUE, KING OF PRUSSIA, PA 19406
(Address of principal executive office) (Zip code)
Registrant's telephone number: (610) 992-7450
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
As of April 30, 2000, NAHC, Inc. had 63,343,263 shares of common stock, $.01 par
value, outstanding.
<PAGE> 2
NAHC, INC. AND SUBSIDIARIES
FORM 10-Q - QUARTER ENDED MARCH 31, 2000
INDEX
<TABLE>
<CAPTION>
PART NO. ITEM NO. DESCRIPTION PAGE NO.
- -------- -------- ----------- --------
<S> <C> <C> <C>
I FINANCIAL INFORMATION
1 Financial Statements
- Condensed Consolidated Balance Sheets as of
March 31, 2000 and June 30, 1999 1
- Condensed Consolidated Statements of Operations for
the Three Months Ended March 31, 2000 and 1999 2
- Condensed Consolidated Statements of Operations for
the Nine Months Ended March 31, 2000 and 1999 3
- Condensed Consolidated Statements of Cash Flows for
the Nine Months Ended March 31, 2000 and 1999 4
- Notes to Condensed Consolidated Financial Statements 5-12
2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 13-17
II OTHER INFORMATION
6 Exhibits and Reports on Form 8-K 18
Signatures 19
</TABLE>
i
<PAGE> 3
NAHC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2000 AND JUNE 30, 1999
(In thousands, except per share data)
(Unaudited)
(See Note 1)
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................................... $ 9,901 $ 17,110
Income taxes receivable ..................................................... -- 25,255
Deferred income taxes ....................................................... 6,150 37,422
Net assets of discontinued operations - current portion ..................... 13,380 877,548
Restricted cash - current portion ........................................... 3,300 --
Other current assets, principally miscellaneous receivables ................. 4,754 4,803
--------- ---------
Total current assets .................................................... 37,485 962,138
Property and equipment, net .................................................... -- 3,372
Deferred income taxes .......................................................... -- 1,669
Net assets of discontinued operations - non-current portion .................... 10,463 22,200
Restricted cash - non-current portion .......................................... 14,646 --
Escrow receivable, net ......................................................... 13,800 --
Other assets, net .............................................................. -- 5,216
--------- ---------
$ 76,394 $ 994,595
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of financing arrangements ................................... $ -- $ 522,543
Accounts payable and accrued expenses ....................................... 20,843 39,366
--------- ---------
Total current liabilities ............................................... 20,843 561,909
Financing arrangements, net of current portion ................................. -- 336
Deferred income taxes .......................................................... 6,150 39,091
Other liabilities .............................................................. 8,365 --
--------- ---------
Total liabilities ....................................................... 35,358 601,336
Commitments and contingencies .................................................. -- --
Shareholders' equity:
Common stock, $.01 par value; authorized 200,000 shares; issued 68,693 shares
at March 31, 2000 and issued 68,561 shares at
June 30, 1999 ............................................................. 687 686
Additional paid-in capital .................................................. 274,646 274,603
(Accumulated deficit) retained earnings ..................................... (191,623) 160,644
--------- ---------
83,710 435,933
Less: Common stock in treasury (at cost), 5,308 shares at March 31, 2000
and at June 30, 1999 ...................................................... (42,674) (42,674)
--------- ---------
Total shareholders' equity .............................................. 41,036 393,259
--------- ---------
$ 76,394 $ 994,595
========= =========
</TABLE>
The accompanying Notes to Condensed Consolidated Financial
Statements are an integral part of these statements.
1
<PAGE> 4
NAHC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
(See Note 1)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
------------------------------
2000 1999
-------- ---------
<S> <C> <C>
Net revenues ................................................................. $ -- $ --
Cost of services ............................................................. -- --
-------- ---------
Gross profit ............................................................. -- --
Selling, general and administrative expenses ................................. 1,811 21,584
-------- ---------
(Loss) from operations ..................................................... (1,811) (21,584)
Investment and other income, net ............................................. 993 54
Interest expense ............................................................. (219) (7,298)
-------- ---------
(Loss) before income taxes ................................................. (1,037) (28,828)
Income taxes ................................................................. -- 10,090
-------- ---------
(Loss) from continuing operations .......................................... (1,037) (18,738)
(Loss) from discontinued operations, net of tax .............................. -- (93,304)
(Loss) on disposal of discontinued operations, net of tax .................... (15,556) --
-------- ---------
Net (loss) ................................................................. $(16,593) $(112,042)
======== =========
(Loss) per share from continuing operations - basic and assuming
dilution ............................................................... $ (0.02) $ (0.30)
======== =========
(Loss) per share - basic and assuming dilution ............................. $ (0.26) $ (1.78)
======== =========
Weighted average number of shares outstanding - basic and assuming dilution
63,343 62,930
======== =========
</TABLE>
The accompanying Notes to Condensed Consolidated Financial
Statements are an integral part of these statements.
2
<PAGE> 5
NAHC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
(See Note 1)
<TABLE>
<CAPTION>
For the Nine Months Ended
March 31,
-------------------------
2000 1999
--------- ---------
<S> <C> <C>
Net revenues ................................................................. $ -- $ --
Cost of services ............................................................. -- --
--------- ---------
Gross profit ............................................................... -- --
Selling, general and administrative expenses ................................. 24,212 63,743
(Credit) provision for restructure ........................................... (1,987) --
--------- ---------
(Loss) from operations ..................................................... (22,225) (63,743)
Investment and other income, net ............................................. 3,505 209
Gain on sale of property and equipment ....................................... 1,528 --
Interest expense ............................................................. (6,876) (21,203)
--------- ---------
(Loss) before income taxes ................................................. (24,068) (84,737)
Income taxes ................................................................. -- 29,658
--------- ---------
(Loss) from continuing operations before extraordinary item ................ (24,068) (55,079)
Income (loss) from discontinued operations, net of tax ....................... 11,902 (69,788)
(Loss) on disposal of discontinued operations, net of tax .................... (340,699) --
Extraordinary item - gain on repurchase of financing arrangements ............ 598 --
--------- ---------
Net (loss) ................................................................. $(352,267) $(124,867)
========= =========
(Loss) per share from continuing operations before extraordinary item -
basic and assuming dilution ............................................ $ (0.38) $ (0.88)
========= =========
(Loss) per share from continuing operations - basic and assuming dilution.. $ (0.37) $ (0.88)
========= =========
(Loss) per share- basic and assuming dilution .............................. $ (5.56) $ (1.99)
========= =========
Weighted average number of shares outstanding - basic and assuming
dilution ................................................................ 63,320 62,738
========= =========
</TABLE>
The accompanying Notes to Condensed Consolidated Financial
Statements are an integral part of these statements.
3
<PAGE> 6
NAHC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except per share data)
(Unaudited)
(See Note 1)
<TABLE>
<CAPTION>
For the Nine Months Ended
March 31,
------------------------------
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) ............................................................. $(352,267) $(124,867)
Adjustments to reconcile net (loss) to net cash flows
from operating activities of continuing operations:
(Income) loss from discontinued operations, net of tax .................. (11,902) 69,788
Loss on disposal of discontinued operations, net of tax ................ 340,699 --
Extraordinary item - gain on repurchase of financing arrangements ...... (598) --
(Credit) provision for restructure ...................................... (1,987) --
(Gain) on sale of property and equipment ................................ (1,528) --
Depreciation and amortization ......................................... 1,336 6,232
Deferred income taxes ................................................. -- 617
Changes in assets and liabilities, net of effects from acquisitions and
dispositions:
Other current assets, principally miscellaneous receivables ............ 2,125 (531)
Accounts payable and accrued expenses .................................. (21,571) (1,236)
Current income taxes ................................................... 26,962 (28,850)
Escrow receivable, net ................................................. (13,800) --
Other, net ............................................................. (4,375) (3,076)
--------- ---------
Net cash flows (used in) continuing operations ......................... (36,906) (81,923)
Net cash flows provided by discontinued operations ..................... 14,430 67,765
--------- ---------
Net cash flows (used in) operating activities ......................... (22,476) (14,158)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Continuing operations - proceeds from sale of property and equipment ... 4,934 --
Discontinued operations:
Net proceeds from sales of businesses ................................. 564,811 --
Deposits of restricted cash ........................................... (17,946) --
Payments for businesses acquired, net of cash acquired ................ (5,007) (56,434)
Additions to property and equipment ..................................... (5,249) (28,767)
Other, net ............................................................ -- 857
--------- ---------
Net cash flows provided by (used in) investing activities .............. 541,543 (84,344)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt and credit arrangements - continuing operations ...... -- 342,777
Payment of debt and credit arrangements - continuing operations ......... (522,281) (232,622)
Proceeds from debt and credit arrangements - discontinued operations .... 1,654 8,503
Payment of debt and credit arrangements - discontinued operations ....... (5,693) (30,798)
Proceeds from common stock issued ....................................... 44 1,686
--------- ---------
Net cash flows (used in) provided by financing activities ............. (526,276) 89,546
--------- ---------
Net (decrease) in cash and cash equivalents ............................. (7,209) (8,956)
Cash and cash equivalents, beginning of period .......................... 17,110 32,760
--------- ---------
Cash and cash equivalents, end of period ................................ $ 9,901 $ 23,804
========= =========
</TABLE>
The accompanying Notes to Condensed Consolidated Financial
Statements are an integral part of these statements.
4
<PAGE> 7
NAHC, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(In thousands, except per share data)
(Unaudited)
1. BASIS OF PRESENTATION
On July 1, 1999, NAHC, Inc., formerly NovaCare, Inc., (the "Company")
completed the sale of its Orthotic and Prosthetic ("O&P") business to Hanger
Orthopedic Group, Inc. ("Hanger").
On September 21, 1999, the stockholders of the Company approved three
proposals submitted as part of a Special Meeting of Stockholders. The first
proposal recommended the sale of the Company's Physical Rehabilitation and
Occupational Health ("PROH") division, the second proposal recommended the sale
of the Company's 64% interest in NovaCare Employee Services, Inc. ("NCES") and
the third proposal recommended the adoption of a plan to restructure the
Company. Under the third proposal, a Plan of Restructuring was adopted whereby
if, by December 31, 2000, the Company is unable to find suitable acquisition
candidates to reinvest the proceeds from the PROH and NCES sales, after the
payment of its convertible subordinated debentures (see Note 3) and other
liabilities, it will liquidate, unless the Board of Directors, in its
discretion, determines otherwise.
On October 19, 1999, the Company completed the sale of its 64% interest
in NCES to a subsidiary of Plato Holdings, Inc. ("Plato") as part of a tender
offer by Plato for all of NCES's outstanding shares at a price of $2.50 per
share.
On November 19, 1999, the Company completed the sale of the PROH
business to Select Medical Corporation ("Select") for $200,000. In conjunction
with the PROH sale, the "NovaCare" name was also sold and the Company changed
its name to NAHC, Inc. effective March 28, 2000.
The Company's former long-term care services segment was disposed in
fiscal 1999 with the shutdown of certain of its operations in the Western United
States during the third fiscal quarter and the sale of the remaining operations
on June 1, 1999. The Company's former employee services segment was disposed
through the Company's sale of its interest in NCES. The Company's former
outpatient services segment was disposed through the sales of O&P and PROH. As a
result of these transactions, the Company has disposed of all of its operating
segments. The Company's remaining activities consist of the winding up of its
affairs with respect to the disposed segments, the search for potential
acquisition candidates and the preparation for potential liquidation.
Accordingly, the accompanying condensed consolidated financial
statements reflect all the Company's assets and liabilities, results of
operations and cash flows as discontinued operations, except for its remaining
general and administrative activities which are treated as continuing
operations. Results of operations and cash flows for the three and nine months
ended March 31, 1999 have been reclassified to reflect the current period
presentation. The accompanying financial statements as of March 31, 2000 and for
the three and nine months ended March 31, 2000 and 1999 are unaudited. The
balance sheet as of June 30, 1999 is condensed from the audited balance sheet of
the Company at that date, and has been reclassified to present the assets and
liabilities of all businesses sold as "net assets of discontinued operations".
Management believes readers of these financial statements should focus their
attention on the "Liquidation Analysis and Estimates" section of management's
discussion and analysis of financial condition and results of operations as, in
the opinion of management, that presents the most relevant financial information
about the Company.
These statements have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission and should be read in
conjunction with the Company's consolidated financial statements and the notes
thereto for the year ended June 30, 1999. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. In the opinion of Company management,
the condensed consolidated financial statements for the unaudited interim
periods include all adjustments necessary for a fair statement of the results
for such interim periods.
5
<PAGE> 8
NAHC, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000
(In thousands, except per share data)
(Unaudited)
2. DISCONTINUED OPERATIONS
On July 1, 1999, the Company sold its O&P business to Hanger for
$445,000. Of the purchase price, the Company placed $15,000 in escrow in
conjunction with a guarantee of a minimum $94,000 of working capital, as defined
in the agreement of sale. The final working capital amount is expected to be
settled through binding arbitration by no later than June 30, 2000.
The gain on the sale of O&P consists of the following:
<TABLE>
<S> <C>
Cash received ................................. $ 392,695
Debt assumed by the buyer ..................... 37,305
Less: transaction costs and related liabilities (17,175)
---------
Net transaction amount ........................ 412,825
Book basis of net assets of O&P ............... (362,905)
---------
Gain on sale of O&P ........................... $ 49,920
=========
</TABLE>
The gain on the sale of O&P is included in net loss on disposal of
discontinued operations and includes estimates of reserves and certain
liabilities which may require adjustment. For income tax purposes any tax
liability resulting from this transaction will be offset by net operating losses
and the losses on the sales of NCES and PROH.
In connection with the working capital guarantee, Hanger presented the
Company in November 1999 with a calculation of working capital that indicated an
adjustment of approximately $29,000. In April 2000, Hanger revised the
calculation of working capital which indicates an adjustment of approximately
$33,000. In recognizing the gain on the sale of O&P, management has considered
the amounts presented by Hanger and has made its best estimate of the amount
which may ultimately be required to settle the guaranteed amount with Hanger.
The Company has presented to Hanger its objections to Hanger's working capital
calculation, with which Hanger does not agree. In accordance with the purchase
and sale agreement, an independent arbitrator has been engaged by both parties
to resolve the matter by binding arbitration. The Company and Hanger have each
submitted various documentation to the independent arbitrator, who is presently
reviewing the documentation. Management cannot presently determine the amount,
if any, of additional liability under the working capital guarantee which may
result from the future decisions of the arbitrator.
On October 19, 1999, the Company completed the sale of its interest in
NCES at the tender offer price of $2.50 per share. In connection with the tender
offer, the Company placed approximately $13,400 in escrow related to its
guarantee of a four-year agreement with NCES to provide employee services to
PROH (the "PROH Subscriber Agreement") of which $12,332 remains in escrow at
March 31, 2000 and is included as restricted cash in the accompanying condensed
consolidated balance sheet at March 31, 2000.
The loss on disposal of NCES consists of the following:
<TABLE>
<S> <C>
Cash received ................................. $ 48,500
Less: transaction costs and related liabilities (3,857)
--------
Net transaction amount ........................ 44,643
Book basis of net assets of NCES .............. (47,791)
--------
Loss on disposal of NCES ...................... $ (3,148)
========
</TABLE>
The loss on disposal of NCES is included in the net loss on disposal of
discontinued operations and includes estimates of certain liabilities which may
require adjustment.
6
<PAGE> 9
NAHC, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000
(In thousands, except per share data)
(Unaudited)
On November 19, 1999, the Company completed the sale of PROH. The sales
price for PROH was $200,000, of which the proceeds were reduced by the amount of
PROH debt assumed by Select. Of the remainder, $36,800 has been placed in escrow
for two years related to certain representations made by the Company, including
minimum working capital of $84,856, collectibility of $98,715 in accounts
receivable, net of reserves, as of closing and certain contingent earnout
payments and certain litigation matters. The Company's maximum liability with
respect to these representations, excluding the litigation matters, is limited
to the amount placed in escrow. At March 31, 2000, the Company has established a
reserve of $23,000, of which $16,500 was recorded in the fiscal third quarter,
against the escrow account related to the Company's estimate of amounts which it
might not ultimately receive from the escrow account. Such escrow reserve
primarily relates to the accounts receivable and contingent earnout
representations as described below. Transaction costs include a $12,800
liability related to the PROH Subscriber Agreement as well as $5,000 related to
severance costs to be paid by the Company as a result of terminations which may
be made by the purchaser within the first twelve months following closing. At
March 31, 2000, approximately $11,665 and $3,139, respectively, remains
outstanding on these liabilities. Of the PROH Subscriber Agreement liability,
$3,300 is included in current liabilities and the remainder is reflected in
other liabilities in the accompanying condensed consolidated balance sheet. The
loss on disposal of PROH consists of the following:
<TABLE>
<S> <C>
Cash received ................................. $ 123,616
Amount placed in escrow ....................... 36,800
Debt assumed by the buyer ..................... 39,584
Less: transaction costs and related liabilities (25,712)
---------
Net transaction amount ........................ 174,288
Book basis of net assets of PROH .............. (522,661)
---------
Loss on disposal of PROH before escrow reserve (348,373)
Escrow reserve ................................ (23,000)
---------
Loss on disposal of PROH ...................... $(371,373)
=========
</TABLE>
The Company's guarantee of net accounts receivable as of the closing
date of the PROH sale involves a quarterly comparison of actual cash
collections, on a cumulative basis from the closing date, to historical
collection patterns specified in the purchase and sale agreement (the "quarterly
target amounts"). These quarterly comparisons extend from the closing date to
November 2001. If cash is collected at a rate slower than the quarterly target
amounts set forth in the purchase and sale agreement, the escrow can be drawn
upon by Select, with the Company's approval, to satisfy the shortfall. If actual
collections exceed the quarterly target amounts set forth in the purchase and
sale agreement, no escrow draw by Select occurs. If cumulative cash collections
indicate that excess escrow has been drawn, Select must return the excess to
escrow. The Company retains audit privileges with regard to actual cash
collection data to be used in the quarterly calculation, as well as Select's
cash collection practices with regard to closing date accounts receivable.
Actual cash collections for the period from the closing date through February
29, 2000 exceeded the initial quarterly target amount and as a result, no escrow
draw by Select occurred for that period. However, quarter-to-date cash
collections during the second quarterly period ending May 31, 2000 indicate that
it is probable that actual cash collections for the quarterly target amount for
that period and the target amounts for subsequent quarterly periods will not be
achieved. The Company estimated that the cash collections shortfall over all
periods will be approximately $15,000 and, correspondingly, increased its escrow
reserve in the fiscal third quarter ended March 31, 2000. It is possible that
cash collections will deteriorate further in future periods requiring the
Company to record additional reserves against the escrow receivable.
In the second quarter of fiscal 2000, the Company established an escrow
reserve of $6,500 related to the Company's estimate of amounts which may be due
under the PROH sale working capital representation. During the third quarter of
fiscal 2000, the amount due under the working capital representation was
finalized with Select and the Company released $966 from escrow resulting in a
$5,534 reduction in the escrow reserve. This escrow reserve reduction was more
than offset by a $6,800 addition to the escrow reserve pertaining to certain
contingent earnout payments which the Company estimates will be required to be
paid from escrow based on preliminary negotiations with regard to such
contingent earnout payments.
7
<PAGE> 10
NAHC, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000
(In thousands, except per share data)
(Unaudited)
The loss on disposal of PROH is included in the net loss on disposal of
discontinued operations and includes estimates of reserves and certain
liabilities which may require adjustment.
The loss on disposal of discontinued operations increased by $15,556
during the three months ended March 31, 2000 as a result of the $16,500 increase
in the PROH escrow reserve partially offset by adjustments to estimated
liabilities associated with the sale of the Company's businesses.
Included in the net assets of discontinued operations below, are
accounts receivable of the long-term care services Western operations, which
were closed in fiscal 1999, and accounts receivable related to the operations
sold in fiscal 1999 to Chance Murphy, Inc. ("Chance Murphy"). Pursuant to the
agreement, the Company provided a working capital guarantee of $30,000 and
Chance Murphy agreed to pay to the Company the amount, if any, of working
capital as of June 1, 1999 in excess of $30,000 or, as applicable, to transfer
to the Company any remaining accounts receivable relating to periods prior to
June 1, 1999 once the working capital guarantee has been satisfied. On November
11, 1999, the Company was released from the commitment under the guarantee and
the remaining accounts receivable reverted back to the Company.
In conjunction with the November 11, 1999 release, the Company and
Chance Murphy established an escrow account in support of indemnifications made
by the Company relating to cost report settlements with Medicare, Medicaid and
other third party payers for the Company's services provided prior to selling
the business to Chance Murphy. The escrow account will be funded by Chance
Murphy, up to a maximum of $3,000, from cash collections of receivables due
directly from these payers. Pursuant to the agreement, the funds will remain in
escrow until such time that the Company and Chance Murphy determine that all
indemnification obligations and any related third party claims have been
resolved. The escrow agreement expires 30 days after the end of the period of
limitations for which the filed cost reports may be subject to audit. At that
time, any funds in excess of outstanding claims will be released to the Company.
At March 31, 2000, the Company had $481 in escrow and approximately $1,790, net
of reserves, of accounts receivable due from third party payers and Chance
Murphy. In April 2000, Chance Murphy fully funded the $3,000 escrow.
In the first quarter of fiscal 2000, as a result of the overall
continued deterioration of the financial condition of providers of long-term
care services as a consequence of the Balanced Budget Act of 1997, the Company
recorded an additional loss on the disposal of its long-term care services
operating segment of $13,098. This loss relates to a provision for uncollectible
accounts for certain remaining accounts receivable. Of this amount, $4,300
relates to amounts due to the Company for its indemnification of customers for
disallowed Medicare charges, and the remainder relates to trade accounts
receivable.
In the first quarter of fiscal 2000, a lawsuit was filed against the
Company seeking payment of approximately $13,000 with respect to certain
Medicare cost report settlements related to its medical rehabilitation hospital
division, which was sold in fiscal 1995. The Company recorded an additional
provision of $3,000 for this matter and has included such amount in the loss on
the disposal of the long-term care services segment.
In connection with the sales of businesses, the purchasers have
asserted certain claims under indemnifications made by the Company in connection
with the sales. The amount of such claims in excess of amounts provided by the
Company in the accompanying financial statements totals $16,800 (excluding the
additional working capital claim ($4,000) made by Hanger in April 2000 because,
in the opinion of management, the additional claim by Hanger is without merit
and was not made in accordance with the terms of the agreement). This additional
amount has not been provided because the ultimate amount of liability, if any,
is not presently determinable.
8
<PAGE> 11
NAHC, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000
(In thousands, except per share data)
(Unaudited)
Results of operations for all of the Company's discontinued operations
(consisting of the outpatient services, employee services and long-term care
services operating segments) were as follows for the three and nine months ended
March 31, 2000 and 1999. In the three and nine months ended March 31, 2000,
there were no operations for O&P or long-term care services. The Company has not
included any results of operations for NCES after September 30, 1999 due to the
immaterial effect of such results from that date to October 19, 1999, the date
of sale. The Company has not included any results of operations for PROH after
November 19, 1999, the date of sale of PROH.
<TABLE>
<CAPTION>
Three Months Ended March 31, Nine Months Ended March 31,
2000 1999 2000 1999
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Net revenues .............. $ -- $ 437,307 $ 408,475 $ 1,398,830
Income (loss) before
income taxes ............ -- (109,859) 5,507 (59,293)
Income tax benefit
(provision) ............. -- 16,555 6,395 (10,495)
----------- ----------- ----------- -----------
Net income (loss) ......... $ -- $ (93,304) $ 11,902 $ (69,788)
=========== =========== =========== ===========
</TABLE>
The income tax benefit for the nine months ended March 31, 2000 results
from a reversal of accrued income tax liabilities in conjunction with the sales
of the Company's operating businesses, net of state income taxes provided.
Net assets of discontinued operations consist of the following:
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
--------- ---------
<S> <C> <C>
Cash and cash equivalents .................................. $ -- $ 6,167
Accounts receivable, net ................................... 17,326 249,769
Inventories ................................................ -- 44,651
Property and equipment, net ................................ -- 56,530
Excess cost of net assets acquired, net .................... -- 729,947
Investment in joint ventures ............................... -- 15,120
Medicare indemnification receivables, net .................. 11,051 21,906
Other assets ............................................... 5,413 22,037
Accounts payable and accrued expenses ...................... (9,947) (101,445)
Working capital guarantee, long-term care services ......... -- (28,800)
Financing arrangements ..................................... -- (82,678)
Minority interests ......................................... -- (28,425)
Other liabilities .......................................... -- (5,031)
-------- ---------
Net assets of discontinued operations ...................... 23,843 899,748
Less: current portion ...................................... (13,380) (877,548)
-------- ---------
Net assets of discontinued operations --
non-current portion ...................................... $ 10,463 $ 22,200
======== =========
</TABLE>
Approximately, $2,095 of the long-term care services accounts
receivable, net of reserves, have been converted into notes receivable and are
included in other assets above. These notes are expected to be repaid over the
next two years.
9
<PAGE> 12
NAHC, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000
(In thousands, except per share data)
(Unaudited)
Net assets of discontinued operations by operating segment consists of
the following:
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
-------- --------
<S> <C> <C>
Long-term care services ......................................... $ 23,843 $ 42,088
Employee services ............................................... -- 47,904
Outpatient services ............................................. -- 809,756
-------- --------
$ 23,843 $899,748
======== ========
</TABLE>
3. FINANCING ARRANGEMENTS
Financing arrangements consisted of the following:
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
-------- --------
<S> <C> <C>
Revolving credit facility ....................................... $ -- $347,000
Convertible subordinated debentures (5.5%), due January 2000 .... -- 175,000
Other ........................................................... -- 879
-------- --------
-- 522,879
Less: current portion .......................................... -- 522,543
-------- --------
$ -- $ 336
======== ========
</TABLE>
The Company has a revolving credit facility with a syndicate of
lenders. The facility is collateralized by substantially all the common stock of
the Company's subsidiaries. Amounts outstanding under the facility at June 30,
1999 were entirely repaid on July 1, 1999 from the proceeds of the sale of O&P.
At March 31, 2000, the amount available is approximately $13,000, which amount
exists solely to collaterize standby letters of credit issued in support of
certain guarantees provided by the Company in conjunction with the sales of its
operating businesses.
During the second quarter of fiscal 2000, the Company repurchased
$90,252 par value, plus accrued interest, of the convertible subordinated
debentures through a series of transactions on the open market. The Company
recorded an extraordinary gain of $598 associated with these repurchases. The
Company repaid the remaining outstanding convertible subordinated debentures in
their entirety, including accrued interest, on January 18, 2000.
4. PROVISION FOR RESTRUCTURE
In the fourth quarter of fiscal 1999, the Company recorded a provision
for restructure of $12,260 related to a program to reduce its selling, general
and administrative costs incurred at its corporate headquarters. The program
involved the termination of 74 employees of which 65 employees have been
terminated as of March 31, 2000. This provision consisted of the following:
<TABLE>
<S> <C>
Employee severance and related costs ......................................... $ 3,060
Lease and technology agreement mitigation .................................... 8,515
Write-down of property and equipment ......................................... 685
-------
Total ........................................................................ $12,260
=======
</TABLE>
In the first quarter of fiscal 2000, the Company reversed $1,987 of
this provision based on the current costs expected to complete this program. The
reversal is the net amount of additional severance and related costs of $2,400
and reduction of lease and technology agreement mitigation of $4,387.
10
<PAGE> 13
NAHC, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000
(In thousands, except per share data)
(Unaudited)
Activity in the accrued liability for this provision consisted of the
following:
<TABLE>
<S> <C>
Provision for restructure ......................... $ 12,260
Less: non cash write-down of property and equipment (685)
Reversal of provision ............................. (1,987)
Payments and other reductions ..................... (7,875)
--------
Balance, March 31, 2000 ........................... $ 1,713
========
</TABLE>
The Company expects that all of these remaining costs will be expended by June
30, 2000.
5. NET (LOSS) INCOME PER SHARE
The following table sets forth the computation and
reconciliation of net (loss) income per share-basic and net (loss) income per
share-assuming dilution:
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
March 31, March 31,
------------------------- --------------------------
2000 1999 2000 1999
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
(Loss) from continuing operations
before extraordinary item ............... $ (1,037) $ (18,738) $ (24,068) $ (55,079)
Income (loss) from discontinued
operations, net of tax .................. -- (93,304) 11,902 (69,788)
(Loss) on disposal of discontinued
operations, net of tax .................. (15,556) -- (340,699) --
Extraordinary item ........................ -- -- 598 --
-------- --------- --------- ---------
Net (loss) ................................ $(16,593) $(112,042) $(352,267) $(124,867)
======== ========= ========= =========
Weighted average shares outstanding:
Weighted average shares
outstanding - basic and assuming
dilution .............................. 63,343 62,930 63,320 62,738
======== ========= ========= =========
(Loss) per share from continuing
operations before extraordinary item -
basic and assuming dilution ............ $ (0.02) $ (0.30) $ (0.38) $ (0.88)
(Loss) income per share from
discontinued operations - basic and
assuming dilution ..................... -- (1.48) 0.19 (1.11)
(Loss) per share on disposal of
discontinued operations, net of tax -
basic and assuming dilution ........... (0.24) -- (5.38) --
Extraordinary item per share - basic and
assuming dilution ..................... -- -- 0.01 --
-------- --------- --------- ---------
Net (loss) per share - basic and assuming
dilution .............................. $ (0.26) $ (1.78) $ (5.56) $ (1.99)
======== ========= ========= =========
</TABLE>
11
<PAGE> 14
NAHC, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000
(In thousands, except per share data)
(Unaudited)
The Company did not include the common stock equivalents of the
$175,000 convertible subordinated debentures or stock options because their
effects are antidilutive in all periods. There were no transactions subsequent
to March 31, 2000 that would have materially changed the number of shares used
in computing (loss) from continuing operations per share - basic and assuming
dilution.
6. COMMITMENTS AND CONTINGENCIES
The Company is subject to legal proceedings and claims which arise in
the ordinary course of its business. Also, in conjunction with the sales of its
businesses, the Company has indemnified the purchasers for certain obligations.
In the opinion of management, the amount of ultimate liability, if any, with
respect to these actions and indemnifications will not have a materially adverse
effect on the financial position or results of operations of the Company.
12
<PAGE> 15
NAHC, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
On July 1, 1999, NAHC, Inc., formerly NovaCare, Inc., (the "Company")
completed the sale of its orthotic and prosthetic ("O&P") business to Hanger
Orthopedic Group, Inc. ("Hanger").
On September 21, 1999, the stockholders of the Company approved three
proposals submitted as part of a Special Meeting of Stockholders. The first
proposal recommended the sale of the Company's Physical Rehabilitation and
Occupational Health ("PROH") division, the second proposal recommended the sale
of the Company's 64% interest in NovaCare Employee Services, Inc. ("NCES") and
the third proposal recommended the adoption of a plan to restructure the
Company. Under the third proposal, a Plan of Restructuring was adopted whereby
if, by December 31, 2000, the Company is unable to find suitable acquisition
candidates to reinvest the proceeds from the PROH and NCES sales, after the
payment of its convertible subordinated debentures and other liabilities, it
will liquidate, unless the Board of Directors, in its discretion, determines
otherwise.
On October 19, 1999, the Company completed the sale of its 64% interest
in NCES to a subsidiary of Plato Holdings, Inc. ("Plato") as part of a tender
offer by Plato for all of NCES's outstanding shares at a price of $2.50 per
share.
On November 19, 1999, the Company completed the sale of the PROH
business to Select Medical Corporation ("Select") for $200.0 million. In
conjunction with the PROH sale, the "NovaCare" name was also sold and the
Company changed its name to NAHC, Inc. effective March 28, 2000.
The Company's former long-term care services segment was disposed in
fiscal 1999 with the shutdown of certain of its operations in the Western United
States during the third fiscal quarter and the sale of the remaining operations
on June 1, 1999. The Company's former employee services segment was disposed
through the Company's sale of its interest in NCES. The Company's former
outpatient services segment was disposed through the sales of O&P and PROH. As a
result of these transactions, the Company has disposed of all of its operating
segments. The Company's remaining activities consist of the winding up of its
affairs with respect to the disposed segments, the search for potential
acquisition candidates and the preparation for potential liquidation.
Accordingly, the Company has reflected substantially all of its assets
and liabilities, results of operations and cash flows, for the current and all
prior periods as discontinued operations except for its remaining general and
administrative activities which are treated as continuing operations.
On January 18, 2000, the Company fully satisfied its obligations to
subordinated debenture holders by paying the outstanding principal amount of
$84.7 million together with accrued interest. Prior to December 31, 1999, the
Company had repurchased $90.3 million of subordinated debentures, plus accrued
interest and recognized a gain of $0.6 million during the quarter ended December
31, 1999. Accordingly, all convertible subordinated debentures have been repaid.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 VS. MARCH 31,
1999
Continuing Operations
The loss before income taxes from continuing operations was $1.0
million for the three months ended March 31, 2000 compared to $28.8 million for
the same period last year, which reflects the wind-down of the Company's
administrative functions as a result of the sale of its businesses. The primary
reason for the decrease in the loss was a decrease in selling, general and
administrative costs of approximately $19.8 million, principally as a result of
the reduction of the Company's employee base. Also, interest expense decreased
by approximately $7.1 million and investment income increased $0.9 million as a
result of the payment of the Company's line of credit and convertible debentures
and the investment of excess cash generated by the sale of the Company's
operating businesses, respectively.
13
<PAGE> 16
NAHC, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(CONTINUED)
There is no provision for or benefit from income taxes for the three
months ended March 31, 2000 as the Company could not utilize, for income tax
purposes, the loss incurred in the period. The Company will not recognize an
income statement benefit for any previously incurred or future operating losses
or future tax deductions until such time as management believes it is more
likely than not that the Company's future operations will generate sufficient
taxable income to be able to realize such benefits. Accordingly, the Company has
provided a full valuation allowance against the entire net deferred tax asset at
March 31, 2000. For the same period last year, the Company recognized a tax
benefit of $10.1 million for the carryback of net operating losses to prior
periods.
Discontinued Operations
There was no loss from discontinued operations for the three months
ended March 31, 2000 because all the Company's businesses were sold prior to
December 31, 1999. The loss from discontinued operations, net of tax, for the
three months ended March 31, 1999 was $93.3 million due primarily to a
provision, net of tax, for restructure recorded in the third fiscal quarter in
1999 relating to the Company's long-term care services ("LTCS") segment. During
the three months ended March 31, 2000, the Company recorded an additional loss
on disposal of discontinued operations of $15.6 million primarily as a result of
the Company's estimate of the amount which may be due under the accounts
receivable representation in the PROH sale.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED MARCH 31, 2000 VS. MARCH 31,
1999
Continuing Operations
The loss before income taxes from continuing operations was $24.1 million
for the nine months ended March 31, 2000 compared to $84.7 million for the same
period last year, which reflects the wind-down of the Company's administrative
functions as a result of the sale of its businesses. The primary reason for the
decrease in the loss was a decrease in selling, general and administrative costs
of approximately $39.5 million, the reversal of a provision for restructure of
$2.0 million during the current fiscal year, a decrease in interest expense of
approximately $14.3 million as a result of the payment of the Company's line of
credit and convertible debentures, and an increase in investment income of $3.3
million earned by investing the excess cash generated by the sale of the
Company's operating businesses.
There is no provision for or benefit from income taxes for the nine
months ended March 31, 2000 as the Company could not utilize, for income tax
purposes, the loss incurred in the period. The Company has a net operating loss
carryforward in the range of $105 million to $135 million as of March 31, 2000.
The Company will not recognize an income statement benefit for any previously
incurred or future operating losses or future tax deductions until such time as
management believes it is more likely than not that the Company's future
operations will generate sufficient taxable income to be able to realize such
benefits. Accordingly, the Company has provided a full valuation allowance
against the entire net deferred tax asset at March 31, 2000. For the same period
last year, the Company recognized a tax benefit of $29.7 million for the
carryback of net operating losses to prior periods.
Discontinued Operations
Income from discontinued operations, net of tax, for the nine months
ended March 31, 2000 of $11.9 million increased by approximately $81.7 million
compared to a loss from discontinued operations, net of tax, for the nine months
ended March 31, 1999 of $69.8 million. This increase is due principally to a
$93.2 million provision, net of tax, for restructure recorded in the third
fiscal quarter in 1999 relating to the Company's LTCS segment and a $17.8
million, net of tax, provision for restructure recorded in the second fiscal
quarter of 1999 relating to the Company's outpatient services segment.
Loss on disposal of discontinued operations, net of tax, reflects a
loss on the sale of PROH and NCES ($374.5 million) and adjustments related to
changes in estimates of long-term care services discontinued operations stemming
from deteriorating industry conditions ($16.1 million), offset partially by the
gain on the sale of O&P ($49.9 million).
14
<PAGE> 17
NAHC, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
At March 31, 2000, cash and cash equivalents totaled $9.9 million compared
to $17.1 million at June 30, 1999. The net decrease in cash and cash equivalents
from June 30, 1999 of $7.2 million resulted principally from proceeds from the
sale of the Company's operating businesses ($546.9 million, net of restricted
cash deposits) which was used to retire the outstanding balance on the Company's
line of credit ($347.0 million) and convertible subordinated debentures ($174.4
million), fund capital expenditures and earnouts prior to the sale dates ($10.3
million) and fund operations ($22.5 million).
Liquidation Analysis and Estimates
Management has estimated the following potential realizable values or
range of values for its assets, estimated liabilities and costs of liquidation.
The maximum, or high end of the estimated realizable values of the assets and
liabilities of the Company, as reflected in the Company's March 31, 2000
condensed consolidated balance sheet, is based on the assumption that these
values are fully realizable. The minimum, or low end of the estimated realizable
values is estimated on the same basis as the maximum or high end, except that
the estimated realizable values for the sale of the Company's operating
businesses have been reduced by the amount of escrowed funds or estimated
potential maximum liability, if such amount could be determined, in accordance
with the respective purchase and sale agreements.
The estimated operating costs during liquidation for the period from
March 31, 2000 through December 31, 2000, the assumed liquidation date, have
been based on the Company's internal estimates. It is possible that the actual
liquidation date, if any, could be later if the Board of Directors, in its
discretion, deems it appropriate.
EXCEPT FOR THE HISTORICAL TRANSACTIONS, SOME OF WHICH ARE BASED ON
PRELIMINARY INFORMATION, THERE CAN BE NO ASSURANCE THAT THE COMPANY WILL REALIZE
THE VALUE OF THE ASSETS BELOW, OR LIQUIDATE THE AMOUNTS OF ANY OF THE
LIABILITIES BELOW, FOR OR WITHIN THE INDICATED VALUES OR RANGES (OR AT ALL).
15
<PAGE> 18
NAHC, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(CONTINUED)
<TABLE>
<CAPTION>
($ in millions, except per
share amounts)
(i) ESTIMATED REALIZABLE VALUES OF ASSETS OF THE COMPANY
Minimum Maximum
------- -------
<S> <C> <C>
Cash and cash equivalents at March 31, 2000 ............... $ 9.9 $ 9.9
Restricted cash, net of liability to NCES for guarantee of
PROH contract ........................................... 6.3 6.3
LTCS net assets ........................................... 23.4 23.4
Other current assets, including escrow from sale of PROH .. 4.9 18.7
------ ------
Total estimated assets .................................... 44.5 58.3
------ ------
(ii) ESTIMATED LIABILITIES OF THE COMPANY
Accounts payable and accrued expenses ..................... (32.4) (15.6)
Severance and facility exit costs ......................... (1.7) (1.7)
------ ------
Total estimated liabilities ............................... (34.1) (17.3)
------ ------
(iv) ESTIMATED OPERATING COSTS DURING LIQUIDATION
Investment income during liquidation ...................... -- 0.4
Payroll and benefits for liquidation personnel ............ (2.7) (2.2)
Legal, audit and other professional costs ................. (2.5) (2.0)
Other costs ............................................... (1.5) (0.5)
------ ------
Total estimated operating costs ........................... (6.7) (4.3)
------ ------
ESTIMATED NET PROCEEDS AVAILABLE FOR DISTRIBUTION TO STOCKHOLDERS $ 3.7 $ 36.7
====== ======
ESTIMATED NET PROCEEDS AVAILABLE FOR DISTRIBUTION
PER OUTSTANDING COMMON SHARE .............................. $ 0.06 $ 0.58
====== ======
</TABLE>
In connection with its proxy statement dated August 13, 1999, the
Company estimated that funds available for distribution to stockholders could
range from $111.0 million to $263.6 million ($1.76 - $3.94 per share). As a
result of industry and financial market conditions, both the sales of PROH and
NCES, the largest factors in the proxy statement liquidation analysis, were at
the minimum anticipated values for those transactions. Further, a number of
events, which were not known or anticipated at the time of the proxy statement
estimates or the Company's shareholder meeting on September 21, 1999, resulted
in an additional reduction of the $111.0 million (the minimum estimated
realizable value in the proxy statement) to $36.7 million, the revised maximum
estimated realizable value set forth above. These include: (i) an $18.0 million
reduction in proceeds from the sale of the O&P business arising from the buyer's
assertion of claims under the working capital guarantee, (ii) a $13.1 million
decline in the anticipated collections of long-term care receivables stemming
from deteriorating industry conditions, (iii) a $12.8 million obligation
guaranteed by the Company for NCES services to the PROH business, which was not
assumed by the purchaser of PROH, and (iv) a $23.0 million reduction in proceeds
from the sale of the PROH business arising from actual and anticipated claims
under the accounts receivable, contingent earnout and working capital
representations made by the Company. Possible contingencies could further reduce
the realizable value available for distribution to stockholders to $3.7 million,
the revised minimum realizable value. These possible contingencies include
primarily the potential for additional claims resulting in the loss of the
entire amount of the remaining $13.8 million escrow, after reduction for the
$23.0 million described above, associated with the sale of PROH and $16.8
million in claims asserted in connection with certain other divestitures. These
possible contingencies exclude the additional working capital claim ($4.0
million) made by Hanger in April 2000, because in the opinion of management,
the additional claim by Hanger is without merit and was not made in accordance
with the terms of the O&P sale agreement.
16
<PAGE> 19
NAHC, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(CONTINUED)
The following table sets forth a reconciliation of the low end of the
range of the estimates set forth above under "Liquidation Analysis and
Estimates" with the Company's stockholders' equity, as set forth in its
unaudited Consolidated Balance Sheet as of March 31, 2000:
<TABLE>
<CAPTION>
($ in millions)
---------------
<S> <C>
Total stockholders' equity as of March 31, 2000 ..................... $41.0
Additional maximum amounts due in connection with sales of businesses (30.6)
Estimated operating costs during liquidation ........................ (6.7)
-----
ESTIMATED NET PROCEEDS AVAILABLE FOR DISTRIBUTION
TO STOCKHOLDERS ................................................... $ 3.7
=====
</TABLE>
THE METHODS USED BY MANAGEMENT IN ESTIMATING THE VALUES AND VALUE
RANGES OF THE COMPANY'S ASSETS ARE INEXACT AND MAY NOT APPROXIMATE VALUES
ACTUALLY REALIZED. THESE ESTIMATES ARE SUBJECT TO NUMEROUS UNCERTAINTIES BEYOND
THE COMPANY'S CONTROL AND ALSO DO NOT REFLECT ALL CONTINGENT LIABILITIES THAT
MAY MATERIALIZE. FOR ALL THESE REASONS, THERE CAN BE NO ASSURANCE THAT THE
ACTUAL NET PROCEEDS DISTRIBUTABLE TO STOCKHOLDERS IN LIQUIDATION WILL NOT BE
LESS THAN THE ESTIMATED AMOUNTS SHOWN. MOREOVER, NO ASSURANCE CAN BE GIVEN THAT
ANY AMOUNTS TO BE RECEIVED BY THE COMPANY'S STOCKHOLDERS IN LIQUIDATION WILL
EQUAL OR EXCEED THE PRICE OR PRICES AT WHICH THE COMMON STOCK HAS RECENTLY
TRADED OR MAY TRADE IN THE FUTURE.
YEAR 2000 READINESS
The Company had no significant issues to date with respect to Year 2000 and
does not expect any significant further expenditures with respect to this
matter. However, there can be no assurance that the Company will not experience
ongoing issues with respect to Year 2000 matters.
CAUTIONARY STATEMENT
Except for historical information, matters discussed above including,
but not limited to, statements concerning future operations and estimates of
values to be received in liquidation, are forward-looking statements that are
based on management's estimates, assumptions and projections. Important factors
that could cause results to differ materially from those expected by management
include potential claims related to businesses sold, the ability of the Company
to realize its remaining assets in cash, the cost to wind up the Company's
affairs in preparation for a potential liquidation, the ability of the Company
to identify potential acquisition targets and to successfully complete such
potential acquisitions and the Company's ability to retain management and
professional employees during its wind down period.
17
<PAGE> 20
NAHC, INC. AND SUBSIDIARIES
PART II -- OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibit
Number Exhibit Description Page Number
------ ------------------- -----------
27 Financial Data Schedule
(B) Reports on Form 8-K
There were no reports on Form 8-K during the three months ended March
31, 2000.
18
<PAGE> 21
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 thereunto duly authorized.
NAHC, INC.
--------------------
(Registrant)
May 15, 2000 BY /s/ Robert E. Healy, Jr.
-------------------------
Robert E. Healy, Jr.,
President and
Chief Financial Officer
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2000 AND THE CONDENSED
STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED MARCH 31, 2000 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) STATEMENT IN FORM 10-Q FOR
THE QUARTERLY PERIOD ENDED MARCH 31, 2000.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 9,901
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 37,485
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 76,394
<CURRENT-LIABILITIES> 20,843
<BONDS> 0
0
0
<COMMON> 687
<OTHER-SE> 40,349
<TOTAL-LIABILITY-AND-EQUITY> 76,394
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 24,212<F1>
<OTHER-EXPENSES> (7,020)<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,876
<INCOME-PRETAX> (24,068)
<INCOME-TAX> 0
<INCOME-CONTINUING> (24,068)
<DISCONTINUED> (328,797)
<EXTRAORDINARY> 598
<CHANGES> 0
<NET-INCOME> (352,267)
<EPS-BASIC> (5.56)<F3>
<EPS-DILUTED> (5.56)<F3>
<FN>
<F1>"TOTAL COSTS" CONSIST OF SELLING AND ADMINISTRATIVE EXPENSE.
<F2>"OTHER EXPENSES" CONSIST OF CREDIT FOR RESTRUCTURE, INVESTMENT AND OTHER
INCOME AND GAIN ON SALE OF PROPERTY AND EQUIPMENT.
<F3>"EPS" IS CALCULATED USING NET INCOME. EPS FROM CONTINUING OPERATIONS ONLY IS
($0.38).
</FN>
</TABLE>
