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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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): APRIL 17, 1995 (APRIL 6, 1995)
CORAM HEALTHCARE CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 1-11343 33-0615337
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
</TABLE>
1125 SEVENTEENTH STREET, 15TH FLOOR, 80202
DENVER, COLORADO (Zip Code)
(Address of principal executive offices)
(303) 292-4973
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name or address, if changed since last report)
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On April 6, 1995, Coram Healthcare Corporation ("Coram" or the "Company")
filed a Form 8-K reporting its acquisition of substantially all of the assets
used in the alternate site infusion therapy business, the home care management
and utilization system business and women's health care business (collectively,
the "Caremark Business") of Caremark Inc., a California corporation
("Caremark").
In accordance with Item 7 of Form 8-K, the Company is now filing pro forma
financial information giving effect to the acquisition of the Caremark Business
within 60 days of the filing of the Form 8-K reporting the above-referenced
transaction.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(b) Pro Forma Financial Information.
Pro forma financial information, including an Unaudited Pro Forma Condensed
Combined Balance Sheet, an Unaudited Pro Forma Condensed Combined Statement of
Operations and Notes to Unaudited Pro Forma Condensed Combined Financial
Statements, are filed herewith.
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements
are presented assuming the acquisition of the Caremark Business has been
consummated and has been accounted for as a purchase. The pro forma condensed
combined statements of income for the year ended December 31, 1994 and for the
three months ended March 31, 1995 have been prepared as if the acquisition of
the Caremark Business and the other transactions requiring pro forma adjustments
had occurred on January 1, 1993. The pro forma condensed combined balance sheet
as of March 31, 1995 have been prepared as if the acquisition of the Caremark
Business and the other transactions requiring pro forma adjustments had occurred
on March 31, 1995.
The pro forma combined data are based on the separate historical
consolidated financial statements of Coram and the Caremark Business giving
effect to the transactions under the assumptions and adjustments outlined in the
accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements. The pro forma adjustments are based upon available information and
upon certain assumptions that management believes are reasonable given the
circumstances. The unaudited pro forma condensed combined financial statements
are provided for comparative purposes only and are not necessarily indicative of
the results that would have been obtained had the acquisition of the Caremark
Business occurred on the dates indicated or that may be achieved in the future.
The unaudited pro forma condensed combined financial statements and
accompanying notes should be read in conjunction with the respective historical
audited consolidated financial statements of Coram and the Caremark Business
contained in this Form 8-K, as amended.
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CORAM HEALTHCARE CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
March 31, 1995
(in thousands)
<TABLE>
<CAPTION>
COMBINED
CORAM
AND
CAREMARK PRO FORMA CAREMARK
CORAM BUSINESS ADJUSTMENTS BUSINESS
-------- -------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents........................ $ 21,580 $ -- $ (7,300)(A) $ 14,280
Accounts receivable net of allowances............ 106,419 138,800 -- 245,219
Investments...................................... 15,499 -- -- 15,499
Inventories...................................... 11,250 10,900 -- 22,150
Prepaid taxes.................................... 9,739 -- -- 9,739
Deferred income taxes, net....................... 32,538 -- -- 32,538
Other current assets............................. 20,784 -- -- 20,784
-------- -------- ----------- --------
Total current assets........................... 217,809 149,700 (7,300) 360,209
Property and equipment, net...................... 23,744 26,700 (6,100)(B) 44,344
Other assets..................................... 18,629 4,700 26,000 (B) 47,329
-- -- (2,000)(C) --
Goodwill, net.................................... 337,269 191,900 (191,900)(B) 513,869
-- -- 176,600 (B) --
-------- -------- ----------- --------
TOTAL ASSETS................................... $597,451 $373,000 $ (4,700) $965,751
======== ======== ========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable................................. $ 32,553 $ 23,800 $ -- $ 56,353
Current maturities of long-term debt............. 5,562 -- 30,600 (A) 36,162
Deferred income taxes............................ 5,818 -- -- 5,818
Securities sold for repurchase................... 7,365 -- -- 7,365
Reserve for litigation........................... 22,647 -- -- 22,647
Accrued merger and restructuring................. 35,958 -- -- 35,958
Other accrued liabilities........................ 13,632 13,400 -- 27,032
-------- -------- ----------- --------
Total current liabilities...................... 123,535 37,200 30,600 191,335
Revolving lines of credit........................ 122,300 -- (122,300)(A) --
Long-term debt................................... 10,801 -- 169,400 (A) 430,201
-- -- 150,000 (A) --
-- -- 100,000 (A) --
Minority interest................................ 4,729 5,200 -- 9,929
Other liabilities................................ 1,885 200 -- 2,085
Deferred income taxes, non current............... 1,522 -- -- 1,522
-------- -------- ----------- --------
Total non current liabilities.................. 141,237 5,400 297,100 443,737
-------- -------- ----------- --------
TOTAL LIABILITIES.............................. 264,772 42,600 327,700 635,072
STOCKHOLDERS' EQUITY
Common stock, par $.001.......................... 39 -- -- 39
Additional paid in capital....................... 347,071 -- -- 347,071
Unrealized loss on available for sale
securities..................................... (193) -- -- (193)
Retained earnings (deficit)...................... (14,238) 330,400 (330,400)(B) (16,238)
-- -- (2,000)(C) --
-------- -------- ----------- --------
Total stockholders' equity..................... 332,679 330,400 (332,400) 330,679
-------- -------- ----------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY....... $597,451 $373,000 $ (4,700) $965,751
======== ======== ========== ========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
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CORAM HEALTHCARE CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the three months ended March 31, 1995
(in thousands, except per share data)
<TABLE>
<CAPTION>
COMBINED
CORAM AND
CAREMARK PRO FORMA CAREMARK
CORAM BUSINESS ADJUSTMENTS BUSINESS
-------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Net revenue.......................................... $104,778 $96,100 $ -- $200,878
Cost of service...................................... 75,609 76,200 (305)(F) 151,504
-------- ------- ----------- ---------
Gross profit....................................... 29,169 19,900 305 49,374
Operating expenses:
Selling, general and administrative expenses....... 17,885 14,200 -- 32,085
Provision for estimated uncollectible accounts..... 4,013 4,300 -- 8,313
Amortization of goodwill........................... 2,790 1,300 172 (E) 4,262
Restructuring costs and other...................... (4,131) -- -- (4,131)
-------- ------- ----------- ---------
Total operating expenses........................ 20,557 19,800 172 40,529
Operating income..................................... 8,612 100 133 8,845
Other income (expense)
Interest income.................................... 402 -- -- 402
Interest expense................................... (3,436) -- (7,809)(D) (11,245)
Minority interest.................................. (2,432) (500) (2,932)
Other income (loss)................................ 338 (100) -- 238
-------- ------- ----------- ---------
Income (loss) before income taxes.................... 3,484 (500) (7,676) (4,692)
-------- ------- ----------- ---------
Income tax benefits.................................. (1,105) -- -- (G) (1,105)
-------- ------- ----------- ---------
Net income (loss).................................... $ 4,589 $ (500) $(7,676) $ (3,587)
======== ======= ========= ========
Income (loss) per share.............................. $ .11 $ (.09)
======== ========
Shares used to compute income (loss) per share....... 40,939 40,939
======== ========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
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CORAM HEALTHCARE CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1994
(in thousands, except per share data)
<TABLE>
<CAPTION>
COMBINED
CORAM AND
CAREMARK PRO FORMA CAREMARK
CORAM BUSINESS ADJUSTMENTS BUSINESS
--------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Net revenue.............................................. $ 450,496 $441,900 $ -- $ 892,396
Cost of service.......................................... 313,182 338,200 (1,220)(F) 650,162
--------- -------- ---------- ---------
Gross profit........................................... 137,314 103,700 1,220 242,234
Operating expenses
Selling, general and administrative expenses........... 81,907 54,200 -- 136,107
Provision for estimated uncollectible accounts......... 19,517 22,600 -- 42,117
Amortization expense................................... 8,971 4,500 1,387 (E) 14,858
Provision for litigation............................... 23,220 -- -- 23,220
Merger costs........................................... 28,500 -- -- 28,500
Restructuring costs.................................... 95,500 25,000 -- 120,500
Special provision for uncollectible accounts........... 17,300 -- -- 17,300
--------- -------- ---------- ---------
Total operating expense............................. 274,915 106,300 1,387 382,602
Operating loss........................................... (137,601) (2,600) (167) (140,368)
Other income (expense)
Interest income........................................ 2,469 -- -- 2,469
Interest expense....................................... (7,414) (489) (41,708)(D) (49,611)
Minority interest...................................... (12,622) (3,500) -- (16,122)
Other income........................................... 865 2,489 -- 3,354
--------- -------- ---------- ---------
Loss before income taxes................................. (154,303) (4,100) (41,875) (200,278)
--------- -------- ---------- ---------
Income tax benefit....................................... (26,231) (1,700) -- (G) (27,931)
--------- -------- ---------- ---------
Loss..................................................... $(128,072) $ (2,400) $ (41,875) $(172,347)
========= ======== ========== =========
Net loss per share....................................... $ (3.32) $ (4.46)
========= =========
Shares used to compute loss per share.................... 38,633 38,633
========= =========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
CAREMARK PURCHASE COMBINATION
On January 29, 1995, Coram entered into an agreement to acquire the
Caremark Business for $309 million, subject to a potential purchase price
adjustment of up to $18 million. On April 6, 1995, Coram completed the
acquisition of the Caremark Business effective as of April 1, 1995. Concurrently
with the acquisition, Coram repaid $123.8 million ($122.3 million of which was
outstanding on March 31, 1995) under long-term revolving lines-of-credit.
The purchase price consisted of (i) $209 million in cash and (ii) $100
million aggregate principal amount of junior subordinated pay-in-kind ("PIK")
notes.
Coram financed the cash portion of the purchase price, costs associated
with the acquisition and the repayment of amounts outstanding under its former
credit facility with Toronto Dominion (Texas) Inc. (the "Former Credit
Facility") through (i) $200 million of borrowings under a new credit facility
with Chemical Bank as Agent, providing for aggregate commitments of up to $300
million, including a $100 million revolving credit facility (the "Senior Credit
Facility") and (ii) $150 million from the issuance of Senior Subordinated Bridge
Notes (the "Bridge Notes"). Coram intends to redeem the Bridge Notes as promptly
as practicable, subject to the availability of financing on terms reasonably
satisfactory to it.
Coram anticipates significant expenses to be incurred in connection with
the implementation of a branch office and consolidation program to integrate the
Caremark Business (the "Caremark Consolidation Plan") subsequent to the
acquisition of the Caremark Business combination. Such expenses are expected to
include severance costs, costs to terminate leases on closed branches,
consolidation of information systems, and other costs related to consolidation
activities. Additionally, Coram anticipates that it will record a special charge
associated with a revaluation of specific assets including accounts receivable.
The expenses associated with these activities are not currently estimable with a
reasonable degree of accuracy. Accordingly, they have not been reflected in the
unaudited pro forma condensed combined financial statements of operations as it
will be a one time charge to operations within six months of the purchase
combination.
Coram expects to realize substantial cost savings and efficiencies from the
implementation of the Caremark Consolidation Plan. The Caremark Consolidation
Plan includes the elimination of duplicate or redundant facilities in
overlapping markets, the elimination of duplicative corporate and administrative
expenses and the renegotiation of procurement contracts. Coram has tentatively
identified 66 of 77 total Caremark Business treatment centers which have
significant geographical overlap with Coram's existing facilities. Based on
current information available, management estimates that total annualized
savings to be realized by the Caremark Consolidation Plan will approximate $45
million. No assurance, however, can be given regarding the aggregate amount or
the timing of cost savings to be achieved by Coram from the Caremark
Consolidation Plan. Management is currently developing a detailed Caremark
Consolidation Plan, therefore, the unaudited pro forma condensed combined
financial statements do not reflect such savings.
The historical balances related to the Caremark Business presented in the
pro forma information exclude certain assets and liabilities of the home
infusion business of Caremark which were not included in the acquisition.
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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)
(Dollars in thousands)
A. The Caremark acquisition was financed as presented below:
<TABLE>
<S> <C>
Proceeds from borrowing under the Senior Credit Facility of which $30,600
is classified as a current obligation.................................... $ 200,000
Proceeds from the Bridge Note.............................................. 150,000
$75 million 7% Convertible Subordinated PIK Note (the "Junior Convertible
Subordinated PIK Notes")................................................. 75,000
$25 million 12% Non-Convertible Subordinated PIK Note (the "Junior Non-
Convertible Subordinated PIK Notes")..................................... 25,000
Purchase price for the Caremark Business including $26 million of fees and
expenses(1).............................................................. (335,000)
Refinancing of Former Credit Facility...................................... (122,300)
---------
Decrease in cash......................................................... $ (7,300)
=========
</TABLE>
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(1) Includes approximately $4.8 million of fees and expenses related to a
permanent financing undertaken by Coram and deferred as of May 1, 1995,
which is expected to occur after the completion of this transaction.
B. Allocation of the purchase price of $335 million, based on the fair market
value of the assets of the Caremark Business acquired and liabilities
assumed results in the following:
<TABLE>
<S> <C> <C>
Net assets of Caremark Business at historical amounts....................... $ 330,400
Write-off of previously recorded goodwill................................... (191,900)
Decrease in fair value of property and equipment............................ (6,100)
Deferred financing costs of the acquisition(1).............................. 26,000
Cost in excess of net assets acquired....................................... 176,600
---------
$ 335,000
=========
</TABLE>
(1) Includes approximately $4.8 million of fees and expenses related to a
permanent financing undertaken by Coram and deferred as of May 1, 1995,
which is expected to occur after the completion of this transaction.
C. Represents the write off of unamortized deferred financing costs associated
with Former Credit Facility repaid concurrently with the acquisition of the
Caremark Business. The write off of these costs is not reflected in the
unaudited pro forma condensed combined statements of operations.
D. Pro forma interest expense adjustment detailed below reflects the
elimination of interest expense related to the Former Credit Facility, and
to record interest expense associated with the Senior Credit Facility, the
Bridge Notes, the Junior Convertible Subordinated PIK Notes and Junior
Non-Convertible Subordinated PIK Notes and the amortization of deferred
financing costs.
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1995 1994
------------------ ------------
<S> <C> <C>
Elimination of Former Credit Facility interest expense.... $ (2,921) $ (5,604)
Senior Credit Facility interest expense................... 2,948 13,335
Bridge Notes interest expense............................. 3,406 16,313
Junior Convertible Subordinated PIK notes interest
expense................................................. 1,314 5,334
Junior Non-Convertible Subordinated PIK notes interest
expense................................................. 750 3,083
Amortization of deferred financing costs(1)............... 2,312 9,247
---------- ------------
Net interest expense adjustment........................... $ 7,809 $ 41,708
=============== ==========
</TABLE>
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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)
---------------
(1) Excludes amortization of the $4.8 million of expenses related to a
permanent financing undertaken by Coram and deferred as of May 1, 1995,
which is expected to occur after the completion of this transaction.
E. Goodwill associated with the purchase of the Caremark Business is amortized
in the unaudited pro forma condensed combined statement of operations
assuming an estimated average aggregate 30-year useful life consistent with
Coram accounting policies currently in effect. However, Coram intends to
perform a study of the components of acquired goodwill and intangibles and
may adjust amortization based upon the results of this study. The pro forma
adjustment to record goodwill amortization is detailed below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1995 1994
------------------ ------------
<S> <C> <C>
Elimination of goodwill amortization previously
recorded................................................ $ (1,300) $ (4,500)
Amortization of costs in excess of fair value of net
assets acquired......................................... 1,472 5,887
---------- ------------
Net goodwill adjustment................................. $ 172 $ 1,387
=============== ==========
</TABLE>
F. Depreciation expense related to the decrease in fair value of fixed assets
over five years on a straight-line basis.
INCOME TAXES
G. No tax benefits from the aforementioned pro forma adjustments have been
reflected in the unaudited pro forma condensed combined financial
statements.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 19, 1995 CORAM HEALTHCARE CORPORATION
(registrant)
By: /s/ SAM R. LENO
Sam R. Leno
Vice President, Secretary and Chief
Financial Officer
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