<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------
FORM 8-K/A
AMENDMENT NO. 1 TO 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 30, 1998
UNIVERSAL HOSPITAL SERVICES, INC.
---------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 0-20086 41-0760940
- -------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1250 Northland Plaza, 3800 West 80th Street, Bloomington, Minnesota 55431-4442
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 893-3200
--------------------------
Not Applicable
- -------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
The Undersigned registrant hereby amends the following items, financial
statements, pro forma financial information and exhibits, if any, or other
portions of its Form 8-K Report dated July 30, 1998, filed August 13, 1998, as
set forth in the pages attached hereto:
Item 2. Acquisition or Disposition of Assets.
------------------------------------
As previously reported, on July 30, 1998, Universal Hospital Services,
Inc. (the "Company") acquired HCI Acquisition Corp. ("HCI"), the parent
company of Home Care Instruments, Inc., pursuant to a Stock Purchase
Agreement of the same date among the Company and the shareholders of
HCI. As a result of the acquisition, the Company acquired all of the
outstanding capital stock of HCI, and HCI became a wholly owned
subsidiary of the Company. In connection with the acquisition, the
Company paid approximately $19.3 million to the shareholders of HCI
less the repayment by the Company of approximately $3.6 million of
outstanding indebtedness of HCI. In connection with the acquisition,
the Company amended its Credit Agreement among the Company, Various
Lending Institutions and Bankers Trust Company, as Administrative
Agent, dated as of February 25, 1998 (the "Credit Agreement") to permit
the acquisition, to increase the Borrowing Base, as defined under the
Credit Agreement, as the sum of (i) up to 85% of eligible receivables
and (ii) up to 60% of eligible rental equipment and to increase the
revolving commitment under the Credit Agreement to $40 million. The
purchase price was paid in cash borrowings under the Credit Agreement.
A complete copy of the Credit Agreement has been attached as an exhibit
to the Company's reports filed with the Securities and Exchange
Commission.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
------------------------------------------------------------------
(a) Financial Statements of Business Acquired
-----------------------------------------
Financial statements required to be filed pursuant to Item 7 of
Form 8-K filed October 13, 1998 for HCI Acquisition Corp. and
Subsidiaries.
(b) Pro Forma Financial Information
-------------------------------
Pro forma financial information required to be filed pursuant
to Item 7 of Form 8-K filed October 13, 1998, for Universal
Hospital Services, Inc. ("UHS").
1
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: October 13, 1998 UNIVERSAL HOSPITAL SERVICES, INC.
/s/ David E. Dovenberg
----------------------------------------
David E. Dovenberg
President and CEO
2
<PAGE>
Item 7 -- Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
================================================================================
HCI ACQUISITION CORP.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
================================================================================
3
<PAGE>
Contents
- --------------------------------------------------------------------------------
Page
Independent Auditors' Report....................................... 1
Consolidated Financial Statements
Consolidated Balance Sheet.................................... 2
Consolidated Statements of Income And
Retained Earnings........................................ 3
Consolidated Statement of Cash Flows.......................... 4
Notes to Consolidated Financial Statements.................... 5-11
Supplementary Data
Independent Auditors' Report on Supplementary Data............ 12
Consolidating Balance Sheet................................... 13
Consolidating Statement of Income............................. 14
Consolidating Schedule of Cost of Sales....................... 15
Consolidating Schedule of Operating Expenses.................. 16
4
<PAGE>
[LETTERHEAD OF RUBIN, BROWN, GORNSTEIN & CO. LLP]
INDEPENDENT AUDITORS' REPORT
Board of Directors
HCI Acquisition Corp. and Subsidiaries
St. Louis, Missouri
We have audited the accompanying consolidated balance sheet of HCI Acquisition
Corp. and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of income, retained earnings and cash flows for the
years then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits 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 statement presentation. We believe that our audits
provide 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 HCI Acquisition
Corp. and subsidiaries as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Rubin, Brown Gornstein & Co. LLP
February 6, 1998
[LETTERHEAD OF RUBIN, BROWN, GORNSTEIN & CO. LLP]
5
<PAGE>
HCI ACQUISITION CORP. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
JUNE 30, 1996
1998 (As Restated-
(unaudited) 1997 Note 3)
------------ -----------------------
<S> <C> <C> <C>
REVENUE PRODUCING EQUIPMENT (NOTES 4 AND 7) $4,991,972 $5,206,767 $4,833,389
- -------------------------------------------------------------------------------------------------
OTHER ASSETS
Cash 2,001 31,678 6,842
Accounts receivable (less allowance for doubtful
accounts of $25,400 in 1997 and 1996 - Note 7) 1,544,041 1,473,419 1,471,642
Inventory (Note 7) 283,149 285,985 230,806
Prepaid and refundable income taxes -- 2,699 --
Prepaid expenses and miscellaneous receivables -- 11,436 6,259
Equipment and leasehold improvements (Notes 5 and 7) 322,147 438,257 293,799
Other assets (Note 6) 979,456 716,408 110,748
- -------------------------------------------------------------------------------------------------
TOTAL OTHER ASSETS 3,130,794 2,959,882 2,120,096
- -------------------------------------------------------------------------------------------------
$8,122,766 $8,166,649 $6,953,485
=================================================================================================
LIABILITIES AND STOCKHOLDERS'EQUITY
LIABILITIES
Notes payable (Note 7) $4,025,880 $4,261,757 $3,796,886
Accounts payable and accrued expenses 1,040,580 1,279,324 1,259,874
Income taxes payable -- -- 146,638
Deferred income tax liability (Note 9) 660,000 660,000 670,000
- -------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 5,726,460 6,201,081 5,873,398
- -------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock:
Authorized 1,000 shares of $1 par value;
issued and outstanding 1,000 shares 1,000 1,000 1,000
Additional paid-in capital 447,762 447,762 447,762
Retained earnings 1,947,544 1,516,806 631,325
- -------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS'EQUITY 2,396,306 1,965,568 1,080,087
- -------------------------------------------------------------------------------------------------
$8,122,766 $8,166,649 $6,953,485
=================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
See the accompanying notes to consolidated financial statements.
6
<PAGE>
HCI ACQUISITION CORP. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
AND RETAINED EARNINGS
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEARS ENDED DECEMBER 31,
MONTHS ENDED -----------------------------------------
JUNE 30, 1996
1998 ---------------------
UNAUDITED 1997 (As Restated - Note 3)
---------------------------------------------------------
AMOUNT AMOUNT % AMOUNT %
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES $3,959,796 $8,335,290 100.0 $7,751,584 100.0
COST OF SALES 1,840,070 3,168,924 38.0 3,206,613 41.4
- ---------------------------------------------------------------------------------------------------
GROSS PROFIT 2,119,726 5,166,366 62.0 4,544,971 58.6
OPERATING EXPENSES 1,221,873 3,340,351 40.1 2,811,735 36.2
- ---------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS 897,853 1,826,015 21.9 1,733,236 22.4
OTHER EXPENSES (NOTE 8) 179,853 416,255 5.0 448,685 5.8
- ---------------------------------------------------------------------------------------------------
INCOME BEFORE PROVISION FOR INCOME TAXES 718,000 1,409,760 16.9 1,284,551 16.6
PROVISION FOR INCOME TAXES (NOTE 9) 287,262 524,279 6.3 471,816 6.1
- ---------------------------------------------------------------------------------------------------
NET INCOME $ 430,738 $ 885,481 10.6 $ 812,735 10.5
===================================================================================================
</TABLE>
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
BALANCE - BEGINNING OF YEAR -
AS PREVIOUSLY REPORTED $1,516,806 $ 631,325 $ 513,590
PRIOR PERIOD ADJUSTMENT (NOTE 3) -- -- (695,000)
- ------------------------------------------------------------------------------
BALANCE (DEFICIT) - BEGINNING OF YEAR -
AS RESTATED 1,516,806 631,325 (181,410)
NET INCOME 430,738 885,481 812,735
- ------------------------------------------------------------------------------
BALANCE - END OF PERIOD $1,947,544 $1,516,806 $ 631,325
==============================================================================
- --------------------------------------------------------------------------------
See the accompanying notes to consolidated financial statements.
7
<PAGE>
HCI ACQUISITION CORP. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE FOR THE YEARS
SIX MONTHS ENDED DECEMBER 31,
ENDED JUNE 30, --------------------------
1998 1996
-------------- (As Restated-
UNAUDITED 1997 Note 3)
-----------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 430,738 $ 885,481 $ 812,735
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 825,934 1,615,070 1,447,130
Net (gain) loss on sale of revenue producing equipment (6,904) 89,258 8,211
Change in assets and liabilities:
Increase in accounts receivable (70,622) (1,777) (208,160)
(Increase) decrease in inventory 2,836 (55,179) 10,619
Increase in prepaid and refundable income taxes 2,699 (2,699) --
(Increase) decrease in prepaid expenses and
miscellaneous receivables 11,436 (5,177) 1,467
Increase (decrease) in accounts payable and
accrued expenses (238,744) 19,450 (67,067)
Increase (decrease) in income taxes payable -- (146,638) 60,617
Decrease in deferred income tax liability -- (10,000) (25,000)
- --------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 957,373 2,387,789 2,040,552
- --------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of revenue producing equipment 169,551 285,396 367,773
Proceeds from sale of equipment and leasehold improvements 63,319
Payments for revenue producing equipment (711,974) (2,143,040) (1,910,872)
Payments for equipment and leasehold improvements (9,021) (312,158) (164,996)
Payments for deposits -- (13,022) (1,270)
Payments for deferred merger costs -- -- (19,625)
Cash acquired upon purchase of net assets of Advanced
Durable Medical, Inc. -- -- 5,901
Additional payment for goodwill related to look-back
agreement -- (250,000) --
Other assets (263,048)
- --------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (751,173) (2,432,824) (1,723,089)
- --------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
Net advances (payments) on notes payable (235,877) 69,871 (314,340)
- --------------------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN CASH (29,677) 24,836 3,123
CASH - BEGINNING OF YEAR 31,678 6,842 3,719
- --------------------------------------------------------------------------------------------------------------------
CASH - END OF YEAR $ 2,001 $ 31,678 $ 6,842
====================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 175,540 $ 326,454 $ 329,827
Income taxes paid -- 683,616 436,199
- --------------------------------------------------------------------------------------------------------------------
Noncash investing and financing activities (Note 10)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
See the accompanying notes to consolidated financial statements.
8
<PAGE>
HCI ACQUISITION CORP. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
HCI Acquisition Corp. and its wholly-owned subsidiaries, Home Care
Instruments, Inc. and ADM Acquisition Company. Consolidated operations
relate primarily to the activities of the wholly-owned subsidiaries. All
intercompany account balances have been eliminated in consolidation.
ESTIMATES AND ASSUMPTIONS
Management uses estimates and assumptions in preparing consolidated
financial statements. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses.
REVENUE PRODUCING EQUIPMENT
Revenue producing equipment is carried at cost, less accumulated
depreciation computed using straight-line and accelerated methods over
eight years.
INVENTORY
Inventory is stated at the lower of cost or market, valued principally on
the first-in, first-out basis.
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements are carried at cost, less accumulated
depreciation and amortization computed using straight-line and accelerated
methods over periods ranging from three to seven years, including lease
terms.
DEFERRED MERGER COSTS
Deferred merger costs consist of merger and financing costs incurred in
connection with the merger which are being amortized over sixty months.
GOODWILL
Goodwill represents the excess cost of purchased companies over the fair
value of the net assets at the date of acquisition and payments to former
shareholders for waiver of certain shareholder rights under a look back
agreement. It is being amortized on the straight-line method over 15 years.
- --------------------------------------------------------------------------------
9
<PAGE>
HCI ACQUISITION CORP. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Notes To Consolidated Financial Statements (CONTINUED)
INCOME TAXES
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
income taxes related primarily to the difference between the basis of
revenue producing equipment for financial and income tax reporting. The
deferred income tax liability represents the future tax return consequences
of those differences which will be taxable when the assets are recovered.
INTERIM PERIODS
The balance sheet as of June 30, 1998, and the statements of income and
retained earning and cash flows for the six months ended June 30, 1998, are
unaudited, but, in the opinion of management of the Company, include all
adjustments necessary to present fairly, in all material respects, the
financial position as of June 30, 1998, and the results of operations and
cash flows for the Company for the six months ended June 30, 1998.
2. OPERATIONS
On February 15, 1995, the Company President and two other individuals
executed a management buy-out and corporate restructuring of Home Care
Instruments, Inc. ("Home Care") whereby all outstanding shares of Class A
common stock were redeemed for $2,430,000. As part of the restructuring,
Home Care merged with HCI Acquisition, Inc. ("HCI") and became the
surviving corporation. In addition, HCI Acquisition Corp. ("HCIAC") was
formed. The President contributed all of the outstanding shares of Class B
common stock of Home Care to HCIAC and Home Care became a wholly-owned
subsidiary of HCIAC.
The business combination was accounted for as a purchase and the results of
operations of HCI are included in the accompanying financial statements
since the date of the merger.
On May 31, 1996, the Company formed ADM Acquisition Company ("ADMAC") which
acquired the net assets of Advanced Durable Medical, Inc. ("ADM") in a
business combination accounted for as a purchase. ADM is primarily engaged
in the rental of continuous passive motion equipment to individuals for
post-surgery rehabilitation while in their homes. The total cost of the
acquisition was $178,305 which exceeded the fair value of the net assets of
ADM by $50,450. The excess is being amortized on the straight-line method
over 15 years.
The Company rents and sells medical equipment and sells medical supplies to
hospitals and home care providers. Sales offices are maintained in St.
Louis, Missouri; Chicago, IL; Cedar Rapids, IA; Indianapolis, IN; Omaha,
NE; Dallas, Texas; Lenexa, KS; Columbia, South Carolina and Detroit,
Michigan. The Company grants credit to customers located primarily in the
Midwestern United States.
- --------------------------------------------------------------------------------
10
<PAGE>
HCI ACQUISITION CORP. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Notes To Consolidated Financial Statements (CONTINUED)
3. PRIOR PERIOD ADJUSTMENT
The accompanying financial statements for 1996 have been restated to
correct an error in the understatement of the deferred tax liability. The
effect of the restatement for 1996 was to increase net income and decrease
the provision for income taxes by $90,100. The effect also decreased
retained earnings for periods prior to 1996 by $695,000.
4. REVENUE PRODUCING EQUIPMENT
Revenue producing equipment consists of:
1997 1996
-----------------------
Revenue producing equipment $7,361,070 $6,064,787
Less: Accumulated depreciation 2,154,303 1,231,398
---------------------------------------------------------
$5,206,767 $4,833,389
=========================================================
Depreciation, gains and losses on revenue producing equipment charged
against income amounted to $1,484,266 in 1997 and $1,233,308 in 1996 and is
included in cost of sales.
5. EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements consist of:
1997 1996
-------------------
Vehicle $405,231 $272,070
Furniture and fixtures 220,553 155,643
Leasehold improvements 87,856 4,190
---------------------------------------------------------
713,640 431,903
Less: Accumulated depreciation and
amortization 275,383 138,104
---------------------------------------------------------
$438,257 $293,799
=========================================================
Depreciation and amortization on equipment and leasehold improvements
charged against income amounted to $171,063 in 1997 and $110,846 in 1996
and is included in operating expenses.
- --------------------------------------------------------------------------------
11
<PAGE>
HCI ACQUISITION CORP. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Notes To Consolidated Financial Statements (CONTINUED)
6. OTHER ASSETS
Other assets consist of:
1997 1996
-------------------
Deferred merger costs, net of amortization $ 34,465 $ 50,992
Goodwill, net of amortization 657,653 48,488
Deposits 24,290 11,268
----------------------------------------------------------------
$716,408 $110,748
================================================================
Amortization of deferred merger costs and goodwill charged against income
amounted to $48,999 in 1997 and $118,858 in 1996 (Note 8). Costs related to
the original financing of the merger in the amount of $75,471 were expensed
when the debt was refinanced in 1996.
7. NOTES PAYABLE
Notes payable consist of the following:
1997 1996
---------- -----------
Note payable - bank, secured by accounts
receivable, inventory, equipment, and
personal guarantees of the shareholders,
payable in monthly principal installments
of $38,889 plus interest at 7.91%, with a
final balloon payment due June 30, 2001 $2,138,889 $2,566,668
Note payable - bank (revolving line of
credit), secured by accounts receivable,
inventory, equipment and personal
guarantees of the shareholders, bears
interest at the prime rate plus 0.75%,
due June 30, 2001 1,805,000 1,065,000
Notes payable - bank, secured by vehicles,
payable in monthly installments of $10,229
including principal and interest between
4.8%-10.75%, due at various dates through
October 2001 167,868 165,218
Note payable - shareholders, unsecured,
bearing interest at 9%, paid off subsequent
to year end 150,000 --
------------------------------------------------------------------------
$4,261,757 $3,796,886
========================================================================
- -------------------------------------------------------------------------------
12
<PAGE>
HCI ACQUISITION CORP. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Notes To Consolidated Financial Statements (CONTINUED)
The scheduled maturities of notes payable at December 31, 1997 are as
follows:
YEAR AMOUNT
----------------------------------------
1998 $ 704,948
1999 517,868
2000 490,772
2001 2,548,169
----------------------------------------
$ 4,261,757
========================================
Interest expense amounted to $367,256 in 1997 and $329,827 in 1996 (Note
8).
An agreement with the bank provides that the Company comply with certain
loan covenants and maintain certain net worth and debt service coverage
ratios. In addition, certain restrictions relating to, among other things,
mergers or consolidations, payment of dividends, pledging or assigning any
assets of the Company, the creation of additional indebtedness, and
becoming a guarantor in another company also apply.
The Company was in compliance with all loan covenants as of December 31,
1997.
In February 1998, the Company refinanced its revolving line of credit with
a bank into a $2,000,000 term loan to be amortized over a six year period
with a five year maturity date. The term loan is secured by accounts
receivable, inventory, equipment and personal guarantees of the
shareholders and bears interest at 9.25%.
The Company also obtained a new $1,000,000 revolving line of credit with a
two year maturity. This line of credit is secured by accounts receivable,
inventory, equipment and personal guarantees of the shareholders and bears
interest at the prime rate plus 0.75%.
8. OTHER EXPENSES
Other expenses consist of:
1997 1996
-------------------
Interest expense (Note 7) $367,256 $329,827
Amortization of deferred merger costs (Note 6) 48,999 118,858
--------------------------------------------------------------------
$416,255 $448,685
====================================================================
- -------------------------------------------------------------------------------
13
<PAGE>
HCI ACQUISITION CORP. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Notes To Consolidated Financial Statements (CONTINUED)
9. INCOME TAXES
The provision for income taxes consists of:
1997 1996
-----------------------
Current federal and state income taxes
computed at statutory rates in effect $ 534,279 $ 496,816
Deferred income tax credit (10,000) (25,000)
-------------------------------------------------------------------------
$ 524,279 $ 471,816
=========================================================================
10. SUPPLEMENTAL CASH FLOW INFORMATION
The Company had the following noncash investing and financing activities
during 1997 and 1996:
On February 1, 1997, the Company acquired the rental equipment of Omni
Medical Supply and the rental income stream derived from those assets in a
business combination accounted for as a purchase. The total cost of the
acquisition was $600,000 which exceeded the fair value of the rental
equipment by $395,000. The Company funded the acquisition through
shareholder debt infusion of $150,000 and borrowings on the step-down
revolving note.
On May 31, 1996, the Company's acquisition of the net assets of Advanced
Durable Medical, Inc. was financed in the amount of $178,305. The balance
sheet of Advanced Durable Medical, Inc. on the acquisition date was as
follows:
ASSETS
Revenue producing equipment - net $105,000
Cash 5,901
Accounts receivable 56,131
Equipment 25,000
Goodwill 50,450
--------
242,482
--------
LIABILITIES
Accounts payable and accrued expenses 19,331
Notes payable 44,846
--------
64,177
--------
TOTAL NET ASSETS PURCHASED $178,305
========
- --------------------------------------------------------------------------------
14
<PAGE>
HCI ACQUISITION CORP. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Notes To Consolidated Financial Statements (CONTINUED)
11. COMMITMENTS
On February 15, 1997, the Company entered into a lease agreement at a new
location in St. Louis which provides for annual base rentals of $64,200
throughout the terms of the lease, which expires April 30, 2000.
The Company is also obligated under additional leases for its sales
offices. The leases expire at various dates through 2000.
Rent expense charged to operations amounted to $118,557 in 1997 and
$120,239 in 1996.
The minimal annual lease payments for the remaining terms of the leases are
as follows:
YEAR AMOUNT
---------------------------------------
1998 $ 128,000
1999 124,000
2000 60,000
---------------------------------------
$ 312,000
=======================================
12. SUBSEQUENT EVENTS
On February 28, 1998, the shareholders of HCI Acquisition Corp. and
subsidiaries purchased the stock of ADM Acquisition Company for $200,000.
- --------------------------------------------------------------------------------
15
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTARY DATA
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The consolidating balance
sheet, statement of income and consolidating schedules of cost of sales and
operating expenses are presented for purposes of additional analysis and are not
a required part of the basic consolidated financial statements. Such information
has not been subjected to the auditing procedures applied in the audit of the
basic consolidated financial statements and, accordingly, we express no opinion
on it.
/s/ Rubin, Brown Gornstein & Co. LLP
February 6, 1998
- --------------------------------------------------------------------------------
16
<PAGE>
HCI ACQUISITION CORP. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1997 AND 1996
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------------------
1997 1996
---------------------------------------------------------------- (AS RESTATED)
HCI HOME CARE ADM -------------
ACQUISITION INSTRUMENTS, ACQUISITION CONSOLIDATED CONSOLIDATED
CORP. INC. COMPANY ELIMINATIONS TOTALS TOTALS
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUE PRODUCING EQUIPMENT $ -- $ 5,075,803 $130,964 $ -- $ 5,206,767 $ 4,833,389
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS
Cash -- -- 31,678 -- 31,678 6,842
Accounts receivable (less allowance
for doubtful accounts of $25,400
in 1997 and 1996) -- 1,373,068 100,351 -- 1,473,419 1,471,642
Inventory -- 283,149 2,836 -- 285,985 230,806
Prepaid and refundable income taxes -- 2,699 -- -- 2,699 --
Prepaid expenses and miscellaneous receivables -- 11,436 -- -- 11,436 6,259
Investment in subsidiary 448,762 178,305 -- (627,067) -- --
Equipment and leasehold improvements -- 379,846 58,411 -- 438,257 293,799
Due from affiliated company -- 138,173 -- (138,173) -- --
Other assets -- 671,283 45,125 -- 716,408 110,748
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER ASSETS 448,762 3,037,959 238,401 (765,240) 2,959,882 2,120,096
- ------------------------------------------------------------------------------------------------------------------------------------
$448,762 $ 8,113,762 $369,365 $ (765,240) $8,166,649 $ 6,953,485
====================================================================================================================================
LIABILITIES
Notes payable $ -- $ 4,242,475 $ 19,282 $ -- $4,261,757 $ 3,796,886
Accounts payable and accrued expenses -- 1,261,949 17,375 -- 1,279,324 1,259,874
Income taxes payable -- -- -- -- -- 146,638
Deferred income tax liability -- 660,000 -- -- 660,000 670,000
Due to affiliated company -- -- 138,173 (138,173) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES -- 6,164,424 174,830 (138,173) 6,201,081 5,873,398
- ------------------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock 1,000 1,000 1,000 (2,000) 1,000 1,000
Additional paid-in capital 447,762 447,762 177,305 (625,067) 447,762 447,762
Retained earnings -- 1,500,576 16,230 -- 1,516,806 631,325
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 448,762 1,949,338 194,535 (627,067) 1,965,568 1,080,087
- ------------------------------------------------------------------------------------------------------------------------------------
$448,762 $ 8,113,762 $369,365 $ (765,240) $8,166,649 $ 6,953,485
====================================================================================================================================
</TABLE>
See the accompanying independent auditors' report on supplementary data.
17
<PAGE>
HCI ACQUISITION CORP. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATING STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1996
1997 (AS RESTATED)
--------------------------------------------------------------------
CONSOLIDATED CONSOLIDATED
HOME CARE ADM TOTALS TOTALS
INSTRUMENTS, ACQUISITION -------------------- --------------------
INC. COMPANY AMOUNT % AMOUNT %
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET SALES $7,875,490 $ 459,800 $8,335,290 100.0 $7,751,584 100.0
COST OF SALES 3,102,479 66,445 3,168,924 38.0 3,206,613 41.4
- -------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 4,773,011 393,355 5,166,366 62.0 4,544,971 58.6
OPERATING EXPENSES 2,943,490 396,861 3,340,351 40.1 2,811,735 36.2
- -------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS 1,829,521 (3,506) 1,826,015 21.9 1,733,236 22.4
OTHER EXPENSES
Interest expense 365,944 1,312 367,256 4.4 329,827 4.3
Amortization of deferred merger costs 48,999 -- 48,999 0.6 118,858 1.5
- -------------------------------------------------------------------------------------------------------------------
TOTAL OTHER EXPENSES 414,943 1,312 416,255 5.0 448,685 5.8
- -------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES 1,414,578 (4,818) 1,409,760 16.9 1,284,551 16.6
PROVISION FOR INCOME TAXES 524,279 -- 524,279 6.3 471,816 6.1
- -------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 890,299 $ (4,818) $ 885,481 10.6 $ 812,735 10.5
===================================================================================================================
</TABLE>
18
<PAGE>
Item 7 - Financial Statements and Exhibits
(b) Pro Forma Financial Information
On February 25, 1998, the Company completed a merger pursuant to the
Agreement and Plan of Merger (the Merger), dated as of November 25, 1997,
between UHS Acquisition Corp., a newly-formed Minnesota corporation
controlled by J.W. Childs Equity Partners, L.P. ("Childs"), with and into
the Company. In connection with the Merger, the following occurred:
* The Company's existing shareholders (other than the new senior
management team and certain other continuing members of management)
received, in consideration for the cancellation of approximately 53
million shares of the Company's common stock and options to purchase
approximately 3.3 million shares of common stock, cash in the aggregate
amount of approximately $84.7 million (net of aggregate option exercise
price) or $1.55 per share.
* The Company repaid the outstanding principal balance of
approximately $35.5 million under existing loan agreements and incurred
early termination fees and write-off of the related deferred financing
cost.
* The Company paid fees and expenses of approximately $11.5 million
related to the Merger of which approximately $5.9 million were
capitalized as deferred financing costs.
* The Company paid approximately $3.3 million in severance payments to
certain noncontinuing members of the Company's management of which
$476,000 had already been accrued.
* The Company received an equity contribution of approximately $21.3
million from Childs and affiliates and the management investors.
* The Company issued $100 million in aggregate principal amount of 10.25%
Senior Notes due 2008 (the Senior Notes).
* The Company borrowed approximately $14.3 million under a new Revolving
Credit Facility.
* The Company recognized a tax benefit from the exercise of stock options
of $1 million.
The transaction was structured as a leveraged recapitalization for
accounting purposes.
19
<PAGE>
Pro Forma Financial Information (Continued)
On July 30, 1998, the Company acquired Home Care Instruments, Inc. ("HCI")
pursuant to a stock purchase agreement among the Company and the
shareholders of HCI. Pursuant to the agreement, the Company acquired all of
the outstanding capital stock of HCI for approximately $20 million, which
includes repayment of approximately $4 million of outstanding indebtedness
of HCI. The purchase price was paid with draws on the Company's Revolving
Credit Facility and issuance of 256,272 shares of the Company's common
stock valued at $715,000.
Home Care Instruments, Inc. rents medical equipment to the home care and
hospital markets in the Midwestern United States, renting approximately 100
types of equipment. The Company also supplies disposable medical products
used in connection with the Company's rental equipment and provides a
variety of biomedical services.
The following pro forma condensed consolidated statements of operations for
the six months ended June 30, 1998, and the year ended December 31, 1997,
give effect to the merger, acquisition and the financing thereof as if such
transactions had occurred at January 1, 1997. The pro forma condensed
consolidated balance sheet as of June 30, 1998, gives effect to the
acquisition and the financing thereof as if such transactions had occurred
as of that date. The recapitalization was structured as a leveraged
recapitalization for accounting purposes, with all assets and liabilities
being carried over at historical cost. The acquisition was accounted for
pursuant to the purchase method of accounting.
The pro forma financial data presented herein based on management's
estimate of the effects of the recapitalization and acquisition and
financing thereof. The pro forma financial data is based upon current
available information and certain assumptions that the Company believes are
reasonable. The Company does not expect the receipt of additional
information to have a material adverse effect on the pro forma financial
data. The pro forma condensed consolidated statements of operations for the
six months ended June 30, 1998, and the year ended December 31, 1997, and
the pro forma condensed consolidated balance sheet as of June 30, 1998 are
unaudited, but in the opinion of the Company include all adjustments,
consisting of normal recurring adjustments, necessary for a fair
presentation of the results of operations and financial position for the
periods presented.
The pro forma condensed consolidated statements of operations for the six
months ended June 30, 1997, and the year ended December 31, 1997, and the
pro forma condensed consolidated balance sheet as of June 30, 1998 are not
necessarily indicative of the results of operations or financial position
that actually would have been achieved had the transactions described been
consummated as of the dates indicated, or that may be achieved in the
future.
20
<PAGE>
UNIVERSAL HOSPITAL SERVICES, INC.
UNAUDITED PRO FORMA CONDENSED
BALANCE SHEET
June 30, 1998
(DOLLARS IN THOUSANDS, except per share
information)
<TABLE>
<CAPTION>
Universal Home Care
Hospital Instruments,
Services, Inc. Inc. Pro Forma
Historical(1) Historical(2) Adjustments Pro Forma
---------- --------- ------------ ----------
ASSETS
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents 2 2
Accounts receivable, net 12,417 1,544 150 (2) 14,111
Inventories 1,760 283 (25)(4) 2,018
Other current assets 2,753 337 (337)(5) 2,753
Deferred income taxes 418 237 (6) 655
--------- --------- --------- ---------
Total current assets 17,348 2,166 25 19,539
Property and equipment, net 54,102 5,314 59,416
Intangible assets primarily, goodwill and deferred
financing costs, net 19,880 643 13,654 (7) 34,177
--------- --------- --------- ---------
Total assets $ 91,330 $ 8,123 $ 13,679 $ 113,132
========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current portion of long-term debt 201 800 (800)(8) 201
Accounts payable and accrued expenses 8,326 1,041 516 (9) 9,883
--------- --------- --------- ---------
Total current liabilities 8,527 1,841 (284) 10,084
Long-term debt 112,764 3,226 15,644 (8) 131,634
Deferred income taxes 3,495 660 4,155
Deferred compensation and pension 1,701 1,701
Shareholders' equity (deficiency)
Common Stock, $0.01 par value; 25,000,000 shares
authorized, 15,624,464 shares issued and
</TABLE>
21
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
outstanding, 15,880,736 issued and outstanding
on a pro forma basis 156 1 24 (10) 181
Additional paid in capital 448 242 (10) 690
Accumulated deficit (35,262) 1,947 (1,947)(10) (35,262)
Stock subscription receivable (51) (51)
--------- --------- --------- ---------
Total shareholders' equity (deficiency) (35,157) 2,396 (1,681) (34,442)
--------- --------- --------- ---------
Total liabilities and shareholders' equity $ 91,330 $ 8,123 $ 13,679 $ 113,132
========= ========= ========= =========
</TABLE>
See accompanying notes to unaudited pro forma condensed financial statements
22
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
as of June 30, 1998
The purchase price has been allocated to assets and liabilities as indicated in
the following summary open balance sheet of HCI (in thousands):
HCI
-------
Current assets $ 2,169
Property and equipment, net 5,314
Goodwill 14,109
-------
Total assets $21,592
Accounts payable, accrued compensation, pension and
Accrued expenses $ 1,497
Deferred income taxes 660
-------
Total liabilities $ 2,157
-------
Net assets $19,435
1. Represents the unaudited historical balance sheet of the Company as of June
30, 1998, as reported in the Company's June 30, 1998 Form 10-Q as filed
with the SEC.
2. Represents the unaudited historical balance sheet of HCI as of June 30,
1998.
3. Represents fair value adjustments to accounts receivable of HCI, and an
adjustment to accounts receivable of HCI to conform with the Company's
revenue recognition policy.
4. Represents fair value adjustment to inventories of HCI.
5. Represents the reduction of shareholder notes receivable paid at closing of
HCI acquisition.
6. Represents deferred tax adjustments resulting from other pro forma balance
sheet adjustments.
7. Represents excess of the purchase price on net assets acquired, deferred
financing costs paid for new debt incurred to finance the acquisition, and
the elimination of HCI historical goodwill.
8. Represents the net of HCI debt repaid in conjunction with the acquisition
and new debt incurred to finance the acquisition.
23
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
as of June 30, 1998 (Continued)
9. Represents the establishment of severance accruals for employees terminated
at HCI in connection with the acquisition and accruals recorded upon
acquisition in connection with liabilities incurred upon acquisition and
establishment of accruals to conform to the Company's policies.
10. Represents the elimination of HCI shareholders' equity and the addition of
common stock issued in connection with the HCI acquisition.
24
<PAGE>
UNIVERSAL HOSPITAL SERVICES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNIVERSAL HOME CARE
HOSPITAL INSTRUMENTS,
SERVICES, INC. INC. PRO FORMA
HISTORICAL(1) HISTORICAL(2) ADJUSTMENTS PRO FORMA
-------- ------------- ----------- ---------
Revenues:
<S> <C> <C> <C> <C>
Equipment rentals $ 29,160 $ 3,117 $ (82)(3) $ 32,195
Sales of supplies and equipment, and other 2,366 843 3,209
-------- -------- ------ --------
Total revenues 31,526 3,960 (82) 35,404
Costs of rentals and sales:
Cost of equipment rentals 7,276 437 7,713
Rental equipment depreciation 7,845 773 (9)(4) 8,609
Cost of supplies and equipment sales 1,558 630 (7)(4) 2,181
-------- -------- ------ --------
Total cost of rentals and sales 16,679 1,840 (16) 18,503
-------- -------- ------ --------
Gross profit 14,847 2,120 (66) 16,901
Selling, general and administrative 9,419 1,221 (99)(5) 10,541
Recapitalization and transaction costs 5,028 (5,028)(6)
-------- -------- ------ --------
Operating income 400 899 5,061 6,360
Interest expense 4,392 181 2,099(7) 6,672
-------- -------- ------ --------
(Loss) income before income taxes and extraordinary charge (3,992) 718 2,962 (312)
(Benefit) provision for income taxes: (678) 287 316(8) (75)
-------- -------- ------ --------
Net (loss) income before extraordinary charge (3,314) 431 2,646 (237)
Extraordinary charge, net of tax benefit of $1,300 1,863 (1,863)(9)
-------- -------- ------ --------
Net (loss) income ($ 5,177) $ 431 $4,509 $ (237)
======== ======== ====== ========
</TABLE>
25
<PAGE>
See accompanying notes to unaudited pro forma condensed statement of income.
26
<PAGE>
UNIVERSAL HOSPITAL SERVICES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNIVERSAL
HOSPITAL HOME CARE
SERVICES, INSTRUMENTS,
INC. INC.
HISTORICAL HISTORICAL PRO FORMA
(1) (2) ADJUSTMENTS PRO FORMA
------------------- ----------- -------
<S> <C> <C> <C> <C>
Revenues:
Equipment rentals $ 54,489 $ 6,460 $ (460)(3) $60,489
Sales of supplies and equipment, and other 5,586 1,875 7,461
-------- -------- ------- -------
Total revenues 60,075 8,335 (460) 67,950
Costs of rentals and sales:
Cost of equipment rentals 13,577 793 14,370
Rental equipment depreciation 14,435 1,579 (15)(4) 15,999
Cost of supplies and equipment sales 3,838 1,589 (52)(4) 5,375
-------- -------- ------- -------
Total cost of rentals and sales 31,850 3,961 (67) 35,744
-------- -------- ------- -------
Gross profit 28,225 4,374 (393) 32,206
Selling, general and administrative 18,448 2,598 (1,119)(5) 19,927
Recapitalization and transaction costs 1,719 (1,719)(6)
-------- -------- ------- -------
Operating income (loss) 8,058 1,776 2,445 12,279
Interest expense 3,012 367 10,407(7) 13,786
-------- -------- ------- -------
Income (loss) before income taxes and extraordinary charge 5,046 1,409 (7,962) (1,507)
Provision (benefit) for income taxes: 2,347 524 (3,306)(8) (435)
-------- -------- ------- -------
Net income (loss) $ 2,699 $ 885 $(4,656) $(1,072)
======== ======== ======= =======
</TABLE>
See accompanying notes to unaudited pro forma condensed statement of income.
27
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Six Months Ended June 30, 1998
And the Year Ended December 31, 1997
1. Represents the unaudited historical statement of income of the Company for
the six months ended June 30, 1998, as reported in the Company's June 30,
1998, Form 10-Q as filed with the SEC and the audited historical Statement
of Income for the Company for the year ended December 31, 1997.
2. Represents the unaudited historical statement of income of HCI for the six
months ended June 30, 1998, and the audited historical Statement of Income
of HCI for the year ended December 31, 1997.
3. Represents the elimination of revenue related to ADM, Inc., a wholly-owned
subsidiary of HCI, not acquired by the Company.
4. Represents the elimination of cost of goods sold related to ADM, Inc.
5. Represents the following:
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
June 30, December 31,
1998 1997
------ -------
<S> <C> <C>
Decrease in senior management team compensation
that did not continue employment with the Company
after the recapitalization. (176) (986)
Net of amortization expense of goodwill
capitalized as a result of the acquisition
and the reduction of HCI historical goodwill
eliminated. 443 885
Removal of compensation expense of employees
of HCI terminated as a result of the
acquisition and not replaced. (138) (316)
Decrease in senior management compensation
of HCI employees, to new annual compensation
per employment agreements. (107) (215)
Reduction of office rent for HCI offices
closed as part of the acquisitions. (45) (90)
Elimination of selling general and administrative
expense of ADM, Inc. (56) (397)
---- -------
$(99) $(1,119)
==== =======
</TABLE>
28
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Six Months Ended June 30, 1998
And the Year Ended December 31, 1997 (Continued)
6. Reflects recapitalization and transaction costs consisting primarily of
legal investment banking and special committee fees incurred by the Company
in connection with the recapitalization and the process of exploring
strategic alternatives to enhance shareholder value prior to the date of
the recapitalization.
7. Represents increase interest expense related to indebtedness incurred to
complete the recapitalization and acquisition and amortization of related
deferred financing fees, offset by decreased interest expense of the
Company and HCI retired in conjunction with the recapitalization and
acquisition.
8. Represents the tax effect of the pro forma adjustments at the Company's
effective rate.
9. Represents the elimination of an extraordinary charge of $1,863 net of tax
benefit of $1,300 for the write-off of unamortized deferred financing fees
and prepayment penalty related to debt retired using proceeds of the
offering.
29
