<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 3, 1997
Transworld HealthCare, Inc.
--------------------------------------------------
(Exact name of Registrant as specified in its charter)
New York
--------------------------------------------------
(State or other jurisdiction of incorporation)
1-11570 13-3098275
- ------------------------ ------------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
555 Madison Avenue, New York, New York 10022
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 750-0064
--------------------------------------------------
(Former name or former address, if changed since last report.)
The registrant hereby amends the following items, financial statements,
exhibits or other portions of its Current Report on Form 8-K filed on or about
July 3, 1997 as set forth in the pages attached hereto: Item 7. Financial
Statements, Pro Forma Financial Information and Exhibits.
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
The following are filed as part of this Form 8-K/A:
(a) Financial Statements of Allied Medicare Limited.
Statement of Directors' Responsibilities 3
Auditors' Report 4
Profit and Loss Accounts - For the Years Ended March 31, 1997
and 1996 5
Statements of Total Recognised Gains and Losses - For the
Years Ended March 31, 1997 and 1996 6
Balance Sheets - At March 31, 1997 and 1996 7
Cash Flow Statements - For the Years Ended March 31, 1997
and 1996 8
Notes on Financial Statements 9
(b) Unaudited Pro Forma Combined Condensed Financial
Statements. 17
Pro Forma Combined Condensed Balance Sheet as of April 30,
1997 (Unaudited) 19
Pro Forma Combined Condensed Statement of Operations for
the Year Ended October 31, 1996 (Unaudited) 20
Pro Forma Combined Condensed Statement of Operations for
the Six Months Ended April 30, 1997 (Unaudited) 21
Notes to the Unaudited Pro Forma Combined Condensed Financial
Statements 22
Certain statements contained herein are forward-looking statements that
have been made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements
involve known and unknown risks and uncertainties which may cause the
actual results in the future periods or plans for future periods to
differ materially from those described herein as anticipated, believed
or estimated.
-2-
<PAGE> 3
ALLIED MEDICARE LIMITED
STATEMENT OF DIRECTORS' RESPONSIBILITIES
We are required under company law to prepare financial statements for each
financial year which give a true and fair view of the state of affairs of the
company and of the profit or loss of the company for that period. In preparing
those financial statements we are required to:
- select suitable accounting policies and apply them consistently;
- make reasonable and prudent judgements and estimates;
- prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the company will continue in
business.
We are also responsible for:
- keeping proper accounting records;
- safeguarding the company's assets;
- taking reasonable steps for the prevention and detection of fraud.
On behalf of the board
/s/ D I Johnson
--------------------------------------
D I Johnson
Director
Dated
15 May 1997
-3-
<PAGE> 4
ALLIED MEDICARE LIMITED
AUDITORS' REPORT
AUDITORS' REPORT TO THE MEMBERS OF ALLIED MEDICARE LIMITED
We have audited the financial statements on pages 5 to 16 which have been
prepared under the historical cost convention and the accounting policies set
out on page 9.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As described on page 3, the company's directors are responsible for the
preparation of financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those statements and to report our
opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements. It
also includes an assessment of the significant estimates and judgements made by
the directors in the preparation of the financial statements, and of whether the
accounting policies are appropriate to the company's circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or error or other
irregularity. In forming our opinion we also evaluated the overall adequacy of
the presentation of information in the financial statements.
OPINION
In our opinion the financial statements give a true and fair view of the
state of the company's affairs as at 31 March 1997 and of its profit for the
year then ended and have been properly prepared in accordance with the Companies
Act 1985.
/s/ DEAN STATHAM
--------------------------------------
DEAN STATHAM
Chartered Accountants and
Registered Auditors
Bank Passage
Stafford
ST16 2JS
Dated: 3 June 1997
-4-
<PAGE> 5
ALLIED MEDICARE LIMITED
PROFIT AND LOSS ACCOUNTS
FOR THE YEARS ENDED 31 MARCH 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
Note L L
------ ---------- ----------
<S> <C> <C> <C>
Turnover.............................................. 2 8,570,813 7,362,323
Cost of sales......................................... (2,363,164) (2,024,133)
---------- ----------
Gross profit.......................................... 6,207,649 5,338,190
Net operating expenses
Administrative expenses............................... (4,656,729) (4,438,594)
Other operating income................................ 28,640 22,237
---------- ----------
Operating profit...................................... 3 1,579,560 921,833
Interest payable...................................... 5 (38,808) (44,269)
---------- ----------
Profit on ordinary activities before taxation......... 1,540,752 877,564
Taxation.............................................. 6 (618,127) (400,618)
---------- ----------
Retained profit for the year.......................... 15 922,625 476,946
========== ==========
Movements in reserves are shown in note 15.
</TABLE>
None of the company's activities were acquired or discontinued during the above
two financial years.
-5-
<PAGE> 6
ALLIED MEDICARE LIMITED
STATEMENTS OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEARS ENDED 31 MARCH 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
L L
------- -------
<S> <C> <C>
Profit for the financial year............................................ 922,625 476,946
Prior year adjustments (as explained in note 17)......................... -- (80,814)
------- -------
Total gains recognised since last annual report.......................... 922,625 396,132
======= =======
</TABLE>
-6-
<PAGE> 7
ALLIED MEDICARE LIMITED
BALANCE SHEETS
AT 31 MARCH 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
NOTE L L
---- ----------- -----------
<S> <C> <C> <C> <C> <C>
Fixed assets
Intangible assets........................... 7 766,310 358,043
Tangible assets............................. 8 1,341,031 1,133,617
--------- ---------
2,107,341 1,491,660
Current assets
Stocks...................................... 30,814 48,946
Debtors..................................... 10 4,709,290 3,580,686
Cash at bank and in hand.................... 542,273 131,787
--------- ---------
5,282,377 3,761,419
Creditors: amounts falling due within one
year...................................... 11 (4,578,557) (3,028,491)
--------- ---------
Net current assets.......................... 703,820 732,928
--------- ---------
Total assets less current liabilities....... 2,811,161 2,224,588
Creditors: amounts falling due after more
than one year............................. 12 (56,109) (392,161)
--------- ---------
2,755,052 1,832,427
========= =========
Capital and reserves
Called up share capital..................... 14 86,654 86,654
Profit and loss account..................... 15 2,668,398 1,745,773
--------- ---------
Total shareholders' funds................... 13 2,755,052 1,832,427
========= =========
</TABLE>
The financial statements on pages 5 to 16 were approved by the board of
directors on 15 May 1997 and signed on its behalf by:
/s/ D I Johnson
- -------------------------------
D I Johnson
Director
-7-
<PAGE> 8
ALLIED MEDICARE LIMITED
CASH FLOW STATEMENTS
FOR THE YEARS ENDED 31 MARCH 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
NOTE L L
---- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net cash inflow from operating
activities................................... 18 2,098,445 1,475,776
Returns on investments and servicing of finance
Interest paid.................................. (27,703) (31,799)
Interest element of finance lease rental
payments..................................... (11,105) (12,470)
--------- ---------
(38,808) (44,269)
Taxation
Corporation tax paid........................... (430,284) (550,534)
Corporation tax received....................... -- 12,760
--------- ---------
(430,284) (537,774)
Capital expenditure and financial investment
Purchase of intangible fixed assets............ (525,213) (165,275)
Purchase of tangible fixed assets.............. (498,057) (522,171)
Sale of tangible fixed assets.................. 65,572 86,405
Loans advanced................................. -- (95,000)
--------- ---------
(957,698) (696,041)
--------- ---------
671,655 197,692
Financing
Debt due within a year:
Other loan repayments........................ (310) (918)
Debt due beyond a year:
Other loan (repayments)/advances............. (200,949) 128,430
Capital element of finance lease rentals....... (60,416) (77,238)
--------- ---------
(261,675) 50,274
--------- ---------
Increase in cash............................... 409,980 247,966
========= =========
</TABLE>
-8-
<PAGE> 9
ALLIED MEDICARE LIMITED
NOTES ON FINANCIAL STATEMENTS
31 MARCH 1997
1 ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements have been prepared in accordance with applicable
accounting standards and under the historical cost accounting rules.
DEPRECIATION
Depreciation of fixed assets is calculated to write off their cost or
valuation less any residual value over their estimated useful lives as follows:
<TABLE>
<S> <C>
Freehold land................... Not depreciated
Freehold buildings.............. Commercial property, 4% straight line.
Long leasehold buildings Residential property is maintained to a
Residential property standard so that in the opinion of the
directors depreciation is not provided on
a routine basis. Provisions are made for
any permanent diminution in value.
Short leasehold................. Over terms of lease
Computers....................... 25% straight line
Office equipment................ 25% reducing balance
Motor vehicles.................. 25% reducing balance
Fixtures and fittings........... 20% reducing balance
Goodwill........................ 20% straight line
</TABLE>
LEASES AND HIRE PURCHASE CONTRACTS
Tangible fixed assets acquired under finance leases and hire purchase
contracts are capitalised at the estimated fair value at the date of inception
of each lease or contract. The total finance charges are allocated over the
period of the lease in such a way as to give a reasonably constant charge on the
outstanding liability.
Rentals paid under operating leases are charged to income as incurred.
STOCKS
Stocks are valued at the lower of cost and net realisable value. Cost is
computed on a first in first out basis.
PENSIONS
DEFINED CONTRIBUTION SCHEME
Contributions are charged to the profit and loss account as they become
payable in accordance with the rules of the scheme.
GOODWILL
Goodwill represents the excess of cost of acquisition over the fair value
of the separable net assets acquired. Goodwill is amortised through the profit
and loss account in equal instalments over its estimated useful life.
-9-
<PAGE> 10
ALLIED MEDICARE LIMITED
NOTES ON FINANCIAL STATEMENTS -- (CONTINUED)
31 MARCH 1997
2 TURNOVER
The turnover for the year was derived from the company's principal
activity. The whole of the turnover is attributable to the UK market.
3 OPERATING PROFIT
<TABLE>
<CAPTION>
1997 1996
L L
--------- ---------
<S> <C> <C>
Operating profit is stated after crediting
Rent receivable............................................... 6,600 6,600
Interest receivable........................................... 9,040 2,637
========= =========
and after charging
Staff costs (note 4).......................................... 2,175,694 2,189,586
Auditors' remuneration........................................ 10,000 10,000
Loss on sale of assets........................................ 9,298 58,021
========= =========
Depreciation of tangible fixed assets (note 8)
owned assets................................................ 179,870 121,340
leased assets............................................... 20,278 39,806
Permanent diminution in value................................. 15,625 151,876
Amortisation of intangible fixed assets (note 7).............. 189,350 154,624
--------- ---------
405,123 467,646
========= =========
</TABLE>
4 DIRECTORS AND EMPLOYEES
<TABLE>
<CAPTION>
1997 1996
L L
--------- ---------
<S> <C> <C>
Staff costs including directors' emoluments
Wages and salaries.................................................. 2,119,245 1,693,081
Social security costs............................................... 53,660 51,716
Pension costs....................................................... 2,789 444,789
--------- ---------
2,175,694 2,189,586
========= =========
NUMBER NUMBER
--------- ---------
Average monthly number employed including executive directors
Office and management............................................... 54 55
========= =========
L L
Directors' emoluments
Other emoluments.................................................... 1,707,016 1,749,425
========= =========
Emoluments exclusing pension scheme contributions
Highest paid director............................................... 767,874 595,762
========= =========
Pension costs
Defined contribution scheme
</TABLE>
-10-
<PAGE> 11
ALLIED MEDICARE LIMITED
NOTES ON FINANCIAL STATEMENTS -- (CONTINUED)
31 MARCH 1997
4 DIRECTORS AND EMPLOYEES -- (CONTINUED)
The company operates a defined contribution scheme. The assets of the
scheme are held separately from those of the company in an independently
administered fund. The pension cost charge represents contributions payable by
the company to the fund and amounted to L2,789 (1996 L444,789).
5 INTEREST PAYABLE
<TABLE>
<CAPTION>
1997 1996
L L
--------- ---------
<S> <C> <C>
Bank interest......................................................... 5,209 20,423
Mortgage and other loan interest...................................... 22,494 11,376
Hire purchase interest................................................ 11,105 12,470
--------- ---------
38,808 44,269
========= =========
</TABLE>
6 TAXATION
<TABLE>
<CAPTION>
1997 1996
L L
--------- ---------
<S> <C> <C>
Corporation tax on profit on ordinary activities at 33% (1996
32.6%).............................................................. 610,000 401,000
Under/(over) provision in earlier years............................... 8,127 (382)
--------- ---------
618,127 400,618
========= =========
</TABLE>
7 INTANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
GOODWILL
L
---------
<S> <C>
Cost
1 April 1996.................................................................. 1,060,337
Additions..................................................................... 597,617
---------
31 March 1997................................................................. 1,657,954
---------
Amortisation
1 April 1996.................................................................. 702,294
Charge for the year........................................................... 189,350
---------
31 March 1997................................................................. 891,644
---------
Net book amount
31 March 1997................................................................. 766,310
=========
1 April 1996.................................................................. 358,043
=========
</TABLE>
-11-
<PAGE> 12
ALLIED MEDICARE LIMITED
NOTES ON FINANCIAL STATEMENTS -- (CONTINUED)
31 MARCH 1997
8 TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
FIXTURES
MOTOR OFFICE AND LAND AND
VEHICLES EQUIPMENT FITTINGS BUILDINGS COMPUTERS TOTAL
L L L L L L
-------- --------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Cost
1 April 1996........................ 234,259 116,620 500,460 767,270 109,017 1,727,626
Additions........................... 89,649 1,357 30,262 4,125 372,664 498,057
Disposals........................... (114,395) -- (48,400) -- -- (162,795)
------- ------- ------- ------- ------- ---------
31 March 1997....................... 209,513 117,977 482,322 771,395 481,681 2,062,888
------- ------- ------- ------- ------- ---------
Depreciation
1 April 1996........................ 105,969 34,135 267,197 167,984 18,724 594,009
Charge for year..................... 35,357 20,960 52,705 29,706 77,045 215,773
Disposals........................... (62,122) -- (25,803) -- -- (87,925)
------- ------- ------- ------- ------- ---------
31 March 1997....................... 79,204 55,095 294,099 197,690 95,769 721,857
------- ------- ------- ------- ------- ---------
Net book amount
31 March 1997....................... 130,309 62,882 188,223 573,705 385,912 1,341,031
======= ======= ======= ======= ======= =========
1 April 1996........................ 128,290 82,485 233,263 599,286 90,293 1,133,617
======= ======= ======= ======= ======= =========
</TABLE>
The net book amount of fixed assets includes L60,848 (1996 L119,420) in
respect of assets held under finance leases and hire purchase contracts, the
depreciation of which is shown in note 3.
9 LAND AND BUILDINGS
<TABLE>
<CAPTION>
1997 1996
L L
------- -------
<S> <C> <C>
Freehold................................................................. 318,730 319,860
Long leasehold........................................................... 89,999 105,624
Short leasehold.......................................................... 164,976 173,802
------- -------
573,705 599,286
======= =======
</TABLE>
Long leaseholds are those leaseholds with more than 50 years unexpired.
10 DEBTORS
<TABLE>
<CAPTION>
1997 1996
L L
--------- ---------
<S> <C> <C>
Amounts falling due within one year
Trade debtors.......................................................... 3,697,975 2,822,440
Other debtors.......................................................... 222,753 81,484
Prepayments and accrued income......................................... 788,562 512,903
--------- ---------
4,709,290 3,416,827
Amounts falling due after more than one year
Other debtors.......................................................... -- 163,859
--------- ---------
4,709,290 3,580,686
========= =========
</TABLE>
-12-
<PAGE> 13
ALLIED MEDICARE LIMITED
NOTES ON FINANCIAL STATEMENTS -- (CONTINUED)
31 MARCH 1997
11 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1997 1996
L L
--------- ---------
<S> <C> <C>
Bank overdrafts........................................................ 506 --
Trade creditors........................................................ 205,950 149,837
Other loans............................................................ 99,945 310
Corporation tax........................................................ 622,842 423,157
Other taxation and social security..................................... 1,126,046 1,003,214
Other creditors........................................................ 1,376,592 665,949
Accruals and deferred income........................................... 1,116,010 730,100
Obligations under finance leases and hire purchase contracts -- note
12................................................................... 30,666 55,924
--------- ---------
4,578,557 3,028,491
========= =========
</TABLE>
The bank overdraft is secured by a fixed and floating charge over the
company's assets including a second mortgage over The Larches, a mortgage over
Lindum House and commercial property in Nottingham.
Included in other loans is L344 (1996 L310) which is secured on the
company's residential property (note 12).
12 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1997 1996
L L
------- -------
<S> <C> <C>
Other loans............................................................... 37,182 338,076
Obligations under finance leases.......................................... 18,927 54,085
------- -------
56,109 392,161
======= =======
Maturity of debt
In one year or less, or on demand -- see note 11........................ 99,945 310
Between one and two years............................................... 688 300,619
Between two and five years.............................................. 4,132 3,714
In five years or more................................................... 32,362 33,743
------- -------
137,127 338,386
======= =======
Other loans not wholly repayable within five years:
repayable by installments
-- within five years.................................................... 5,164 4,643
-- in more than five years.............................................. 32,362 33,743
------- -------
37,526 38,386
======= =======
Obligations under finance leases and hire purchase contracts
These are repayable over varying periods by monthly instalments as
follows:
In the next year -- see note 11......................................... 30,666 55,924
In the second to fifth years............................................ 18,927 54,085
------- -------
49,593 110,009
======= =======
</TABLE>
Included in other loans is L37,182 (1996 L38,076) secured by a mortgage
over the company's residential property which bears interest in line with
standard mortgage rates. At the year end the interest rate was 6.48%.
-13-
<PAGE> 14
ALLIED MEDICARE LIMITED
NOTES ON FINANCIAL STATEMENTS -- (CONTINUED)
31 MARCH 1997
12 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR -- (CONTINUED)
Also included in other loans is a loan from Allied Medicare Limited Pension
Scheme which bears interest at 2% above base lending rates.
13 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
1997 1996
L L
---------- ----------
<S> <C> <C>
Profit for the financial year representing a Net addition to
shareholders' funds................................................. 922,625 476,946
Opening shareholders' funds........................................... 1,832,427 1,355,481
--------- ---------
Closing shareholders' funds........................................... 2,755,052 1,832,427
========= =========
</TABLE>
14 CALLED UP SHARE CAPITAL
<TABLE>
<CAPTION>
1997 1996
---------------------- ----------------------
NUMBER OF NUMBER OF
SHARES L SHARES L
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Authorised
Ordinary shares of L1 each...................... 100,000 100,000 100,000 100,000
======= ======= ======= =======
Allotted called up and fully paid
Ordinary shares of L1 each...................... 86,654 86,654 86,654 86,654
======= ======= ======= =======
</TABLE>
15 PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
1997
L
----------
<S> <C>
1 April 1996...................................................................... 1,745,773
Retained profit for the year...................................................... 922,625
---------
31 March 1997..................................................................... 2,668,398
=========
</TABLE>
16 GUARANTEES AND OTHER FINANCIAL COMMITMENTS
a Operating leases
Financial commitments under non-cancellable operating leases will result in
the following payments falling due in the year to 31 March 1998.
<TABLE>
<CAPTION>
1997 1997 1996 1996
LAND AND PLANT & LAND AND PLANT &
BUILDINGS OTHER BUILDINGS OTHER
L L L L
---------- ------- ---------- -------
<S> <C> <C> <C> <C>
Expiring
Within one year.............................. 35,729 1,433 6,959 1,696
Within two to five years..................... 52,150 4,936 24,530 6,336
------ ----- ------ -----
87,879 6,369 31,489 8,032
====== ===== ====== =====
</TABLE>
-14-
<PAGE> 15
ALLIED MEDICARE LIMITED
NOTES ON FINANCIAL STATEMENTS -- (CONTINUED)
31 MARCH 1997
16 GUARANTEES AND OTHER FINANCIAL COMMITMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1997 1996
L L
---- -------
<S> <C> <C>
b Capital expenditure authorised by the directors but not yet
contracted for........................................................ -- 300,000
== =======
</TABLE>
c The company purchased an agency during the year under a contract which is
dependent upon the agency's future performance. A value of L300,000 has been
placed on the agency by the directors, but the final purchase price may be in
excess of this amount.
17 PRIOR YEAR ADJUSTMENT
The prior year item relates to a director's bonus which was paid in the
year ended 31 March 1996 in respect of the year ended 31 March 1995. This amount
was not provided in the financial statements for the year ended 31 March 1995.
18 NOTES TO THE CASH FLOW STATEMENT
Reconciliation of operating profit to operating cash flows
<TABLE>
<CAPTION>
1997 1996
L L
---------- ---------
<S> <C> <C>
Operating profit..................................................... 1,579,560 921,833
Depreciation charges................................................. 215,773 313,022
Amortisation......................................................... 189,350 154,624
Loss on sale of fixed assets......................................... 9,298 58,021
Decrease/(increase) in stocks........................................ 18,132 (25,226)
Increase in debtors.................................................. (1,128,604) (509,752)
Increase in creditors................................................ 1,214,936 563,254
---------- ---------
Net cash inflow from operating activities............................ 2,098,445 1,475,776
========== =========
</TABLE>
Analysis of changes in net debt
<TABLE>
<CAPTION>
AT START CASH OTHER AT END
OF YEAR FLOWS CHANGES OF YEAR
L L L L
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Cash in hand, at bank.............................. 131,787 410,486 -- 542,273
Overdrafts......................................... -- (506) -- (506)
-------
409,980
-------
Debt due within 1 year............................. (310) 310 (99,945) (99,945)
Debt due after 1 year.............................. (338,076) 200,949 99,945 (37,182)
Finance leases..................................... (110,009) 60,416 -- (49,593)
-------
261,675
-------
-------- ------- ------- -------
Total.................................... (316,608) 671,655 -- 355,047
======== ======= ======= =======
</TABLE>
-15-
<PAGE> 16
ALLIED MEDICARE LIMITED
NOTES ON FINANCIAL STATEMENTS -- (CONTINUED)
31 MARCH 1997
18 NOTES TO THE CASH FLOW STATEMENT -- (CONTINUED)
Reconciliation of net cash flow to movement in net debt
<TABLE>
<CAPTION>
1997 1996
L L
-------- --------
<S> <C> <C>
Increase in cash in the year........................................... 409,980 247,966
Cash outflow/(inflow) from decrease/(increase) in debt and lease
financing............................................................ 261,675 (90,619)
-------- --------
Change in net debt resulting from cash flows........................... 671,655 157,347
Net debt at 1 April 1996............................................... (316,608) (473,955)
-------- --------
Net funds/(debt) at 31 March 1997...................................... 355,047 (316,608)
======== ========
</TABLE>
19 RELATED PARTIES
D and VR Wynn-Griffiths controlled the business throughout the year. The
Company owed these directors L930,662 at the end of the financial year.
The Company was committed to paying L350,726 under a forward exchange
contract at the end of the financial year in respect of expenses incurred by the
above directors.
M Wynn-Griffiths, a son of the above directors, owed the Company L131,087
throughout the year. This amount is included within other debtors.
Allied Medicare Nursing and Legal Services Limited, a company in which D
and VR Wynn-Griffiths have a shareholding, had the following transactions with
the Company during the year:
- Allied Medicare Nursing and Legal Services Limited occupy a portion of
office premises and share certain staff. An administration charge of
L13,000 was made for these facilities.
- A car was transferred to Allied Medicare Limited for a value of L30,000.
- Allied Medicare Limited were owed L10,316 at the end of the financial
year. This amount is included within other debtors.
Allied Medicare Limited Pension Scheme made a loan to the Company of
L300,000 during the year ended 31 March 1996. The following amounts are included
in this year's financial statements:
- Interest of L18,601 is included in mortgage and other loan interest.
- A balance of L99,601 was payable at the year end and is included within
other loans payable within one year.
- Allied Medicare Limited paid L376,250 on behalf of the Pension Scheme
during the year to assist with the purchase of land by the Pension
Scheme.
20 SUMMARY OF MAJOR DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES IN THE UNITED KINGDOM AND THE UNITED STATES
The financial statements are prepared in accordance with accounting
principles generally accepted in the United Kingdom. Such principles differ in
certain respects from US GAAP. There are however no significant adjustments
applicable to these financial statements.
-16-
<PAGE> 17
UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
The following Unaudited Pro Forma Combined Condensed Financial
Statements give effect to: (A) the Company's acquisition effective July 1, 1997,
of Omnicare plc ("Omnicare"); (B) the Company's acquisition effective June 23,
1997, of Allied Medicare Limited ("Allied"); and (C) borrowings under the
Company's $100 million senior secured revolving credit facility (the "Credit
Facility") to fund the acquisition and related financing fees (collectively
referred to as the "Transactions").
The Unaudited Pro Forma Combined Condensed Balance Sheet presents the
Company's historical unaudited balance sheet as of April 30, 1997 and the
Transactions as if they had occurred on April 30, 1997. The Pro Forma Balance
Sheet data for Omnicare was derived from the Omnicare Consolidated Condensed
Balance Sheet as of June 30, 1997. The Pro Forma Balance Sheet data for Allied
was derived from the Allied Consolidated Balance Sheet as of March 31, 1997.
The Unaudited Pro Forma Combined Condensed Statement of Operations for
the year ended October 31, 1996 presents the historical operations of the
Company and the Transactions as if they had occurred on November 1, 1995. The
Pro Forma Statement of Operations of Omnicare was derived from Omnicare's
audited historical Statement of Operations for the year ended December 31, 1996.
The Pro Forma Statement of Operations of Allied was derived from Allied's
historical Statement of Operations for the fifty-two (52) weeks ended October
13, 1996 (unaudited). Such statement was derived by taking Allied's audited
historical Statement of Operations for the year ended March 31, 1996,
subtracting the historical operations for the twenty-eight (28) weeks ended
October 8, 1995 and adding the historical operations for the twenty-eight (28)
weeks ended October 13, 1996.
The Unaudited Pro Forma Combined Condensed Statement of Operations for
the six months ended April 30, 1997 presents the historical operations of the
Company (unaudited) and the Transactions as if they had occurred on November 1,
1995. The Pro Forma Statement of Operations of Omnicare was derived from
Omnicare's historical Statement of Operations (unaudited) for the six months
ended June 30, 1997. The Pro Forma Statement of Operations of Allied was derived
from Allied's historical Statement of Operations (unaudited) for the twenty-four
(24) weeks ended March 31, 1997.
The Pro Forma financial statements of Omnicare and Allied have been
prepared in accordance with U.S. GAAP and have been translated into U.S. dollars
using the exchange rate at each balance sheet date for assets and liabilities
and weighted average exchange rates for each period for income and expense
items. This presentation differs from Allied's historical financial statements
which are included in this Form 8-K and Omnicare's historical financial
statements which are included in the Company's Report on Form 8-K filed on
September 8, 1997.
Pro forma adjustments include fair value adjustments required under
purchase accounting for the acquired assets and liabilities of Omnicare and
Allied and are subject to revision when final analysis of such values are
completed. The final allocations of purchase price and the resulting
amortization expense in the accompanying Unaudited Pro Forma Combined Condensed
Statement of Operations will differ from the preliminary estimates due to the
final allocations being based on: (i) actual closing date amounts of assets and
liabilities; (ii) actual closing date conversion rates; and (iii) final
appraised value of assets and liabilities.
17
<PAGE> 18
UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS - (CONTINUED)
Pro forma adjustments are based on Management's estimates of the
financial effects of the acquisitions and related financing on the operations of
the combined companies for the periods presented. The Unaudited Pro Forma
Combined Condensed Financial Statements should be read in conjunction with the
accompanying notes and the Company's historical consolidated financial
statements and notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained in the Company's Annual
Report on Form 10-K for the fiscal year ended October 31, 1996, the Company's
Quarterly Report on Form 10-Q for the quarter ended April 30, 1997, the
historical consolidated financial statements of Allied and notes thereto which
are included in this Form 8-K and the historical consolidated financial
statements of Omnicare and notes thereto which are included in the Company's
Report on Form 8-K filed on September 8, 1997. The Unaudited Pro Forma Combined
Condensed Statement of Operations does not purport to present the results of
operations of the Company as if the transactions assumed herein occurred at the
beginning of fiscal 1996, nor is it indicative of the results of operations
which may be achieved in the future.
18
<PAGE> 19
TRANSWORLD HEALTHCARE, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
April 30, 1997
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Transworld Allied Medicare Omnicare
HealthCare, Inc. Limited plc Transworld
April 30, March 31, June 30, Pro Forma HealthCare, Inc.
1997 1997 1997 Adjustments Pro Forma
======== ======= ====== ======== ========
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and temporary investments ................ $ 37,263 $ 884 $ 872 $(32,650)(a) $ 6,369
Accounts receivable, less allowance
for doubtful accounts ..................... 32,599 6,028 4,205 -- 42,832
Inventories ................................... 1,985 50 1,242 -- 3,277
Prepaid income taxes .......................... 62 -- -- -- 62
Prepaid expenses and other current assets ..... 7,337 1,648 372 -- 9,357
-------- ------- ------ -------- --------
Total current assets ................. 79,246 8,610 6,691 (32,650) 61,897
Property & equipment, net ......................... 4,084 2,186 2,979 -- 9,249
Advances to and investment in HMI ................. 31,508 -- -- -- 31,508
Intangible assets, net of accumulated amortization 43,658 1,249 -- 84,833 (b) 129,740
Other assets ...................................... 7,001 -- 214 1,000 (c) 8,215
-------- ------- ------ -------- --------
Total assets ......................... $165,497 $12,045 $9,884 $ 53,183 $240,609
======== ======= ====== ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable,accrued expenses
and other current liabilities ............. $ 10,045 $ 6,448 $3,819 $ 731 (d) $ 21,043
Income taxes payable .......................... -- 1,015 984 -- 1,999
Acquisitions payable .......................... 96 -- -- -- 96
-------- ------- ------ -------- --------
Total current liabilities ............ 10,141 7,463 4,803 731 23,138
Long-term debt, including obligations
under capital leases ........................ 35,494 91 -- 61,924 (e) 97,509
Deferred income taxes and other ................... 651 -- 100 -- 751
-------- ------- ------ -------- --------
Total liabilities .................... 46,286 7,554 4,903 62,655 121,398
-------- ------- ------ -------- --------
Stockholders' equity:
Preferred stock, $.01 par value;
authorized 2,000 shares, issued
outstanding - none ........................ -- -- -- -- --
Common stock, $.01 par value;
authorized 30,000 shares, issued
and outstanding - 15,104 shares ........... 151 141 1,981 (2,122)(f) 151
Additional paid-in capital .................... 112,799 -- 355 (355)(g) 112,799
Retained earnings ............................. 6,261 4,350 2,645 (6,995)(h) 6,261
-------- ------- ------ -------- --------
Total stockholders' equity ............... 119,211 4,491 4,981 (9,472) 119,211
-------- ------- ------ -------- --------
Total liabilities and stockholders' equity $165,497 $12,045 $9,884 $ 53,183 $240,609
======== ======= ====== ======== ========
</TABLE>
See notes to pro forma combined condensed financial statements
19
<PAGE> 20
TRANSWORLD HEALTHCARE, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
Year Ended October 31, 1996
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Fifty-Two
Year Ended Weeks Ended Year Ended
October 31, October 13, December 31,
1996 1996 1996 Transworld
Transworld Allied Medicare Omnicare Pro Forma HealthCare, Inc.
HealthCare, Inc. Limited plc Adjustments Pro Forma
================ =============== ============= ============ ===============
<S> <C> <C> <C> <C> <C>
Net revenues ....................................... $ 76,304 $11,950 $ 12,108 $ -- $ 100,362
Cost of revenues ................................... 34,680 3,442 7,550 -- 45,672
-------- ------- -------- ------- ---------
Gross profit ....................................... 41,624 8,508 4,558 -- 54,690
Selling, general and administrative expenses ....... 33,552 6,000 2,865 119 (a) 42,536
-------- ------- -------- ------- ---------
Operating income ................................... 8,072 2,508 1,693 (119) 12,154
Interest income .................................... (75) -- (37) -- (112)
Interest expense ................................... 4,427 15 5 4,687 (b) 9,134
-------- ------- -------- ------- ---------
Income before income taxes and extraordinary
loss ............................................. 3,720 2,493 1,725 (4,806) 3,132
Provision for income taxes ......................... 1,702 788 622 (1,914)(c) 1,198
-------- ------- -------- ------- ---------
Income before extraordinary loss ......... $ 2,018 $ 1,705 $ 1,103 $(2,892) $ 1,934
======== ======= ======== ======= =========
Income per share of common stock before
extraordinary loss:
Primary ........................................ $ 0.26 -- -- -- $ 0.25
Fully diluted .................................. $ 0.26 -- -- -- $ 0.25
Weighted average number of shares outstanding:
Primary ........................................ 7,741 -- -- -- 7,741
Fully diluted .................................. 7,833 -- -- -- 7,833
</TABLE>
See notes to pro forma combined condensed financial statements
20
<PAGE> 21
TRANSWORLD HEALTHCARE, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
Six Months Ended April 30, 1997
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Twenty-Four Six Months
Ended Weeks Ended Ended
April 30, March 31, June 30,
1997 1997 1997 Transworld
Transworld Allied Medicare Omnicare Pro Forma HealthCare, Inc.
HealthCare, Inc. Limited plc Adjustments Pro Forma
================ =============== ============= =========== ============
<S> <C> <C> <C> <C> <C>
Net revenues ................................. $ 40,966 $7,173 $ 10,586 $ -- $ 58,725
Cost of revenues ............................. 19,739 2,001 7,058 -- 28,798
-------- ------ -------- ------- --------
Gross profit ................................. 21,227 5,172 3,528 -- 29,927
Selling, general and administrative expenses . 17,004 3,796 2,549 96 (a) 23,445
-------- ------ -------- ------- --------
Operating income ............................. 4,223 1,376 979 (96) 6,482
Interest income .............................. (1,108) -- (26) 47 (b) (1,087)
Interest expense ............................. 2,113 34 -- 2,343 (c) 4,490
Equity in losses of Health Management, Inc ... 296 -- -- -- 296
-------- ------ -------- ------- --------
Income before income taxes ................... 2,922 1,342 1,005 (2,486) 2,783
Provision for income taxes ................... 1,566 509 383 (987)(d) 1,471
-------- ------ -------- ------- --------
Net income ......................... $ 1,356 $ 833 $ 622 $(1,499) $ 1,312
======== ====== ======== ======= ========
Net income per share of common stock:
Primary .................................. $ 0.12 -- -- -- $ 0.12
Fully diluted ............................ $ 0.12 -- -- -- $ 0.12
Weighted average number of shares outstanding:
Primary .................................. 11,360 -- -- -- 11,360
Fully diluted ............................ 11,360 -- -- -- 11,360
</TABLE>
See notes to pro forma combined condensed financial statements
21
<PAGE> 22
TRANSWORLD HEALTHCARE, INC.
NOTES TO PRO FORMA COMBINED CONDENSED BALANCE SHEET
APRIL 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<S> <C> <C>
(a) Cash and temporary investments:
To record acquisition of Omnicare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (31,243)
To record payment of Omnicare and Allied acquisition related costs (legal, accounting and
financial advisory) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,407)
---------
$ (32,650)
=========
(b) Intangible assets, net of accumulated amortization:
Omnicare:
To record goodwill on the acquisition of Omnicare as follows:
Purchase price in cash (pound sterling 17,485 at 1.6235 at April 30, 1997 plus $2,856) . $ 31,243
Acquisition related costs (legal, accounting and financial advisory;
legal and tax contingencies) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,084
Liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,903
---------
Total cost of acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,230
Less assets at fair value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,884
---------
Goodwill on the acquisition of Omnicare (forty year amortization). . . . . . . . $ 27,346
Allied:
To record goodwill and covenants not to compete on the acquisition of
Allied as follows:
Purchase price in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 60,183
Acquisition related costs (legal and accounting; legal and tax contingencies) . . . . . 1,795
Liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,554
----------
Total cost of acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,532
Less assets at fair value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,045
----------
Excess of cost over net tangible assets acquired . . . . . . . . . . . . . . . 57,487
Non - compete agreements associated with the acquistion (3 year amortization) . . . . . . . $ 731
Goodwill on the acquisition of Allied (forty year amortization) . . . . . . . . . . . . . . 56,756
---------
$ 57,487
========= ---------
$ 84,833
=========
The Company has selected the forty-year amortization period for
goodwill based on the likely period of time over which the related
economic benefit will be realized. The Company believes its estimated
goodwill life is reasonable given the continuing movement of patient
care to noninstitutional settings, expanding demand due to demographic
trends, the emphasis of the Company on establishing significant
coverage in its local and regional markets, the consistent practice
with other alternate site health care companies and other factors. At
the balance sheet date, management assesses whether there has been
permanent impairment in the value of goodwill and the amount of any
impairment by comparing anticipated undiscounted future cash flows
from operating activities with the carrying value of goodwill The
factors considered by management in deriving future cash flows include
current operating results, trends and prospects of acquired businesses
as well as the effect of demand, competition, market, and other
economic factors.
The value of the non - compete agreements reflect management's
estimates and are based on similar acquisitions made by the Company.
Such amounts will be adjusted, if necessary, based on independent
valuations to be made and are not expected to be materially different.
(c) Other assets:
Financing fee related to the acquisition of Allied . . . . . . . . . . . . . . . $ 1,000
=========
</TABLE>
22
<PAGE> 23
TRANSWORLD HEALTHCARE, INC.
NOTES TO PRO FORMA COMBINED CONDENSED BALANCE SHEET - CONTINUED
APRIL 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<S> <C>
(d) Accrued expenses and other current liabilities:
Accrual of unpaid acquisition related costs (legal and tax contingencies) . . . . . . . . . . . . . . . $ 731
========
(e) Long-term debt, including obligations under capital leases:
Borrowings under the Credit Agreement to fund the acquisition of Allied . . . . . . . . . . . . . . . . $ 60,183
Borrowings under the Credit Agreement to fund the fee for the Amendment to the Credit Agreement . . . . 1,000
Borrowings under the Credit Agreement to fund a portion of the Allied acquisition related costs . . . . 741
--------
$ 61,924
========
(f) Common stock:
To eliminate Omnicare's historical common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,981)
To eliminate Allied's historical common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (141)
--------
$ (2,122)
========
(g) Additional paid-in capital:
To eliminate Omnicare's historical additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . $ (355)
========
(h) Retained earnings:
To eliminate Omnicare's historical retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . $ (2,645)
To eliminate Allied's historical retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,350)
--------
$ (6,995)
========
</TABLE>
23
<PAGE> 24
TRANSWORLD HEALTHCARE, INC.
NOTES TO PRO FORMA COMBINED
CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<S> <C>
(a) Selling, general and administrative expenses:
Amortization of non-compete agreements associated with the acquisition of Allied ($731) straight line
over three years .................................................................................... $ 244
To record the amortization of goodwill associated with the acquisition of Omnicare ($27,346) straight
line over forty years ............................................................................... 684
To record the amortization of goodwill associated with the acquisition of Allied ($56,756) straight line
over forty years .................................................................................... 1,419
Elimination of Allied's historical former owner/sellers salaries and benefits ............................... (2,228)
----------
$ 119
==========
(b) Interest expense:
To book adjustments to interest expense at 7.19% (rate at April 30, 1997, net of .5% unused
commitment fee) to reflect interest charged on borrowings under the Credit Facility as
follows:
Interest expense on cash borrowed to effect the acquisition of Allied ........................ $ 4,452
Amortization under the interest method of the fee for the Amendment to the Credit Agreement .. 235
----------
$ 4,687
==========
A change in interest rates by one-eighth of a percent (1/8%) would
impact interest expense by $77.
(c) Provision for taxes:
To book tax benefit attributable to pro forma adjustments of $119 at the UK statutory rate of 33% .......... $ (39)
To book tax benefit attributable to pro forma adjustments of $4,687 at the US statutory rate of 40% ........ (1,875)
----------
$ (1,914)
==========
</TABLE>
24
<PAGE> 25
TRANSWORLD HEALTHCARE, INC.
NOTES TO PRO FORMA COMBINED
CONDENSED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<S> <C>
(a) Selling, general and administrative expenses:
Amortization of non-compete agreements associated with the acquisition of Allied ($731) straight line
over three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 122
To record the amortization of goodwill associated with the acquisition of Omnicare ($27,346) straight
line over forty years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342
To record the amortization of goodwill associated with the acquisition of Allied ($56,756) straight line
over forty years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 710
Elimination of Allied's historical former owner/sellers salaries and benefits. . . . . . . . . . . . . . . . . (1,078)
--------
$ 96
========
(b) Interest income:
To book reduction in interest income at 5.2% on Company funds utilized for acquisitions and
related costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 47
========
(c) Interest expense:
To book adjustments to interest expense at 7.19% (rate at April 30, 1997, net of .5% unused
commitment fee) to reflect interest charged on borrowings under the Credit Facility as
follows:
Interest expense on cash borrowed to effect the acquisition of Allied . . . . . . . . . . . . $ 2,226
Amortization under the interest method of the fee for the Amendment to the Credit Agreement . 117
--------
$ 2,343
========
A change in interest rates by one-eighth of a percent (1/8%) would
impact interest expense by $39.
(d) Provision for taxes:
To book tax benefit attributable to pro forma adjustments of $96 at the UK statutory rate of 32.7% . . . . . $ (31)
To book tax benefit attributable to pro forma adjustments of $2,390 at the US statutory rate of 40% . . . . . (956)
--------
$ (987)
========
</TABLE>
25
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Transworld HealthCare, Inc.
---------------------------
(Registrant)
Date: September 8, 1997 By: /s/ Wayne A. Palladino
----------------------------------
Wayne A. Palladino
Senior Vice President and
Chief Financial Officer
-26-
