<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A2
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 19, 1996
AMERICAN HOMEPATIENT, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-19532 62-1474680
- --------------- ------------ ----------------
(State of other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification
incorporation) Number)
5200 Maryland Way, Suite 400 Brentwood, Tennessee 37027
----------------------------------------------------------
(Address of principal executive offices)
(615) 221-8884
--------------
(Registrant's telephone number, including area code)
Not applicable
--------------
(Former name, former address and former fiscal year,
if changed since last report)
- ------------------------------------------------------------------------------
Page 1 of 28
<PAGE> 2
Those portions of Item 7 (Financial Statements and Exhibits) of the Current
Report on Form 8-K filed on July 31, 1996 are amended and restated in their
entirety as follows:
<TABLE>
<CAPTION>
Page
Number:
-------
<S> <C>
a. Financial Statements of Business Acquired
i. Audited balance sheet of Miller Medical Services, Inc. as of
November 30, 1995 and the related statements of income,
stockholders' equity and cash flows for the year then ended. 5
ii. Unaudited balance sheet of Miller Medical Services, Inc. as of
May 31, 1996 and the related statements of income, stockholders
equity and cash flows for the six months ended May 31, 1996 and
1995. 5
b. Pro Forma Financial Information
i. Introductory information 24
ii. Unaudited pro forma selected income statement data of American
HomePatient, Inc. for the six months ended June 30, 1996 and
the year ended December 31, 1995. 25
</TABLE>
2
<PAGE> 3
Item 2. Acquisition or Disposition of Assets
The Registrant reports the following acquisition to inform its security
holders:
Pursuant to a Plan and Agreement of Merger dated June 28, 1996, the Registrant
acquired the operations of Miller Medical Services, Inc. and its subsidiary,
Mid-Prairie, Inc., both Iowa corporations, which operate a respiratory therapy,
rehabilitation equipment and durable medical equipment supply business in
sixteen locations throughout Iowa, Wisconsin and Nebraska. The acquisition was
accomplished by merger of Miller Medical Services, Inc. into Registrant's
wholly-owned subsidiary, American HomePatient of Iowa, Inc. The terms of the
merger were the results of arm's-length negotiations with shareholders of
Miller Medical Service, Inc.
The purchase price included cash of $10,620,000 and 297,640 shares of the
Registrant's common stock. The cash portion of the purchase price was funded
through drawing on the Company's line of credit with a syndicate of banks
headed by Bankers Trust Company.
3
<PAGE> 4
Item 7. Financial Statements and Exhibits.
<TABLE>
<CAPTION>
Page
----
<S> <C>
a. Financial statements of Business Acquired
i. Audited balance sheet of Miller Medical Services, Inc. as of
November 30, 1995 and the related statements of income,
stockholders' equity and cash flows for the year then ended. 5
ii. Unaudited balance sheet of Miller Medical Services, Inc.
as of May 31, 1996 and the related statements of income,
stockholders' equity and cash flows for the six months ended
May 31, 1996 and 1995. 5
b. Pro Forma Financial Information
i. Introductory information 24
ii. Unaudited pro forma selected income statement data of
American HomePatient, Inc. for the six months ended
June 30, 1996 and the year ended December 31, 1995. 25
c. Exhibits. None
</TABLE>
4
<PAGE> 5
MILLER MEDICAL SERVICE, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL REPORT
NOVEMBER 30, 1995
5
<PAGE> 6
CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Consolidated balance sheets as of
November 30, 1995 and May 31, 1996 (unaudited) 2-3
Consolidated statements of income for the year ended November 30, 1995
and the six months ended May 31, 1995 and 1996 (unaudited) 4
Consolidated statements of stockholders' equity for the year ended
November 30, 1995 and the six months ended May 31, 1996 (unaudited) 5
Consolidated statements of cash flows for the year ended
November 30, 1995 and the six months ended May 31, 1995
and 1996 (unaudited) 6-7
Notes to consolidated financial statements 8-15
</TABLE>
6
<PAGE> 7
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Miller Medical Service, Inc.
Waterloo, Iowa
We have audited the accompanying consolidated balance sheet of Miller Medical
Service, Inc. and its subsidiary as of November 30, 1995 and the related
consolidated 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statements presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Miller Medical
Services, Inc. and its subsidiary as of November 30, 1995 and the results of
their operations and their cash flows for the year then ended in conformity
with generally accepted accounting principles.
McGladrey & Pullen, LLP
Waterloo, Iowa
January 19, 1996, except for Note 11,
as to which the date is July 19, 1996
7
<PAGE> 8
MILLER MEDICAL SERVICE, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
November 30, May 31,
ASSETS (NOTE 3) 1995 1996
- -------------------------------------------------------------------------------------------------------
Current Assets (Unaudited)
<S> <C> <C>
Cash and cash equivalents $1,306,369 $ 920,533
Trade receivables, less allowance for nonallowed charges
and doubtful accounts 1995 $587,700; 1996 $787,700 2,964,383 2,976,007
Inventory 1,095,746 1,259,942
Prepaid expenses 56,355 136,258
Deferred income taxes (Note 9) 176,380 300,000
-----------------------
TOTAL CURRENT ASSETS 5,599,233 5,592,740
-----------------------
Investments and Other Assets
Cash value of life insurance 120,622 135,622
Investment in available-for-sale securities (Note 2) 372,757 -
Deferred income taxes (Note 9) 91,300 -
-----------------------
584,679 135,622
-----------------------
Property and Equipment
Land 50,000 50,000
Building 693,734 693,734
Leasehold improvements 74,646 78,997
Machinery and equipment 22,644 22,644
Office furniture, fixtures and equipment 671,391 801,113
Rental equipment (Note 6) 5,131,034 5,383,413
-----------------------
6,643,449 7,029,901
Less accumulated depreciation 3,484,884 3,759,043
-----------------------
3,158,565 3,270,858
-----------------------
Intangibles
Goodwill, less accumulated
amortization 1995 $1,455; 1996 $1,915 35,299 34,839
Covenant not to compete, less accumulated
amortization 1995 $1,584; 1996 $2,083 3,416 2,917
-----------------------
38,715 37,756
-----------------------
$9,381,192 $9,036,976
=======================
</TABLE>
See Notes to Consolidated Financial Statements.
8
<PAGE> 9
<TABLE>
<CAPTION>
November 30, May 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1996
- --------------------------------------------------------------------------------------
<S> <C> <C>
Current Liabilities (Unaudited)
Notes payable (Note 3) $ 46,000 $ 499,000
Current maturities of long-term debt (Note 3) 1,210,809 1,144,560
Accounts payable 858,004 413,188
Accrued payroll and payroll related expenses 692,511 170,646
Other accrued liabilities 229,267 109,677
Deferred revenue 351,134 379,340
-------------------------
TOTAL CURRENT LIABILITIES 3,387,725 2,716,411
-------------------------
Long-Term Debt, less current maturities (Note 3) 1,217,213 1,116,815
-------------------------
Deferred Compensation (Note 5) 472,757 -
-------------------------
Deferred Income Taxes, net (Note 9) - 111,000
-------------------------
Commitments and Contingencies (Notes 4 and 7)
Redeemable Common Stock Held by Employee Stock
Ownership Plan (ESOP) (Note 7) 1,034,000 1,157,000
Stockholders' Equity
Capital stock, common, no par or stated value; authorized
1,000,000 shares; issued 94,169 shares, at amount paid in 970,000 970,000
Retained earnings 3,306,033 4,122,750
Unrealized gain on investment securities, net (Note 2) 27,464 -
-------------------------
4,303,497 5,092,750
Less maximum cash obligation related to ESOP shares
(Note 7) 1,034,000 1,157,000
-------------------------
3,269,497 3,935,750
-------------------------
$ 9,381,192 $ 9,036,976
=========================
</TABLE>
9
<PAGE> 10
MILLER MEDICAL SERVICE, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Six Months Six Months
November 30, Ended May Ended May
1995 31, 1995 31, 1996
----------------------------------------------------------------
<S> <C> <C> <C>
Net revenues: (Unaudited) (Unaudited)
Sales $ 8,995,950 $4,200,084 $ 4,942,837
Rental (Note 6) 7,862,473 3,663,929 4,619,158
----------------------------------------------------------------
16,858,423 7,864,013 9,561,995
----------------------------------------------------------------
Cost of revenue:
Sales 5,134,587 2,279,673 2,929,180
Rental 1,297,888 576,618 620,282
----------------------------------------------------------------
6,432,475 2,856,291 3,549,462
----------------------------------------------------------------
INCOME BEFORE OPERATING EXPENSES 10,425,948 5,007,722 6,012,533
Operating expenses (Notes 4 and 8) 8,395,137 4,063,284 4,540,690
----------------------------------------------------------------
OPERATING INCOME 2,030,811 944,438 1,471,843
Financial income (expenses):
Interest income 57,184 23,801 80,825
Interest expense (240,845) (119,393) (128,138)
----------------------------------------------------------------
INCOME BEFORE INCOME TAXES 1,847,150 848,846 1,424,530
Income taxes (Note 9) 742,522 338,235 607,813
----------------------------------------------------------------
NET INCOME $ 1,104,628 $ 510,611 $ 816,717
================================================================
Earnings per common share $ 11.73 $ 5.42 $ 8.67
================================================================
Weighted average common shares outstanding 94,169 94,169 94,169
================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
10
<PAGE> 11
MILLER MEDICAL SERVICE, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEAR ENDED NOVEMBER 30, 1995 AND SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Less
Unrealized Maximum
Gain on Cash
Capital Investment Obligation
Stock, Retained Securities related to
Common Earnings (Note 2) ESOP Shares Total
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, November 30, 1994 $970,000 $2,201,405 $ - $ (963,000) $2,208,405
Net income - 1,104,628 - - 1,104,628
Increase in fair value
during the year, net
(Note 2) - - 27,464 - 27,464
Change related to ESOP
shares - - - (71,000) (71,000)
-----------------------------------------------------------------------------------
Balance, November 30, 1995 970,000 3,306,033 27,464 (1,034,000) 3,269,497
Net income (unaudited) - 816,717 - - 816,717
Realization of gain on
investment securities
(unaudited) (Note 2) - - (27,464) - (27,464)
Change related to ESOP
shares (unaudited) - - - (123,000) (123,000)
-----------------------------------------------------------------------------------
Balance, May 31, 1996
(Unaudited) $970,000 $4,122,750 $ - $(1,157,000) $3,935,750
===================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
11
<PAGE> 12
MILLER MEDICAL SERVICE, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Six Months
Year Ended Ended Ended
November 30, May 31, May 31,
1995 1995 1996
----------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities (Unaudited) (Unaudited)
Net income $ 1,104,628 $510,611 $ 816,717
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,296,975 565,380 622,001
Amortization 1,920 960 959
Deferred income taxes (101,989) (184,000) 96,989
Deferred compensation 148,581 69,585 (53,091)
Loss on sale of equipment 5,443 2,980 1,993
Gain on sale of available for sale securities - - (51,566)
Changes in assets and liabilities:
(Increase) decrease in trade receivables (772,244) (788,375) (211,624)
(Increase) decrease in allowance for
nonallowed charges and doubtful
accounts 195,900 483,200 200,000
(Increase) decrease in inventories (56,173) 34,932 (164,196)
Increase (decrease) in accounts payable
and accrued expenses 265,609 (305,057) (1,086,271)
Increase in deferred revenue 61,035 28,364 28,206
Other prepaids and accruals, net (8,336) (4,850) (79,903)
----------------------------------------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 2,141,349 413,730 120,214
----------------------------------------------
Cash Flows from Investing Activities
Increase in cash value of life insurances (30,607) (15,000) (15,000)
Available for sale securities:
Purchases (111,688) (55,465) (41,116)
Sales - - 419,388
Proceeds from sale of equipment 6,500 - -
Purchase of equipment (1,483,615) (525,272) (736,287)
----------------------------------------------
NET CASH (USED IN) INVESTING
ACTIVITIES (1,619,410) (595,737) (373,015)
----------------------------------------------
</TABLE>
12
<PAGE> 13
MILLER MEDICAL SERVICE, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Six Months
Year Ended Ended Ended
November 30, May 31, May 31,
1995 1995 1996
--------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Financing Activities (Unaudited) (Unaudited)
Proceeds from notes payable 328,000 328,000 453,000
Principal payments on notes payable (590,000) (590,000) -
Proceeds from long-term borrowings 1,453,245 853,245 500,000
Principal payments on long-term borrowings (998,131) (415,848) (666,647)
Payment of deferred compensation - - (419,388)
----------------------------------------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 193,114 175,397 (133,035)
----------------------------------------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 715,053 (6,610) (385,836)
----------------------------------------------
Cash and cash equivalents
Beginning 591,316 591,316 1,306,369
----------------------------------------------
Ending $1,306,369 $584,706 $ 920,533
==============================================
Supplemental Disclosures of Cash Flow
Information
Cash payments for:
Interest $ 239,543 $115,368 $ 131,698
Income taxes, net of refunds $ 416,583 $267,439 $1,057,167
Supplemental Schedule of Noncash Investing
and Financing Activities
Net change in unrealized holding gains on
available for sale securities $ 45,773 $ 23,000 $ (45,773)
Less deferred income taxes (18,309) (9,200) 18,309
----------------------------------------------
$ 27,464 $ 13,800 $ (27,464)
==============================================
</TABLE>
See Notes to Consolidated Financial Statements.
13
<PAGE> 14
MILLER MEDICAL SERVICE, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED MAY 31, 1995 AND MAY 31, 1996
IS UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of business: The Company's operations consist primarily of the retail
sale and short-term rental of home medical equipment. The Company has twelve
locations in Iowa, two in Wisconsin and one in Minnesota. Credit is granted to
customers under normal industry standards. The majority of the Company's
revenues come from various government agencies and private insurance companies.
Accounting estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Significant accounting policies:
Principles of consolidation: The consolidated financial statements include
the accounts of the Company and its subsidiary, Mid-Prairie, Inc., which is
wholly-owned. All material intercompany accounts and transactions are
eliminated in consolidation.
Cash and cash equivalents: For purposes of reporting cash flows, the
Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Inventory: Inventory consists primarily of home health related supplies.
Larger inventory items are valued at the lower of cost (specific
identification) or market. Smaller inventory items are valued at the lower
of cost (average) or market.
Property and equipment and depreciation methods: Property and equipment is
stated at cost. Depreciation is computed principally by the double
declining-balance method over the estimated useful life of the assets.
Buildings are being depreciated over 30 to 31.5 years. All other property
and equipment is being depreciated over 5 to 7 years.
Investment in debt and marketable equity securities and accounting change:
The Company had investments in debt and marketable equity securities. Debt
securities consisted primarily of obligations of state and municipal
governments. Marketable equity securities consisted primarily of common
stocks and mutual funds that were traded or listed on national exchanges.
14
<PAGE> 15
MILLER MEDICAL SERVICE, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED MAY 31, 1995 AND MAY 31, 1996
IS UNAUDITED)
- -------------------------------------------------------------------------------
The Company adopted the provisions of FASB Statement No. 115, Accounting for
Certain Investments in Debt and Equity Securities, as of December 1, 1994.
Statement 115 requires that management determine the appropriate
classification of securities at the date of adoption, and thereafter at the
date individual investment securities are acquired, and that the
appropriateness of such classification be reassessed at each balance sheet
date. Since the Company neither bought investment securities in
anticipation of short-term fluctuations in market prices or could commit to
holding debt securities to their maturities, the investment in debt and
marketable equity securities were classified as available-for-sale in
accordance with Statement 115. Available-for-sale securities are stated at
fair value, and unrealized holding gains and losses, net of the related
deferred tax effect, are reported as a separate component of stockholders'
equity.
Prior to the adoption of Statement 115, the Company stated its debt
securities at amortized cost and the marketable equity securities were
stated at the lower of their aggregate cost or market, with unrealized
losses on the current portfolio charged to income and on the noncurrent
portfolio charged to a separate component of stockholders' equity. Under
both the newly adopted accounting standard and the Company's former
accounting practices, premiums and discounts on investments in debt
securities are amortized over their contractual lives. The method of
amortization results in a constant effective yield on those securities (the
interest method). Interest on debt securities is recognized in income as
earned, and dividends on marketable equity securities is recognized in
income when declared. Realized gains and losses, including losses from
declines in value of specific securities determined by management to be
other-than-temporary, are included in income. Realized gains and losses are
determined on the basis of the specific securities sold.
Note 2 to the financial statements provides further information about the
effect of adopting Statement 115.
Common stock held by ESOP: The Company's maximum cash obligation related to
these shares is classified outside stockholders' equity because the shares
are not readily traded and could be put to the Company for cash.
Intangibles: Goodwill and covenant not to compete resulting from an
acquisition are being amortized over 40 years and 5 years respectively using
the straight-line method and are periodically reviewed for impairment based
upon an assessment of future operations to ensure that they are
appropriately valued.
Earnings per common share: Earnings per common share are determined by
dividing net income by the weighted average number of common shares
outstanding during the year.
15
<PAGE> 16
MILLER MEDICAL SERVICE, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED MAY 31, 1995 AND MAY 31, 1996
IS UNAUDITED)
- -------------------------------------------------------------------------------
Revenue recognition: Rental income, at estimated allowable amounts, is
recognized as earned, pro rata on a daily basis. The equipment is rented to
customers primarily on a month-to-month basis. Deferred revenues represent
the portion of rental payments submitted to various government agencies and
private insurance companies for payment in advance of earning the rent.
Sales of medical equipment and related supplies and services are recognized
upon delivery.
Income taxes: Deferred taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their
tax bases. Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that some portion
or all of the deferred tax assets will not be realized. Deferred tax assets
and liabilities are adjusted for the effect of changes in tax laws and rates
on the date of enactment.
Fair value of financial instruments: The carrying amount of cash and cash
equivalents, trade receivables and accounts payable approximates fair value
because of the short maturity of these instruments. The fair value of
marketable debt and equity securities is based upon quoted market prices.
The carrying amount of current notes payable and long-term debt approximates
fair value because these instruments bear interest at approximate current
rates available to the Company for similar borrowings.
Recently issued accounting standards: In March 1995, the Financial
Accounting Standards Board (FASB) issued SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
which will require the Company to review for the impairment of long-lived
assets and certain identifiable intangibles to be held and used by the
Company whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Adoption of SFAS No.
121 is required in fiscal 1996. The Company does not expect that the
adoption of SFAS 121 will have a material effect on the Company's
consolidated financial statements.
Interim financial information (unaudited): The financial statements and
notes related thereto as of May 31, 1996, and for the six-month periods
ended May 31, 1995 and 1996, are unaudited, but in the opinion of management
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the financial position and results of
operations. The operating results for the interim periods are not
indicative of the operating results to be expected for a full year or for
other interim periods. Not all disclosures required by generally accepted
accounting principles necessary for a complete presentation have been
included.
16
<PAGE> 17
MILLER MEDICAL SERVICE, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED MAY 31, 1995 AND MAY 31, 1996
IS UNAUDITED)
- -------------------------------------------------------------------------------
NOTE 2. ACCOUNTING CHANGE AND INVESTMENT IN DEBT AND MARKETABLE EQUITY
SECURITIES
As discussed in Note 1, the Company adopted FASB Statement No. 115 as of
December 1, 1994. The December 1, 1994 cumulative effect of adopting Statement
115 was not material to the Company's financial statements.
The Company sold all available for sale investments in April 1996.
The following is a summary of the Company's investment in available-for-sale
securities as of November 30, 1995:
<TABLE>
<CAPTION>
Available-for-Sale
------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized
Cost Gains (Losses) Fair Value
------------------------------------------------------------
<S> <C> <C> <C> <C>
Marketable debt securities:
Corporate bonds $ 89,392 $ 1,821 $ - $ 91,213
State and municipal bonds 25,000 659 - 25,659
------------------------------------------------------------
114,392 2,480 - 116,872
Marketable equity securities,
common stocks 180,389 43,293 - 223,682
Mutual funds, money market
funds 32,203 - - 32,203
------------------------------------------------------------
$ 326,984 $ 45,773 $ - $ 372,757
============================================================
</TABLE>
The amortized cost and fair value of debt securities, by contractual
maturities, as of November 30, 1995 are as follows:
<TABLE>
<CAPTION>
Amortized
Cost Fair Value
--------------------------
<S> <C> <C>
Due within one (1) year $ - $ -
Due after one (1) year through three (3) years - -
Due after three (3) years through five (5) years 49,899 50,917
Due after five (5) years 64,493 65,955
-------------- ----------
$ 114,392 $ 116,872
============== ==========
</TABLE>
17
<PAGE> 18
MILLER MEDICAL SERVICE, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED MAY 31, 1995 AND MAY 31, 1996
IS UNAUDITED)
- -------------------------------------------------------------------------------
A summary of investment earnings included financial income (expense) in the
accompanying statements of income for the year ended November 30, 1995:
<TABLE>
<S> <C>
Interest earned $5,518
Dividends 3,718
------
$9,236
======
</TABLE>
All securities were sold in April 1996. The total proceeds from sales were
$419,388.
The change in the unrealized gain on investment securities during the year
ended November 30, 1995 consisted of the following:
<TABLE>
<S> <C>
Unrealized gain on debt securities $ 2,480
Unrealized gain on marketable equity securities and mutual funds 43,293
Related deferred tax effect (18,309)
--------
$ 27,464
========
</TABLE>
NOTE 3. PLEDGED ASSETS AND RELATED DEBT
<TABLE>
<S> <C>
Line of credit and current notes payable:
The Company has an agreement with the bank expiring March 30, 1997
which allows multiple advances limited to $600,000 at variable rate
of interest (8.75% at November 30, 1995 8.25% at May 31, 1996) for
operating expenses. The amount borrowed under this agreement at
November 30, 1995 and May 31, 1996 was $46,000 and $499,000,
respectively. (A)
Long-term debt at November 30, 1995:
Note payable, bank, due in monthly installments of $7,522, including
interest at 8.0%, to May 7, 1999. (A) $245,906
Note payable, bank, due in monthly installments of $4,692, including
interest at a variable rate (currently 10.5%), to February 1, 1997.
(A) 72,412
Note payable, bank, due in monthly installments of $9,413, including
interest at a variable rate (currently 9.75%), to April 1, 1997. (A) 149,595
Note payable, bank, due in monthly installments of $925, including
interest at a variable rate (currently 11%), to February 1, 1997. (A) 12,965
Note payable, bank, due in monthly installments of $16,179,
including interest at a variable rate (currently 10.5%), to September
15, 1996. (A) 159,426
Note payable, bank, due in monthly installments of $6,350, including
interest at a variable rate (currently 9.75%), to May 26, 1997. (A) 107,358
</TABLE>
18
<PAGE> 19
MILLER MEDICAL SERVICE, INC.
AND SUBSIDIARY
<TABLE>
<CAPTION>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED MAY 31, 1995 AND MAY 31, 1996
IS UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C>
Note payable, bank, due in monthly installments of
$6,350, including interest at a variable rate (currently
9.75%), to July 19, 1997. (A) $ 118,453
Note payable, bank, due in monthly installments of
$1,033, including interest at a variable rate (currently
10.75%), to October 15, 1996. (A) 11,150
Note payable, bank, due in monthly installments of
$9,594, including interest at a variable rate (currently
9.75%), to August 26, 1997. (A) 185,723
Note payable, bank, due in monthly installments of
$6,349, including interest at a variable rate (currently
9.75%), to October 14, 1997. (A) 134,557
Note payable, bank, due in monthly installments of
$9,703, including interest at a variable rate (currently
9.75%), to April 18, 1998. (A) 248,363
Note payable, bank, due in monthly installments of
$12,937, including interest at a variable rate
(currently 9.75%), to April 19, 1998. (A) 331,144
Note payable, bank, due in monthly installments of
$6,444, including interest at a variable rate (currently
9.75%), to August 8, 1998. (A) 185,531
Note payable, bank, due in monthly installments of
$6,443, including interest at a variable rate (currently
9.75%), to October 24, 1998. (A) 190,377
Note payable, bank, due in monthly installments of
$6,444, including interest at a variable rate (currently
9.75%), to October 24, 1998. (A) 195,235
Note payable, vendor, due in monthly installments of
$11,268, including interest at 15%, to May 25, 1996,
collateralized by security interest on inventory
purchased. 64,744
Contracts payable, vendors, due in various monthly
installments through 1996, collateralized by equipment
with a carrying value of $5,715 at November 30, 1995. 15,083
----------
2,428,022
Less current maturities 1,210,809
----------
Long-term portion $1,217,213
==========
Long-term debt at May 31, 1996:
Note payable, bank, due in monthly installments of
$7,522, including interest at 8%, to May 7, 1999. (A) $ 209,991
Note payable, bank, due in monthly installments of
$925, including interest at a variable rate (currently
11%), to February 1, 1997. (A) 7,858
Note payable, bank, due in monthly installments of
$25,396, including interest at 9%, to February 5, 1997. (A) 220,053
Note payable, bank, due in monthly installments of
$24,625, including interest at a variable rate
(currently 9%) to November 15, 1997. (A) 412,696
</TABLE>
19
<PAGE> 20
MILLER MEDICAL SERVICE, INC.
AND SUBSIDIARY
<TABLE>
<CAPTION>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED MAY 31, 1995 AND MAY 31, 1996
IS UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C>
Note payable, bank, due in monthly installments of
$55,915, including interest at a variable rate
(currently 9%) to September 25, 1998. (A) $1,405,076
Contracts payable, vendors, due in various monthly
installments through 1996, collateralized by equipment
with no carrying value at May 31, 1996. 5,701
----------
2,261,375
Less current maturities 1,144,560
----------
Long-term portion $1,116,815
==========
</TABLE>
(A) Agreements are collateralized by a real estate mortgage and security
agreements covering substantially all assets of the Company.
The following is a schedule by years of the maturities of long-term debt as
of November 30, 1995:
<TABLE>
<S> <C>
Year ending November 30:
1996 $1,210,809
1997 875,105
1998 334,664
1999 7,444
----------
$2,428,022
==========
</TABLE>
NOTE 4. LEASE COMMITMENTS AND TOTAL RENT EXPENSE
The Company leases sixteen of its store locations, including an agreement
entered into subsequent to year end, under various agreements which expire at
various dates through August 31, 2002 and require various minimum annual
rentals. The Company also leases vehicles and equipment under various
short-term agreements.
20
<PAGE> 21
The total minimum rental commitment at November 30, 1995 under these agreements
is $1,881,263, which is due as follows:
<TABLE>
<S> <C>
Year ending November 30:
1996 $ 758,651
1997 575,906
1998 311,541
1999 128,455
Later years 106,710
----------
$1,881,263
==========
</TABLE>
Total rental expense included in the income statements for the year ended
November 30, 1995 is $884,165.
NOTE 5. DEFERRED COMPENSATION
The Company had deferred compensation agreements with four of its
officer-stockholders, whereby the Company would make an annual discretionary
contribution to a reserve account for each officer-stockholder. The assets in
this reserve account were general assets of the Company subject to the claims
of general creditors. The custodian for the reserve account had invested these
proceeds at various rates of return. The liability under the agreement had
been established at an amount equal to the annual contributions plus investment
income, which is guaranteed to not be less than the rate of return on a
thirty-year treasury note. The deferred compensation charged to expense
totaled $149,773 for the year ended November 30, 1995. In April 1996 the
agreements were terminated and all deferred compensation was paid to the
officer-stockholders.
NOTE 6. LEASING ACTIVITIES
The Company's leasing operations consist of the short-term rental of durable
home medical equipment primarily on a month-to-month basis. Based on the lease
terms, these leases are classified as operating leases.
Under the operating method of accounting for leases, the cost of the equipment
is recorded as an asset and is depreciated over its estimated useful life and
the rental income is recognized as the lease rental payments are earned.
The composition of the Company's investment in equipment under operating leases
at November 30, 1995 is as follows:
<TABLE>
<S> <C>
Rental equipment, at cost $5,131,034
Less accumulated depreciation 2,712,838
----------
$2,418,196
==========
</TABLE>
21
<PAGE> 22
NOTE 7. EMPLOYEE STOCK OWNERSHIP PLAN
The Company sponsors an Employee Stock Ownership Plan. The purpose of the Plan
is to enable full-time employees who are at least 21 years of age and have been
employed for at least one year to acquire stock ownership in the Company.
Contributions to the Plan are discretionary and are determined by the Company's
Board of Directors, not to exceed the contribution allowable by current IRS
regulations. For the year ended November 30, 1995 the Company made a cash
contribution of $30,843 to the Plan. This contribution is included in
operating expenses in the accompanying income statement.
In the event a terminated Plan participant desires to sell his or her shares of
the Company's stock, the Company may be required to purchase the shares from
the participant at their fair market value. To the extent that shares of
common stock held by the ESOP are not readily traded, a sponsor must reflect
the maximum cash obligation related to those securities outside of
stockholders' equity. The Company is increasing the carrying amount of the
redeemable common stock so that the carrying amount will equal the estimated
redemption amount. The estimated redemption amount at each year end was
determined by an independent appraiser. For interim periods, the amount was
estimated by management. As of November 30, 1995, 14,170 shares held by the
ESOP, at a fair value of approximately $1,034,000, have been reclassified from
stockholders' equity to liabilities.
NOTE 8. DISCRETIONARY BONUSES
The Company pays discretionary bonuses to officers-stockholders. The amount of
these bonuses charged to operating expenses was $200,000 for the year ended
November 30, 1995.
NOTE 9. INCOME TAX MATTERS AND EXPENSE ANALYSIS
Net deferred taxes consist of the following as of November 30, 1995:
<TABLE>
<S> <C>
Deferred tax assets:
Receivable allowances $129,580
Deferred compensation 189,100
Accrued expenses 49,900
Inventory 15,500
--------
$384,080
--------
Deferred tax liabilities
Property and equipment $ 98,100
Investments 18,300
--------
$116,400
--------
</TABLE>
22
<PAGE> 23
The deferred tax amounts have been classified in the accompanying balance sheet
as of November 30, 1995 as follows:
<TABLE>
<CAPTION>
CURRENT LONG-TERM TOTAL
-------------------------------
<S> <C> <C> <C>
Assets $ 300,540 $ 189,420 $489,960
Liabilities 124,160 98,120 222,280
-------------------------------
Net asset $ 176,380 $ 91,300 $267,680
===============================
</TABLE>
Income tax expense for the year ended November 30, 1995 is composed of the
following:
<TABLE>
<S> <C>
Current tax expense $ 844,511
Deferred tax expense (101,989)
---------
$ 742,522
=========
</TABLE>
The income tax provision for the year ended November 30, 1995 consists of the
following components:
<TABLE>
<S> <C>
Computed "expected" tax $628,014
Increase (decrease) in income taxes resulting from:
State income taxes, net of federal income taxes 122,464
Other (7,956)
--------
$742,522
========
</TABLE>
NOTE 10. PROFIT SHARING AND 401 (K) PLAN
The Company has a profit-sharing plan under Section 401 (k) of the Internal
Revenue Code covering employees who are 21 years old and have completed one
year of service. For each plan year the Company can make can make
discretionary contributions to the plan. Contributions by the Company to the
plan totaled $75,000 for year ended November 30, 1995.
NOTE 11. ACQUISITION
On July 19, 1996, the stockholders exchanged all of their shares of the
Company's common stock for 261,283 shares of American Home Patient, Inc.'s
capital stock, plus $10,620,622.
23
<PAGE> 24
AMERICAN HOMEPATIENT, INC.
PRO FORMA SELECTED FINANCIAL DATA
(unaudited)
On July 19, 1996, the Registrant closed on the acquisition of certain assets of
Miller Medical Services, Inc. and its subsidiary (collectively "Miller
Medical"). The net purchase price included cash of $10,620,000 and
297,640 shares of the registrant's common stock. The Company assumed
responsibility for the operations effective June 1, 1996.
In addition, effective during 1995 and the first six months of 1996, American
HomePatient has acquired assets and assumed liabilities of other home care
businesses (the "Other Acquired Operations"). The Other Acquired Operations
include seven significant acquisitions under Regulation S-X of the Securities
and Exchange Commission (ConPharma Home Health Care, Inc., Life Support
Products, The Illinois Home Health Business, The Mobile Medical Services
Business and the Homehealth Center Business). The Company has previously filed
audited financial statements for these significant acquisitions. None of the
other acquisitions effective in 1995 or 1996 have been significant acquisitions
under Regulation S-X of the Securities and Exchange Commission.
The unaudited pro forma income statement data for the year ended December 31,
1995 and the six months ended June 30, 1996 have been prepared based on the
historical income statements of the Company, as adjusted to reflect the
acquisitions of Miller Medical Services and the Other Acquired Operations as if
such agreements had been effective as of January 1 of each respective year, if
applicable. The assets and liabilities of Miller Medical and the Other
Acquired Operations are included in the Company's balance sheet as of June 30,
1996. The pro forma income statement data may not be indicative of the future
results of operations and what the actual results of operations would have been
had the acquisitions described above been effective January 1 of each
respective period.
24
<PAGE> 25
AMERICAN HOMEPATIENT, INC.
PRO FORMA INCOME STATEMENT DATA
YEAR ENDED DECEMBER 31, 1995
(unaudited, in thousands, except per share amounts)
<TABLE>
<CAPTION>
AMERICAN OTHER
HOMEPATIENT, MILLER ACQUIRED
INC. MEDICAL OPERATIONS ADJUSTMENTS PRO FORMA
----------- ------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
NET REVENUES $ 162,371 $16,858 $ 80,935 $ - $ 260,164
---------- ------- -------- ------- ---------
EXPENSES:
Cost of sales and related
services, excluding
depreciation and amortization 34,031 5,264 22,165 - 61,460
Operating 81,718 7,350 35,271 810 (a,b) 125,149
General and administrative 12,594 916 8,244 (4,323)(a,b) 17,431
Depreciation and amortization 14,081 1,297 5,501 2,288(c) 23,167
Interest 4,829 184 878 6,410(d) 12,301
---------- ------- -------- ------- ---------
147,253 15,011 72,059 5,185 239,508
---------- ------- -------- ------- ---------
Income (loss) from continuing
operations before taxes 15,118 1,847 8,876 (5,185) 20,656
Provision for income taxes 6,029 743 271 1,195(e) 8,238
Net income (loss) from ---------- ------- -------- ------- ---------
continuing operations $ 9,089 $ 1,104 $ 8,605 $(6,380) $ 12,418
Weighted average number of ========== ======= ======== ======= =========
common shares 10,842 446(f) 11,288
========== ======= =========
Net income per share from
continuing operations $ 0.84 $ 1.10
========== =========
</TABLE>
25
<PAGE> 26
AMERICAN HOMEPATIENT, INC.
PRO FORMA INCOME STATEMENT DATA
SIX MONTHS ENDED JUNE 30, 1996
(unaudited, in thousands, except per share amounts)
<TABLE>
<CAPTION>
AMERICAN OTHER
HOMEPATIENT, MILLER ACQUIRED
INC. MEDICAL OPERATIONS ADJUSTMENTS PRO FORMA
---------- ------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
NET REVENUES $117,472 $7,990 $ 9,716 $ - $135,178
-------- ------ -------- -------- --------
EXPENSES:
Cost of sales and related
services, excluding
depreciation and amortization 25,015 2,811 2,456 - 30,282
Operating 59,995 2,713 3,786 383 (a,b) 66,877
General and administrative 7,381 717 1,002 (584)(a,b) 8,516
Depreciation and amortization 10,549 432 859 378(c) 12,218
Interest 3,993 74 80 1,058(d) 5,205
-------- ------ -------- -------- --------
106,933 6,747 8,183 1,235 123,098
-------- ------ -------- -------- --------
Income (loss) from continuing
operations before taxes 10,539 1,243 1,533 (1,235) 12,080
Provision for income taxes 4,068 497 55 43(e) 4,663
Net income (loss) from -------- ------ -------- -------- --------
continuing operations $ 6,471 $ 746 $ 1,478 $ (1,278) $ 7,417
Weighted average number of ======== ====== ======== ======== ========
common shares 12,609 299(f) $ 12,908
======== ======== ========
Net income per share from
continuing operations $ 0.51 $ 0.57
======== ========
</TABLE>
26
<PAGE> 27
AMERICAN HOMEPATIENT, INC.
NOTES TO PROFORMA SELECTED FINANCIAL DATA
(UNAUDITED)
(a) Reflects additional general and administrative and operating expenses as
a result of integrating acquired operations. This adjustment includes
additional salaries and personnel expenses for certain acquisitions,
interim operating agreement management fees and other corporate expenses
expected to be incurred in connection with the acquisitions.
(b) Reflects the elimination of corporate overhead charges allocated to
certain of the acquired companies by each company's respective parent and
the elimination of expenses related to the officers of the certain
acquired entities. The Company did not acquire the parent's operations
and therefore did not assume these liabilities and expenditures. In
addition, the Company did not hire certain officers of certain of the
acquired operations.
(c) Reflects the incremental depreciation and amortization resulting from the
step-up of property and equipment in accordance with purchase accounting
for the acquired operations and the adjustment of depreciation methods
associated with certain of the acquired operations.
(d) Reflects additional interest expense as a result of seller notes payable
and borrowings under the Company's line of credit in order to fund the
cash portion of the acquisitions and the elimination of interest expenses
of certain of the acquired operations upon the repayment of debt by the
Company immediately following the acquisition where applicable.
(e) Reflects adjustment to income taxes related to pro forma adjustments.
(f) Reflects the impact of shares issued in connection with certain
acquisitions.
27
<PAGE> 28
SIGNATURE
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.
AMERICAN HOMEPATIENT, INC.
By: /s/ Mary Ellen Rodgers
----------------------
Name: Mary Ellen Rodgers
Title: Chief Financial Officer and an
Officer Duly authorized to Sign
on behalf of the Registrant
Date: October 15, 1996
28
