<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 25, 1999
Healthcare Recoveries, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
----------------------------------------------
(State or other jurisdiction of incorporation)
0-22585
------------------------
(Commission File Number)
61-1141758
------------------------------------
(IRS Employer Identification Number)
1400 Watterson Tower, Louisville, Kentucky 40218
------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (502) 454-1340
---------------
Not applicable
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
Exhibit Index Located on Page: 5
---
Total Number of Pages: 10
---
<PAGE> 2
Item 2. Acquisition
Healthcare Recoveries, Inc., a Delaware corporation ("HRI"), acquired
the assets and certain of the liabilities of Subro-Audit, Inc., a Wisconsin
corporation, ("SAI"), and O'Donnell Leasing Co., LLP, a Wisconsin limited
liability partnership ("ODL") in an asset acquisition (the "Asset Purchase") on
January 25, 1999. The Asset Purchase was consummated in accordance with the
terms of that certain asset purchase agreement (the "Asset Purchase Agreement"),
dated January 3, 1999 among HRI, SAI, ODL, and Kevin M. O'Donnell and Leah
Lampone, individual residents of the State of Wisconsin, as amended by the
parties on January 25, 1999. HRI paid $24,400,000 in cash at closing and may pay
up to an additional $8,500,000 over the next two years pursuant to an earn-out
arrangement. The payment at closing was derived from cash on hand. The total
consideration paid by HRI in the Asset Purchase was determined through arm's
length negotiations among representatives of the parties to the Asset Purchase
Agreement. Neither HRI, nor any of its affiliates had, nor to the knowledge of
HRI did any director or officer or any associate have, any material relationship
with SAI or ODL prior to the Asset Purchase. Through the Asset Purchase, HRI
acquired substantially all of the tangible and intangible assets of SAI and ODL,
consisting, in part, of the existing recovery engagements with customers,
associated computer hardware and software, and real property, including one
office building located in Georgia and one office building located in Wisconsin
used primarily to conduct SAI's operations. HRI currently intends to continue to
utilize the office buildings in the same manner for the foreseeable future.
SAI has provided recovery services to an installed base of
approximately 8 million lives who are covered by insurers, managed care
organizations and employer-funded plans throughout the United States of America.
The tangible and intangible assets acquired in the Asset Purchase were used
prior to the Asset Purchase to provide recovery services and HRI intends to use
such assets for substantially the same purpose.
On January 25, 1999, HRI issued a press release (the "Press Release")
announcing the consummation of the Asset Purchase. The Press Release is filed
herewith as Exhibit 99.2 and is incorporated herein by reference thereto.
2
<PAGE> 3
Item 7. Financial Statements, Pro Forma
Financial Information and Exhibits
(a) The financial statements required by this Item 7(a) are not
currently available. Such financial statements will be filed as soon as
practicable and in no event later than 60 days after the date of this Current
Report.
(b) The pro forma financial information required by this Item 7(b) is
not currently available. Such financial information will be filed as soon as
practicable and in no event later than 60 days after the date of this Current
Report.
(c) Exhibits
<TABLE>
<CAPTION>
Exhibit No.
<S> <C>
2.1 Asset Purchase Agreement by and among Healthcare Recoveries, Inc.,
Subro-Audit, Inc., O'Donnell Leasing Co., LLP, Kevin M. O'Donnell and
Leah Lampone, dated as of January 3, 1999. The Exhibits and Disclosure
Letters which are referenced in the table of contents and elsewhere in
the Asset Purchase Agreement are hereby incorporated by reference. Such
Exhibits and Disclosure Letters have been omitted for purposes of this
filing, but will be furnished supplementally to the Commission upon
request (incorporated herein by reference to Exhibit 2.1 of HRI's
Current Report on Form 8-K filed with the Securities and Exchange
Commission on January 11, 1999).
2.2 Amendment to Asset Purchase Agreement by and among Healthcare
Recoveries, Inc., Subro-Audit, Inc., O'Donnell Leasing Co., LLP, Kevin
M. O'Donnell and Leah Lampone, dated as of January 25, 1999. The
Exhibits which are referenced in the Amendment to the Asset Purchase
Agreement are hereby incorporated by reference. Such Exhibits have been
omitted for purposes of this filing, but will be furnished
supplementally to the Commission upon request.
99.1 Text of Press Release of Healthcare Recoveries, Inc., dated January 4,
1999 (incorporated herein by reference to Exhibit 99.1 of HRI's Current
Report on Form 8-K filed with the Securities and Exchange Commission on
January 11, 1999).
99.2 Text of Press Release of Healthcare Recoveries, Inc., dated January 25,
1999.
</TABLE>
3
<PAGE> 4
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.
Date: February 3, 1999
HEALTHCARE RECOVERIES, INC.
By: /s/ Douglas R. Sharps
------------------------------------------------
Douglas R. Sharps
Executive Vice President -- Finance and
Administration, and Chief Financial Officer
4
<PAGE> 5
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page No.
<S> <C> <C>
2.1 Asset Purchase Agreement by and among Healthcare Recoveries, Inc.,
Subro-Audit, Inc., O'Donnell Leasing Co., LLP, Kevin M. O'Donnell and
Leah Lampone, dated as of January 3, 1999. The Exhibits and Disclosure
Letters which are referenced in the Table of Contents of the Asset
Purchase Agreement are hereby incorporated by reference. Such Exhibits
and Disclosure Letters have been omitted for purposes of this filing,
but will be furnished supplementally to the Commission upon request
(incorporated herein by reference to Exhibit 2.1 of HRI's Current
Report on Form 8-K filed with the Securities and Exchange Commission on
January 11, 1999).
2.2 Amendment to the Asset Purchase Agreement by and among Healthcare
Recoveries, Inc., Subro-Audit, Inc., O'Donnell Leasing Co., LLP, Kevin
M. O'Donnell and Leah Lampone, dated as of January 25, 1999. The
Exhibits which are referenced in the Amendment to the Asset Purchase
Agreement are hereby incorporated by reference. Such Exhibits have been
omitted for purposes of this filing, but will be furnished
supplementally to the Commission upon request.
99.1 Text of Press Release of Healthcare Recoveries, Inc., dated January 4,
1999 (incorporated herein by reference to Exhibit 99.1 of HRI's Current
Report on Form 8-K filed with the Securities and Exchange Commission on
January 11, 1999).
99.2 Text of Press Release of Healthcare Recoveries, Inc., dated January 25,
1999.
</TABLE>
5
<PAGE> 1
EXHIBIT 2.2
AMENDMENT
TO ASSET PURCHASE AGREEMENT
THIS AMENDMENT (this "Amendment"), dated as of the 25th day of January,
1999 by and among, HEALTHCARE RECOVERIES, INC., a Delaware corporation
("Purchaser"), SUBRO-AUDIT, INC. a Wisconsin corporation ("SAI"), O'DONNELL
LEASING CO., LLP, a Wisconsin limited liability partnership ("ODL"), (SAI and
ODL shall collectively be referred to as the "Sellers"), KEVIN M. O'DONNELL, a
resident of the State of Wisconsin ("Kevin O'Donnell") and LEAH LAMPONE, a
resident of the State of Wisconsin ("Leah Lampone" and together with Kevin
O'Donnell, hereinafter collectively referred to as the "Shareholders").
W I T N E S S E T H;
WHEREAS, pursuant to the Asset Purchase Agreement, dated as of January
3, 1999 by and among Purchaser, Sellers and Shareholders (the "Asset Purchase
Agreement"), Sellers proposed to sell to Purchaser and Purchaser proposed to
purchase from Sellers substantially all of the assets and properties of the
Business, and Purchaser proposed to assume certain of the liabilities of the
Business, and the Shareholders desired to provide certain representations,
warranties, covenants and agreements relating thereto;
WHEREAS, pursuant to Section 1.9 of the Asset Purchase Agreement,
Purchaser has agreed to assume certain liabilities and obligations of Sellers;
WHEREAS, pursuant to the Asset Purchase Agreement, Purchaser in no
event assumes or incurs any liability or obligation included as Excluded
Liabilities pursuant to Section 1.10 of the Asset Purchase Agreement;
WHEREAS, SAI entered into retention bonus agreements in the form
attached hereto as Exhibit A (the "Bonus Agreements") with certain SAI employees
and plans to pay to those employees of SAI listed on Exhibit B attached hereto,
the amounts listed on Exhibit B as retention bonuses (the "Retention Bonuses");
and
WHEREAS, the parties desire to amend the Asset Purchase Agreement to
reflect their understanding with respect to the Retention Bonuses.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Capitalized terms used and not otherwise defined
herein shall have the same meaning as ascribed to them in the Asset
Purchase Agreement.
6
<PAGE> 2
2. Any liability or obligation arising under or incurred
in connection with amounts paid to SAI employees as Retention Bonuses
and any oral or written agreement between any of the Sellers or
Shareholders, on one hand, and any SAI employee, on the other, which is
substantially similar in purpose or effect to that agreement attached
as Exhibit A (all such liabilities referred to herein as "Retention
Bonus Liabilities"), shall constitute Excluded Liabilities under
Section 1.10 of the Asset Purchase Agreement.
3. Purchaser shall assume no obligation, liability, cost
or expense with respect to the Retention Bonus Liabilities.
4. Sellers and Shareholders shall not be required to
reserve or accrue the amounts paid as Retention Bonus Liabilities on
the Closing Date Balance Sheet, whether or not any such accrual would
be required by GAAP.
5. Sellers and Shareholders hereby agree to pay and
discharge in full all Retention Bonus Liabilities.
6. Except as expressly set forth herein, all of the
provisions of the Asset Purchase Agreement shall remain in full force
and effect.
7
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first set forth above.
HEALTHCARE RECOVERIES, INC.
Attest: By: /s/ Douglas R. Sharps
--------------------------
Title: Executive Vice
President and Chief
Financial Officer
By: /s/ Robert G. Bader
---------------------------
Title: Senior Vice President-
Development
SUBRO-AUDIT, INC.
Attest: By: /s/ Kevin M. O'Donnell
--------------------------
Title: President
By: /s/ Leah Lampone
---------------------------
Title: Assistant Secretary
O'DONNELL LEASING CO., LLP
By: /s/ Kevin M. O'Donnell
--------------------------
General Partner
/s/ Leah Lampone
--------------------------
General Partner
SHAREHOLDERS
By: /s/ Kevin M. O'Donnell
--------------------------
Kevin M. O'Donnell
/s/ Leah Lampone
--------------------------
Leah Lampone
8
<PAGE> 1
EXHIBIT 99.2
NEWS RELEASE
Contact: Douglas R. Sharps
Chief Financial Officer
(502) 454-1365
HEALTHCARE RECOVERIES, INC. ANNOUNCES CONSUMMATION OF THE
ACQUISITION OF SUBRO-AUDIT, INC.
LOUISVILLE, Ky.--(BUSINESS WIRE)--Jan. 25, 1999--Healthcare Recoveries, Inc.
(NASDAQ: HCRI) today consummated the purchase of Subro-Audit, Inc. ("SAI") and a
related real estate partnership. HCRI paid $24,400,000 in cash at closing and
may pay up to $8,500,000 over the next two years pursuant to an earn-out
arrangement.
Based in Milwaukee, SAI provides recovery services to an installed base of
approximately 8 million lives, who are covered by insurers, HMOs and
employer-funded plans throughout the U.S. The company has approximately 150
full- and part-time employees at its locations in Milwaukee and Atlanta. SAI's
revenue for 1997 was approximately $6.7 million, and 1998 revenue was
approximately $7.05 million.
Starting in 1999 and continuing into 2000, HCRI expects to obtain significant
improvements in productivity at SAI as a result of deploying its systems, work
processes and standards throughout the SAI organization. These improvements
should appear as increases in both the recoveries per installed life and the
recoveries per SAI employee.
Patrick B. McGinnis, Chairman and CEO of HCRI, said: "We are delighted to join
forces with Subro-Audit, Inc. We look forward to integrating our operations and
renewing our focus on customer service."
Kevin O'Donnell stated: "We are excited to have the transaction consummated so
we can focus our efforts on maintaining and improving our service to customers."
HCRI is the leading provider of health insurance subrogation and related
recovery services for healthcare payors.
This press release contains forward-looking information regarding HCRI. The
forward-looking statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
may be significantly affected by certain risks
Page 1 of 2
*HEALTHCARE RECOVERIES, INC. * 1400 Watterson Tower
Louisville, Kentucky 40218 *
* 502/454-1340 * www.hcrec.com *
9
<PAGE> 2
and uncertainties, including the ability of HCRI to integrate acquisitions.
Other risk factors are described in HCRI's Annual Report on Form 10-K for the
year ended December 31, 1997, 1st Quarter 1998 Report on Form 10-Q, 2nd Quarter
1998 Report on Form 10-Q, and 3rd Quarter 1998 Report on Form 10-Q, all on file
with the Securities and Exchange Commission.
Page 2 of 2
*HEALTHCARE RECOVERIES, INC. * 1400 Watterson Tower
Louisville, Kentucky 40218 *
* 502/454-1340 * www.hcrec.com *
10
