<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
AMENDMENT TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
CRA MANAGED CARE, INC.
----------------------
(Exact name of registrant as specified in its charter)
Massachusetts 02-25856 04-2658593
- - --------------------------------------------------------------------------------
(State or other jurisdiction of (Commission File (I.R.S. Employer
incorporation or organization) Number) Identification No.)
312 Union Wharf
Boston, Massachusetts 02109 (617) 367-2163
- - --------------------------------------------------------------------------------
(Address of principal executive (Zip Code) (Registrants telephone
offices) number, including area code)
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report on Form 8-K dated
April 17, 1996 as set forth in the pages attached hereto:
<PAGE>
Item 7
Item 7 of CRA Managed Care, Inc.'s Current Report on Form 8-K filed on April
17, 1996 is hereby amended so as to read in its entirety as follows:
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
- - ------ ---------------------------------
(a) Financial Statements of Business Acquired.
------------------------------------------
Report of Independent Public Accountants
Financial Statements of Focus Healthcare Management, Inc.
Balance Sheets
Statements of Operations
Statements of Shareholder's Equity (Deficit)
Statements of Cash Flows
Notes to Financial Statements
(b) Consolidated Pro Forma Financial Statements of CRA Managed Care, Inc. and
-------------------------------------------------------------------------
Focus Healthcare Management, Inc. (unaudited).
- - ---------------------------------------------
Consolidated Pro Forma Balance Sheet
Consolidated Pro Forma Statement of Operations
Notes to Consolidated Pro Forma Financial Statements
(c) Exhibits.
--------
The following documents are filed as Exhibits to this Form 8-K:
*2.1 Stock Purchase Agreement, dated as of March 19,1996, by and
between CRA Managed Care, Inc. and United Health Services, Inc.
23.1 Consent of Arthur Andersen LLP
_____________________________________
* Previously filed with the Current Report on Form 8-K dated April 17,
1996.
<PAGE>
CRA MANAGED CARE, INC.
FORM 8-K ITEM 7(a)
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
<PAGE>
FOCUS HEALTHCARE MANAGEMENT, INC.
Financial Statements
as of December 31, 1994 and 1995
Together with Auditor's Report
<PAGE>
Report of Independent Public Accountants
To the Board of Directors of
Focus Healthcare Management, Inc.:
We have audited the accompanying balance sheets of Focus Healthcare Management,
Inc. (Focus) as of December 31, 1994 and 1995, and the related statements of
operations, shareholder's equity (deficit) and cash flows for each of the two
years in the period ended December 31, 1995. We have also audited the
statements of operations, shareholder's equity (deficit) and cash flows of Focus
Healthcare Management, Inc. (the Predecessor) for the year ended December 31,
1993. These financial statements are the responsibility of the Focus'
management. Our responsibility is to express an opinion on these 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Focus as of December 31, 1994
and 1995, and the results of the operations of Focus and the Predecessor and
their cash flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
March 27, 1996
<PAGE>
FOCUS HEALTHCARE MANAGEMENT, INC.
Balance Sheets
<TABLE>
<CAPTION>
Assets
March 31,
December 31, 1996
1994 1995 (Unaudited)
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 58,000 $ 62,000 $ 16,000
Accounts receivable, net of allowance for doubtful accounts
of $493,000, $388,000 and $388,000 in December 31 1994
and 1995, and March 31, 1996, respectively 2,465,000 1,464,000 1,745,000
Prepaid expenses and other current assets 134,000 66,000 34,000
----------- ----------- -----------
Total current assets 2,657,000 1,592,000 1,795,000
Property and Equipment, net 2,139,000 1,067,000 929,000
Other Assets 6,000 5,000 5,000
Goodwill, net 29,275,000 28,526,000 28,339,000
----------- ----------- -----------
Total assets $34,077,000 $31,190,000 $31,068,000
=========== =========== ===========
<CAPTION>
Liabilities and Shareholder's Equity
<S> <C> <C> <C>
Current Liabilities:
Current portion of capital lease obligations $ 84,000 $ 70,000 $ 69,000
Accounts payable 375,000 240,000 310,000
Accrued expenses 1,206,000 137,000 176,000
Accrued taxes 30,000 18,000 2,000
Other current liabilities 267,000 139,000 154,000
Intercompany payable, net 3,165,000 1,488,000 1,479,000
----------- ----------- -----------
Total current liabilities 5,127,000 2,092,000 2,190,000
----------- ----------- -----------
Capital Lease Obligations 126,000 55,000 39,000
Deferred Taxes - 324,000 324,000
Commitments and Contingencies (Notes 3 and 5)
Shareholder's Equity:
Parent Company investment 30,965,000 30,965,000 30,965,000
Accumulated deficit (2,141,000) (2,246,000) (2,450,000)
----------- ----------- -----------
Total shareholder's equity 28,824,000 28,719,000 28,515,000
----------- ----------- -----------
Total liabilities and shareholder's equity $34,077,000 $31,190,000 $31,068,000
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
FOCUS HEALTHCARE MANAGEMENT, INC.
Statements of Operations
<TABLE>
<CAPTION>
For the Three
Months
(Predecessor) (Focus) Ended
For the Years Ended December 31, March 31,
1993 1994 1995 1996
(Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Case management $ 7,625,000 $ 4,740,000 $ - $ -
Network access fees 10,207,000 9,367,000 9,295,000 2,227,000
Fee schedule audit 1,537,000 856,000 613,000 100,000
----------- ----------- ----------- ------------
Total revenues 19,369,000 14,963,000 9,908,000 2,327,000
----------- ----------- ----------- ------------
Costs and Expenses:
Cost of services 18,796,000 14,811,000 7,347,000 1,926,000
General and administrative 2,271,000 3,124,000 2,269,000 605,000
----------- ----------- ----------- ------------
Total costs and expenses 21,067,000 17,935,000 9,616,000 2,531,000
----------- ----------- ----------- ------------
(Loss) income from operations (1,698,000) (2,972,000) 292,000 (204,000)
Interest Expense (Income), net 95,000 (112,000) 2,000 -
----------- ----------- ----------- ------------
(Loss) income before provision
income taxes (1,793,000) (2,860,000) 290,000 (204,000)
Provision for Income Taxes 100,000 19,000 395,000 -
----------- ----------- ----------- ------------
Net loss $(1,893,000) $(2,879,000) $ (105,000) $ (204,000)
=========== =========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
FOCUS HEALTHCARE MANAGEMENT, INC.
Statements of Cash Flows
<TABLE>
<CAPTION>
(Predecessor) (Focus) For the Three
For the Years Ended December 31, Months Ended
1993 1994 1995 March 31, 1996
(Unaudited)
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss $(1,893,000) $(2,879,000) $ (105,000) $(204,000)
Adjustment to reconcile net loss to
net cash provided by operating
activities-
Depreciation and amortization 1,038,000 2,211,000 1,778,000 397,000
Loss on sale of property and
equipment (5,000) - - -
Transfers of property and
equipment (to) from United, net - (211,000) 203,000 -
Deferred taxes - - 324,000 -
Changes in assets and
liabilities-
Decrease (increase) in accounts
receivable 457,000 (250,000) 1,001,000 (281,000)
(Increase) decrease in prepaid
expenses and other current assets (176,000) 152,000 68,000 34,000
Decrease in other assets 486,000 5,000 1,000 -
Increase (decrease) in accounts
payable 1,387,000 (1,563,000) (134,000) 70,000
Decrease in accrued expenses (603,000) (617,000) (1,082,000) 21,000
Increase (decrease) in other
current liabilities 168,000 99,000 (128,000) 15,000
Increase (decrease) in
intercompany payable - 3,165,000 (1,677,000) (9,000)
----------- ----------- ----------- ---------
Net cash provided by operating
activities 859,000 112,000 249,000 43,000
----------- ----------- ----------- ---------
Cash Flows from Investing Activities:
Purchase of property and equipment (2,174,000) (487,000) (161,000) (72,000)
----------- ----------- ----------- ---------
Net cash used in investing
activities (2,174,000) (487,000) (161,000) (72,000)
----------- ----------- ----------- ---------
Cash Flows from Financing Activities:
Exercise of stock options 8,000 34,000 - -
Acquisition of Focus by United - 3,294,000 - -
Proceeds (payment) of long-term
debt, net 1 ,315,000 (2,867,000) - -
Payment of capital lease obligations (248,000) (29,000) (84,000) (17,000)
------------ ----------- ----------- ---------
Net cash provided by (used in)
financing activities 1,075,000 432,000 (84,000) (17,000)
----------- ----------- ----------- ---------
(Decrease) Increase in Cash and Cash
Equivalents (240,000) 57,000 4,000 (46,000)
Cash and Cash Equivalents, beginning of
period 241,000 1,000 58,000 62,000
----------- ----------- ----------- ---------
Cash and Cash Equivalents, end of period $ 1,000 $ 58,000 $ 62,000 $ 16,000
=========== =========== =========== =========
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period for
interest $ 195,000 $ 47,000 $ 16,000 $ -
=========== =========== =========== ==========
Cash paid during the period for taxes $ 205,000 $ 747,000 $ 74,000 $ 16,000
=========== =========== =========== ==========
Schedule of Noncash Investing and
Financing Activities:
Accretion of redeemable preferred
stock $ 1,264,000 $ - $ - $ -
=========== ============ =========== ==========
Capital lease assets acquired
and obligations incurred $ 13,000 $ - $ - $ -
=========== ============ =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
FOCUS HEALTHCARE MANAGEMENT, INC.
Statements of Shareholder's Equity (Deficit)
<TABLE>
<CAPTION>
Redeemable Additional
Preferred Common Stock Paid-in Accumulated Treasury
Stock Shares Amount Capital Deficit Stock Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 $ 10,722,000 3,667,000 $ 2,000 $ 617,000 $(10,285,000) $ (432,000) $ 624,000
Exercise of stock options - 68,000 - 8,000 - - 8,000
Accretion of preferred stock
to redemption value 1,264,000 - - - (1,264,000) - 34,000
Net loss - - - - (1,893,000) - (1,893,000)
------------ --------- ------- ----------- ------------ ---------- -----------
Balance, December 31, 1993 11,986,000 3,735,000 2,000 625,000 (13,442,000) (432,000) (1,261,000)
Exercise of stock options - 198,000 - 34,000 - - 34,000
Elimination of Predecessor
stockholder's equity (11,986,000) (3,933,000) (2,000) (659,000) 14,180,000 432,000 1,965,000
Acquisition by United and
pushdown of purchase price - - - 30,965,000 - - 30,965,000
Net loss - - - - (2,879,000) - (2,879,000)
-------------- ---------- --------- ----------- ------------ ---------- -----------
Balance, December 31, 1994 - - - 30,965,000 (2,141,000) - 28,824,000
Net loss - - - - (105,000) - (105,000)
-------------- ---------- --------- ----------- ------------ ----------- -----------
Balance, December 31, 1995 - - 30,965,000 (2,246,000) - 28,719,000
Net loss for the three
months ended March 31,
1996 (unaudited) - - - - (204,000) - (204,000)
-------------- ---------- --------- ----------- ------------ ----------- -----------
Balance, March 31, 1996 $ - - $ - $30,965,000 $(2,450,000) $ - $28,515,000
============== ========== ========= =========== ============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
FOCUS HEALTHCARE MANAGEMENT, INC.
Notes to Financial Statements
December 31, 1995
(1) Summary of Significant Accounting Policies
Focus Healthcare Management, Inc. ("Focus") was incorporated in the State
of Tennessee in February 1986 to develop and operate managed care programs
related to workers' compensation and to provide administrative services for
self-insuring employers, insurance carriers and others.
On December 20, 1993, Focus was acquired pursuant to an Agreement and Plan
of Acquisition (the Agreement) with UHC Management, Inc., an affiliate of
United Healthcare Corporation (collectively, "United"). Under the terms of
the Agreement, United purchased all of the stock of Focus for $28,000,000
in cash and the assumption of $2,578,000 in debt. For accounting purposes,
the transaction was assumed to be effective on January 1, 1994. In
connection therewith, United implemented a restructuring that consolidated
Focus' operations and resulted in the exit from the case management
services business. The charge for restructuring has been reflected as an
increase in goodwill associated with the transaction.
(a) Cash and Cash Equivalents
Cash and cash equivalents are composed of highly liquid
investments with original maturities of three months or less.
(b) Revenues
Focus recognizes revenue primarily as services are rendered based
on the number of charges reviewed or the percentage of savings
achieved for Focus' customers. Accounts receivable at December
31, 1994 and 1995 include $1,321,000 and $563,000, respectively,
of unbilled accounts receivable relating to services rendered
prior to the period but not invoiced until after year-end.
(c) Property and Equipment
Property and equipment are carried at cost. Depreciation is
computed by the straight-line method over the estimated useful
lives of the assets. Amortization of capital leases is included
in depreciation and amortization expense. The estimated useful
lives of the depreciable assets are as follows:
Asset Classification Estimated Useful Life
Software 3 Years
Office equipment 3-5 Years
Furniture and fixtures 5-7 Years
Equipment under capital leases The shorter of the life of lease
or asset life
<PAGE>
FOCUS HEALTHCARE MANAGEMENT, INC.
Notes to Financial Statements
December 31, 1995
(Continued)
(1) Summary of Significant Accounting Policies (Continued)
(d) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities as of
the date of the financial statements and the reported amounts of
income and expenses during the reporting periods. Actual results could
differ from these estimates.
(e) Concentration of Credit Risk
Statement of Financial Accounting Standards (SFAS) No. 105, Disclosure
of Information about Financial Instruments with Off-Balance-Sheet Risk
and Financial Instruments with Concentration of Credit Risk, requires
disclosure of any significant off-balance-sheet and credit risk
concentrations. Financial instruments that subject Focus to credit
risk consist primarily of trade accounts receivable.
(f) Goodwill
Goodwill is being amortized using the straight-line method over a
period of 40 years. Accumulated amortization was $687,000 and $749,100
at December 31, 1994 and 1995, respectively. Focus periodically
evaluates whether changes have occurred which would require revision
of the remaining estimated useful life of the assigned goodwill or
render the goodwill not recoverable based on the gross cash flow
method.
(2) Property and Equipment
Property and equipment consist of the following at December 31, 1994 and
1995:
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Software $ 456,000 $ 481,000
Office equipment 2,436,000 2,076,000
Furniture and fixtures 1,198,000 866,000
Equipment under capital leases 573,000 367,000
---------- ----------
4,663,000 3,790,000
Less--Accumulated depreciation
and amortization 2,524,000 2,723,000
---------- ----------
$2,139,000 $1,067,000
========== ==========
</TABLE>
<PAGE>
FOCUS HEALTHCARE MANAGEMENT, INC.
Notes to Financial Statements
December 31, 1995
(Continued)
(3) Leases
Focus leases office space under various operating leases. The corporate
office lease has an option to renew for an additional five years at
prevailing rates and is subject to increase based on increases in building
maintenance and operating expenses. Total rent expense for the years ended
1993, 1994 and 1995 was $573,000, $639,000 and $514,000, respectively.
Focus leases certain equipment under capital leases that extend to various
dates through 1997. Future minimum payments, by year and in the aggregate,
under the capital leases and noncancellable operating leases with terms of
one year or more consist of the following at December 31, 1995:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
<S> <C> <C>
Year Ending December 31,
1996 $ 85,000 $240,000
1997 62,000 132,000
--------- --------
Total minimum lease payments 147,000 $372,000
========
Less--Amounts representing
interest and taxes 22,000
--------
$125,000
========
</TABLE>
(4) Income Taxes
Focus accounts for income taxes in accordance with SFAS No. 109, Accounting
for Income Taxes, which requires the asset and liability method of
accounting for income taxes. Prior to its acquisition by United, Focus
elected to be taxed as an S corporation under Section 1362 of the Internal
Revenue Code. The tax provision in 1993 resulted from certain states that
do not recognize S corporation status.
Beginning in 1994, Focus' results were included in the consolidated tax
return of United. No federal tax benefit was recognized in 1994 due to the
loss for the year. In accordance with the tax allocation agreement with
United, Focus' net operating loss was utilized by United in the IRS Tax
filing.
<PAGE>
FOCUS HEALTHCARE MANAGEMENT, INC.
Notes to Financial Statements
December 31, 1995
(Continued)
(4) Income Taxes (Continued)
The tax provision for 1995 consisted of the following:
<TABLE>
<CAPTION>
<S> <C>
Current-
Federal $ -
State 18,000
--------
18,000
--------
Deferred-
Federal 339,000
State 38,000
--------
377,000
--------
$395,000
========
</TABLE>
The deferred tax liabilities consist of the difference between book and tax
depreciation methods and certain differences in the book and tax deduction
of certain accrued and prepaid items.
The difference between the federal statutory rate and the Focus' effective
tax rate for 1995 consists of nondeductible amortization of goodwill and
state income taxes, net of federal benefits.
(5) Litigation
Focus, Genesys, and the other shareholder of Genesys are defendants in a
class action seeking damages resulting from alleged breach of contract and
other claims. Focus is pursuing discovery of the allegations; until such
discovery is completed, it is not possible to evaluate the outcome or
estimate the amount or range of potential loss. Accordingly, no provision
for any loss that may result upon resolution of this matter has been made
in the accompanying financial statements. In connection with the
acquisition, Focus has been indemnified by United and, as a result, does
not expect any outcome to materially affect its financial position.
Focus is also involved in various other legal matters arising in the
ordinary course of business. Focus is not involved in any legal proceeding
that it believes will result, individually or in the aggregate, in a
material adverse effect on financial position or results of operations.
<PAGE>
FOCUS HEALTHCARE MANAGEMENT, INC.
Notes to Financial Statements
December 31, 1995
(Continued)
(6) Corporate Services
Focus and United have a corporate services agreement under which United's
corporate staff provides certain administrative services, including certain
legal advice and services, risk management, certain employee benefit
administration, tax advice and preparation of tax returns, centralized cash
management, and certain financial and other services, for which Focus pays
United annually. For these services, Focus was charged $887,000 and
$1,725,000 in fiscal 1994 and 1995, respectively. For items such as
employee benefit plans, insurance coverage and other identifiable costs,
United charges Focus based on costs directly attributable to Focus.
(7) Subsequent Event
On March 19, 1996, CRA Managed Care, Inc. signed a definitive agreement to
acquire Focus from United for $21,000,000 in cash. The transaction was
completed on April 2, 1996.
<PAGE>
CRA MANAGED CARE, INC.
FORM 8-K ITEM 7(b)
PRO FORMA FINANCIAL INFORMATION
<PAGE>
CRA Managed Care, Inc.
CONSOLIDATED PRO FORMA BALANCE SHEET
(Amounts in thousands - unaudited)
The following sets forth the Consolidated Pro Forma Balance Sheet of CRA
Managed Care, Inc. (the "Company") as of March 31, 1996 giving effect to the
acquisition of Focus Healthcare Management, Inc. ("Focus"). The Company's
Consolidated Pro Forma Balance Sheet presents the acquisition of Focus as if it
had been consummated on March 31, 1996. The Pro Forma Financial Statements of
the Company do not purport to present the financial position or results of
operations of the Company had the transaction assumed therein occurred on the
dates indicated, nor are they necessarily indicative of the results of
operations which may be expected to occur in the future.
The acquisition of Focus has been accounted for by the Company as a
purchase whereby the basis for accounting for Focus' assets and liabilities is
based upon their fair values at the date of acquisition. Pro forma adjustments
represent the Company's preliminary determination of these adjustments and are
based upon available information and certain assumptions the Company considers
reasonable under the circumstances. Final amounts could differ from those set
forth below.
<TABLE>
<CAPTION>
March 31, 1996
-------------------------------------------------
Pro Forma Pro Forma
ASSETS CRA Focus Adjustments Combined
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 2,893 $ 16 - $ 2,909
Accounts receivable, net 28,964 1,745 - 30,709
Prepaid expenses 664 34 - 698
-------------------------------- ------------
Total current assets 32,521 1,795 - 34,316
Property and equipment, net 5,990 929 - 6,919
Other assets 400 5 - 405
Excess of cost over fair value
of net assets acquired - 28,339 (8,439)(1) 19,900
-------------------------------- ------------
$38,911 $31,068 ($8,439) $61,540
================================ ============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Revolving credit facilities $ 9,100 $ - $ 21,000(2) $30,100
Current portion of long-term
debt - 69 69
Accounts payable and accrued
expenses 13,026 640 555(3) 14,221
Intercompany payable - 1,479 (1,479)(4) -
Accrued income taxes 1,009 2 1,011
-------------------------------- ------------
Total current liabilities 23,135 2,190 20,076 45,401
Long-term debt - 39 - 39
Long-term deferred tax
liabilities 2,056 324 - 2,380
Stockholders' equity 13,720 28,515 (28,515)(5) 13,720
-------------------------------- ------------
$38,911 $31,068 ($8,439) $61,540
================================ ============
</TABLE>
See accompanying Notes to Consolidated Pro Forma Financial Statements
<PAGE>
CRA Managed Care, Inc.
CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
(Amounts in thousands, except earnings per share - unaudited)
The following sets forth the Company's Consolidated Pro Forma Statement of
Operations for the fiscal year ended December 31, 1995 and the three months
ended March 31, 1996 giving effect to the acquisition of Focus. The Company's
Consolidated Pro Forma Statement of Operations presents the acquisition of Focus
as if it had been consummated at January 1, 1995. The Consolidated Pro Forma
Financial Statements of the Company do not purport to present the financial
position or results of operations of the Company had the transaction assumed
therein occurred on the dates indicated, nor are they necessarily indicative of
the results of operations which may be expected to occur in the future.
The acquisition of Focus has been accounted for by the Company as a
purchase whereby the basis for accounting for Focus' assets and liabilities is
based upon their fair values at the date of acquisition. Pro forma adjustments
represent the Company's preliminary determination of theses adjustments and are
based upon available information and certain assumptions the Company considers
reasonable under the circumstances. Final amounts could differ from those set
forth below.
<TABLE>
<CAPTION>
Year ended December 31, 1995
------------------------------------------------
Pro Forma Pro Forma
CRA Focus Adjustments Combined
------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $146,055 $9,908 ($407)(6) $155,556
Cost of services 122,615 7,347 (493)(7) 129,469
------------------------------ ------------
Gross profit 23,440 2,561 86 26,087
General and administrative
expenses 11,021 2,269 (646)(8) 12,644
------------------------------ ------------
Operating income 12,419 292 732 13,443
Interest expense, net 2,484 2 1,796(9) 4,282
Provision for income taxes 3,974 395 (439)(10) 3,930
------------------------------ ------------
Net income (loss) $ 5,961 ($105) ($625) $ 5,231
============================== ============
Earnings per share $0.91 $0.80
========== ============
Weighted average shares
outstanding 6,540 6,540
========== ============
Three months ended March 31, 1996
------------------------------------------------
Pro Forma Pro Forma
CRA Focus Adjustments Combined
------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 40,225 $2,327 ($269)(6) $ 42,283
Cost of services 33,422 1,926 (290)(7) 35,058
------------------------------ ------------
Gross profit 6,803 401 21 7,225
General and administrative
expenses 3,109 605 (110)(8) 3,604
------------------------------ ------------
Operating income 3,694 (204) 131 3,621
Interest expense, net 194 - 374(9) 568
Provision for income taxes 1,453 - (117)(10) 1,336
------------------------------ ------------
Net income (loss) $ 2,047 ($204) ($126) $ 1,717
============================== ============
Earnings per share $0.27 $0.23
========== ============
Weighted average shares
outstanding 7,550 7,550
========== ============
</TABLE>
See accompanying Notes to Consolidated Pro Forma Financial Statements.
<PAGE>
CRA Managed Care, Inc.
NOTES TO CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(Amounts in thousands - unaudited)
(1) Eliminate existing goodwill of Focus ($28,339) and record excess of cost
over fair value of net assets acquired resulting from the preliminary purchase
price allocation as follows:
<TABLE>
<CAPTION>
<S> <C>
Pro forma purchase price including fees and expenses: $21,555
Purchase price allocated to:
Current assets 1,795
Property and equipment 929
Other long term assets 5
Current liabilities (711)
Long-term deferred tax liabilities (324)
Long-term capital leases (39)
-------
Net assets acquired 1,655
-------
Excess of cost over fair value of net assets acquired $19,900
-------
</TABLE>
The foregoing purchase price allocation is based upon preliminary information.
The final purchase price allocation is contingent upon the final determination
of the fair value of the net assets acquired on April 2, 1996, the date of
acquisition. Based upon presently available information, the Company does not
believe that the final purchase price allocation will materially differ from the
preliminary allocation.
(2) Record borrowings of $21,000 under the Company's existing $40,000 Credit
Facility to finance the acquisition.
(3) Record fees and expenses associated with the purchase of Focus.
(4) To eliminate the intercompany payable between United HealthCare Corporation
and Focus which was forgiven as part of the transaction.
(5) To eliminate the historical stockholder's equity of Focus.
(6) To eliminate sales between CRA and Focus of $407 and $269 for the year
ended December 31, 1995 and the three months ended March 31, 1996, respectively.
<PAGE>
CRA Managed Care, Inc.
NOTES TO CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(Amounts in thousands - unaudited)
(7) The pro forma adjustment included:
<TABLE>
<CAPTION>
Year ended Three months ended
December 31, 1995 March 31, 1996
------------------ -------------------
<S> <C> <C>
Elimination of sales between CRA and
Focus $(407) $(269)
Elimination of historical goodwill
amortization (749) (187)
Record new goodwill amortization
under a thirty year life 663 166
----- -----
$(493) $(290)
----- -----
</TABLE>
(8) To eliminate general overhead expenses allocated to Focus by United
HealthCare Corporation of $646 and $110 for the year ended December 31, 1995 and
three months ended March 31, 1996, respectively.
(9) To record interest expense of $1,796 and $374 associated with the borrowing
of $21,000 under the Company's Credit Facility for the year ended December 31,
1995 and three months ended March 31, 1996, respectively. Interest expense was
calculated assuming an interest rate of 8.55% and 7.12% (weighted average
interest rate on borrowings during the period) for the year ended December 31,
1995 and three months ended March 31, 1996, respectively.
(10) To record the tax benefit of $439 and $117 associated with the pro forma
adjustments and to adjust Focus's results of operation to the Company's
effective tax rate of 40% and 41.5% for the year ended December 31, 1995 and
three months ended March 31, 1996, respectively.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
CRA MANAGED CARE, INC.
By: /s/ Donald J. Larson
-----------------------
Name: Donald J. Larson
Title: President and Chief
Executive Officer
Dated: May 6, 1996
<PAGE>
CRA MANAGED CARE, INC.
INDEX TO EXHIBITS
Exhibit No. Exhibit
- - -------------------------------------------------------
*2.1. Stock Purchase Agreement, dated as of
March 19,1996, by and between
CRA Managed Care, Inc. and
United Health Services, Inc.
**23.1 Consent of Arthur Andersen LLP
__________________________________
*Previously filed.
**Filed herewith.
<PAGE>
EXHIBIT 23.1
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our firm) included in or made part of this Form 8-K.
Boston, Massachusetts Arthur Andersen LLP
May 6, 1996
