UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): June 28, 2002
CURATIVE HEALTH SERVICES, INC.
(Exact name of registrant as specified in its charter)
Minnesota 000-19370 41-1503914
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
150 Motor Parkway
Hauppauge, New York 11788-5145
(Address of principal executive offices)
(631) 232-7000
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report.)
This amendment is being filed to revise Item 7 in the Registrant's current
report on Form 8-K filed July 2, 2002 to include the historical and pro forma
financial information required by paragraphs (a) and (b) of Item 7 which were
omitted from the report as initially filed.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
The report of independent auditors, audited balance sheet,
related audited statements of income, stockholders' equity and
cash flows of Infinity Infusion Care, Inc. as of and for the
year ended December 31, 2001 and the Notes thereto.
Unaudited condensed balance sheets, related condensed
statements of income and condensed cash flows of Infinity
Infusion Care, Ltd. as of and for the three months ended March
31, 2002 and 2001 and the Notes thereto.
(b) Pro Forma Financial Information
The unaudited pro forma condensed consolidated statement of
operations of Curative Health Services, Inc. and Subsidiaries
for the year ended December 31, 2001.
The unaudited pro forma condensed consolidated balance sheet
and condensed consolidated statement of operations of Curative
Health Services, Inc. and Subsidiaries as of and for the three
months ended March 31, 2002.
(c) Exhibits
23.1 Consent of Ernst & Young LLP
Item 7. (a) Financial Statements of Business Acquired
Infinity Infusion Care, Inc.
Audited Financial Statements
As of and for the Year Ended
December 31, 2001
Contents
Report of Independent Auditors.............................................. 1
Balance Sheet............................................................... 2
Statement of Income......................................................... 3
Statement of Stockholders' Equity........................................... 4
Statement of Cash Flows..................................................... 5
Notes to Financial Statements............................................... 6
Report of Independent Auditors
Board of Directors and Stockholders
Infinity Infusion Care, Inc.
We have audited the accompanying balance sheet of Infinity Infusion Care, Inc.
(the "Company") as of December 31, 2001, and the related statements of income,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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 audit provides 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 Infinity Infusion Care, Inc. at
December 31, 2001, and the results of its operations and its cash flows for the
year then ended in conformity with accounting principles generally accepted in
the United States.
/s/ Ernst & Young LLP
New York, New York
May 15, 2002
1
Infinity Infusion Care, Inc.
Balance Sheet
December 31, 2001
Assets
Cash and cash equivalents $ 46,116
Accounts receivable, net 1,963,336
Marketable securities available-for-sale 212,020
Inventory 368,404
---------
Total current assets 2,589,876
Property and equipment, net 64,864
Goodwill, net 18,474
Other long-term assets 3,850
---------
Total assets $ 2,677,064
=========
Liabilities and stockholders' equity
Accounts payable and accrued expenses $ 308,700
Short-term loan 350,000
Other current liabilities 258,986
---------
Total current liabilities 917,686
Stockholders' equity:
Common stock, $1.00 par value; 1,000 shares authorized,
issued and outstanding 1,000
Retained earnings 2,064,193
Accumulated other comprehensive loss (305,815)
---------
Total stockholders' equity 1,759,378
---------
Total liabilities and stockholders' equity $ 2,677,064
=========
See accompanying notes.
2
Infinity Infusion Care, Inc.
Statement of Income
Year ended December 31, 2001
Revenues, net $ 11,224,693
Costs and expenses:
Cost of services provided 4,676,287
General and administrative 2,731,164
Depreciation and amortization 21,228
----------
Total costs and expenses 7,428,679
----------
Income from operations 3,796,014
Other expenses:
Interest expense, net 66,206
Loss on sales of securities, net 41,083
----------
107,289
----------
Income before provision for income taxes 3,688,725
Provision for income taxes 133,000
----------
Net income $ 3,555,725
==========
See accompanying notes.
3
Infinity Infusion Care, Inc.
Statement of Stockholders' Equity
Year ended December 31, 2001
Accumulated
Other Total Comprehensive
Common Retained Comprehensive Stockholders' Income
Stock Earnings Loss Equity (Loss)
---------------------------------------------------------------------------------
Balance at December 31, 2000 $1,000 $1,296,543 $(272,884) $1,024,659
Comprehensive income:
Net income - 3,555,725 - 3,555,725 $3,555,725
Change in fair value of
available-for-sale securities - - (32,931) (32,931) (32,931)
Distributions to stockholders - (2,788,075) - (2,788,075) -
---------------------------------------------------------------------------------
Balance at December 31, 2001 $1,000 $2,064,193 $(305,815) $1,759,378 $3,522,794
=================================================================================
See accompanying notes.
4
Infinity Infusion Care, Inc.
Statement of Cash Flows
Year ended December 31, 2001
Operating activities
Net income $ 3,555,725
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 21,228
Changes in operating assets and liabilities:
Accounts receivable, net (408,270)
Inventory (24,796)
Accounts payable and accrued expenses 93,476
Other assets and liabilities 44,625
---------
Net cash provided by operating activities 3,281,988
Investing activities
Purchases of marketable securities available-for-sale (180,118)
Proceeds from sales of marketable securities available-for-sale 135,105
Capital expenditures (40,813)
---------
Net cash used in investing activities (85,826)
Financing activities
Payments on short-term loan (450,000)
Payment on long-term loan (129,187)
Distributions to stockholders (2,387,922)
---------
Net cash used in financing activities (2,967,109)
Net change in cash and cash equivalents 229,053
Cash and cash equivalents (overdraft) at beginning of year (182,937)
---------
Cash and cash equivalents at end of year $ 46,116
=========
Interest paid $ 66,347
=========
State income taxes paid $ 90,286
=========
See accompanying notes.
5
Infinity Infusion Care, Inc.
Notes to Financial Statements
December 31, 2001
1. Organization
Infinity Infusion Care, Inc. (the "Company") was originally a division of a
larger organization that provided home health care, but was spun off as a
separate corporation in 1997.
The Company focuses on the specialty infusion market with more than 90% of its
revenues from this service throughout the United States. The largest service
line is intravenous immunoglobulin ("IVIG") therapy, which accounts for
approximately 77% of revenue.
2. Summary of Significant Accounting Policies
Cash Equivalents
The Company considers all highly liquid short-term investments with original
maturities of three months or less at the date of purchase to be cash
equivalents.
Allowance for Doubtful Accounts
The allowance for doubtful accounts is based on past experience and other
factors that, in management's judgment, deserve current recognition in
estimating bad debts. Such factors include growth and composition of accounts
receivable, the relationship of the allowance for doubtful accounts to total
accounts receivable, current economic conditions and collection issues related
to specific accounts.
Marketable Securities
Marketable securities available-for-sale are recorded at fair value, and
unrealized gains and losses are included in other comprehensive income (loss).
Inventory
Inventories consisting primarily of pharmaceutical products are stated at the
lower of cost (determined using the first-in, first-out cost method) or market.
6
Infinity Infusion Care, Inc.
Notes to Financial Statements
December 31, 2001
2. Summary of Significant Accounting Policies (continued)
Depreciable Assets
Depreciable assets are recorded at cost, less accumulated depreciation and
amortization. Depreciation and amortization is computed using the straight-line
method over the estimated useful lives of the assets, ranging from three to
seven years.
Goodwill and Intangible Assets
Goodwill, under purchase accounting, represents the excess of cost over fair
values of net assets acquired and is being amortized on a straight-lie basis
over a period of 15 years. The goodwill is related to the spin-off of the
Company in 1997. In June 2001, the Financial Accounting Standards Board ("FASB")
issued two statements: Statement of Financial Accounting Standards ("SFAS") No.
141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible
Assets, effective for fiscal years beginning after December 15, 2001. Under the
new rules, goodwill and intangible assets deemed to have indefinite lives will
no longer be amortized but will be subject to annual impairment tests. Other
intangible assets will continue to be amortized over their useful lives.
The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning on January 1, 2002. Application of the
non-amortization provisions of SFAS No. 142 are expected to result in an
increase in net income of approximately $2,000 per year. During 2002, the
Company will perform the first of the required impairment tests of goodwill and
indefinite lived intangible assets as of January 1, 2002. The Company has not
yet determined what the effect of these tests will be, if any, on its financial
position or results of operations.
Income Taxes
The Company has elected to be treated as a "Subchapter S-Corporation" for
federal income tax purposes. Consequently, all income and expenses of the
Company are reported on the stockholders' individual federal income tax returns.
As a result, no provision for federal income taxes is included in the income
statement for 2001 (see Note 10).
7
Infinity Infusion Care, Inc.
Notes to Financial Statements
December 31, 2001
2. Summary of Significant Accounting Policies (continued)
Revenue Recognition
The Company recognizes revenue, net of contractual allowances, in the period the
services are performed.
Use of Estimates
The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Concentration of Credit Risk
The Company provides services to certain patients covered by various
non-governmental third-party payers. Revenues, net of contractual allowances,
from three third-party payers amounted to 43% of revenues for the year ended
December 31, 2001. Accounts receivable related to the same three third-party
payers amounted to 55% at December 31, 2001.
3. Accounts Receivable
Accounts receivable are due from commercial insurance companies and other
nongovernmental payers and consisted of the following at December 31, 2001:
Accounts receivable trade $ 2,218,597
Allowance for doubtful accounts (298,663)
Accounts receivable due from related party (see Note 5) 43,402
---------
$ 1,963,336
=========
4. Bank Line of Credit
The Company has available a $1,000,000 line of credit with a commercial bank.
The line is secured by the Company's accounts receivable, inventory and fixed
assets. Outstanding borrowings under the line at December 31, 2001 are $350,000,
which bear interest at 4.75% per annum. The maturity date of the line is May 31,
2003.
8
Infinity Infusion Care, Inc.
Notes to Financial Statements
December 31, 2001
5. Transactions With Related Parties
The Company acquired a parcel of land from an independent party in June 2000 for
$586,210. In connection with the purchase, the Company obtained a long-term loan
from a commercial bank of $400,000. In December 2001, the Company transferred
the parcel and the remaining loan to Forum Twenty Two Enterprises L.P. ("Forum
22"), which has the same stockholders as the Company.
The parcel was transferred to Forum 22 at its historical cost. The balance of
the loan was $186,762 at the time of transfer. The net transfer of $399,448 is
reflected in the accompanying statement of stockholders' equity as distributions
to owners.
A current receivable from Forum 22 of $43,402 is included in accounts
receivable.
There have been no revenue or expenses incurred in connection with affiliated
companies.
6. Marketable Securities
The Company held the following available-for-sale marketable equity securities
as of December 31, 2001:
Fair Unrealized
Cost Market Gain
Basis Value (Loss)
-----------------------------------------
Cisco Systems, Inc. $ 66,183 $ 36,220 $ (29,963)
Corning, Inc. 1,132 200 (932)
EMC Corporation 1,982 500 (1,482)
JDS Uniphase Corp. 45,290 8,680 (36,610)
Lucent Technologies, Inc. 18,982 6,300 (12,682)
Microsoft Corporation 116,575 66,300 (50,275)
Motorola, Inc. 23,022 15,020 (8,002)
Nokia Corporation 3,033 3,700 667
Qualcomm, Inc. 180,057 50,500 (129,557)
Sun Microsystem, Inc. 61,579 24,600 (36,979)
-----------------------------------------
$ 517,835 $ 212,020 $ (305,815)
=========================================
9
Infinity Infusion Care, Inc.
Notes to Financial Statements
December 31, 2001
6. Marketable Securities (continued)
The proceeds from sales of available-for-sale marketable securities during 2001
of $135,105 resulted in a gross realized gain and gross realized loss of $39,587
and $80,670, respectively, which is included net in loss on sales of securities
in the accompanying statement of income. The gain and loss calculations were
computed based on specific identification of the related cost of the marketable
securities.
The net increase in unrealized loss on available-for-sale marketable securities
of $32,931 from $272,884 to $305,815 is included in accumulated other
comprehensive loss in the accompanying statement of stockholders' equity.
The Company has a margin account related to its marketable securities. The
margin account has a $100,770 liability balance at December 31, 2001. The
Company has included the liability margin account balance in the accompanying
financial statements as part of other current liabilities.
7. Property and Equipment
Property and equipment consist of the following at December 31, 2001:
Automobiles $ 22,771
Equipment 129,391
Computer software 20,258
Leasehold improvements 4,720
-------
177,140
Less accumulated depreciation and amortization 112,276
--------
$ 64,864
========
8. Goodwill
Goodwill consists of the following at December 31, 2001:
Goodwill $ 30,000
Less accumulated amortization 11,526
------
$ 18,474
======
10
Infinity Infusion Care, Inc.
Notes to Financial Statements
December 31, 2001
9. Other Current Liabilities
Other current liabilities consist of the following at December 31, 2001:
State income taxes payable $133,216
Marketable securities margin account 100,770
Other 25,000
-------
$258,986
=======
10. Income Taxes
The Texas corporate franchise tax includes a tax on income. The franchise tax is
based on the greater of .25% of net taxable capital or 4.5% of net taxable
earned surplus. Net taxable earned surplus is based on federal taxable income
after certain adjustments. During 2001, the Company incurred approximately
$133,000 of franchise tax based on earned surplus.
Under Financial Accounting Standards Board Statement No. 109, Accounting for
Income Taxes, the liability method is used in accounting for state income taxes.
Under this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted state tax rates and laws that will be in
effect when the differences are expected to reverse. Deferred state taxes arise
principally due to differences between the financial statement and income tax
treatment of the allowance for doubtful accounts receivable, the use of
accelerated depreciation for tax purposes and unrealized holding gains and
losses on available-for-sale securities. The net state deferred tax assets and
liabilities are not material at December 31, 2001.
11. Savings Plan
The Company provides a 401(k) savings plan whereby all eligible employees may
voluntarily contribute a percentage of compensation. For 2001, the Company
contributed $25,000 to the plan.
11
Infinity Infusion Care, Inc.
Notes to Financial Statements
December 31, 2001
12. Leases
Rental expenses amounted to approximately $68,000 in 2001. The Company has a
long-term lease for office space, which expires May 31, 2003. Future minimum
lease payments for the noncancelable long-term office lease at December 31, 2001
are approximately $75,000 in 2002 and $31,000 in 2003.
13. Subsequent Events
Effective January 1, 2002, the Company changed its legal status from a
corporation and became a limited partnership.
In June 2002, the Company entered into an agreement to be acquired by Curative
Health Services, Inc. ("Curative"). The total purchase price is approximately
$24 million, of which $18 million will be paid in cash and $6 million in the
form of subordinated convertible notes of Curative. The subordinated convertible
notes are convertible into shares of Curative's common stock.
12
Infinity Infusion Care, Ltd.
Unaudited Condensed Financial Statements
As of and for the Three Months Ended
March 31, 2002 and 2001
Contents
Condensed Statements of Income
Three Months ended March 31, 2002 and 2001..............................14
Condensed Balance Sheets
March 31, 2002 and 2001.................................................15
Condensed Statements of Cash Flows
Three Months ended March 31, 2002 and 2001..............................16
Notes to Condensed Financial Statements......................................17
13
Infinity Infusion, Care, Ltd.
Condensed Statements of Income
(In thousands)
(Unaudited)
Three Months Ended
March 31,
2002 2001
-------- --------
Net revenues $ 2,531 $ 2,469
Cost and operating expenses:
Cost of sales 961 1,140
Selling, general and administrative 768 426
----- -----
Total cost and operating expenses 1,729 1,566
----- -----
Income from operations 802 903
Other income (expense):
Gain on sale of asset - 55
Loss on sale of asset - (96)
Interest expense (2) (15)
----- -----
Total other income (expense) (2) (56)
----- -----
Income before provision for income taxes 800 847
Income tax provision - 33
----- -----
Net income $ 800 $ 814
===== =====
See accompanying notes
14
Infinity Infusion, Care, Ltd.
Condensed Balance Sheets
March 31, 2002 and 2001
(In thousands)
(Unaudited)
2002 2001
------- -------
ASSETS
Current assets:
Cash and cash equivalents $ 125 $ 40
Accounts receivable, net 1,806 1,446
Marketable securities available for sale, net 231 162
Inventory 455 423
----- -----
Total current assets 2,617 2,071
Property and equipment, net 63 629
Goodwill 18 20
Other assets 4 28
----- -----
Total assets $ 2,702 $ 2,748
===== =====
LIABILITIES AND STOCKHOLDERS' EQUITY/PARTNERS' CAPITAL
Current liabilities:
Accounts payable and accrued expenses $ 579 $ 644
Note payable 500 450
Other current liabilities 101 105
----- -----
Total current liabilities 1,180 1,199
Long-term liabilities - 293
----- -----
Total liabilities 1,180 1,492
Stockholders' equity/Partners' capital:
Partners' capital 1,615 -
Common stock - 1
Retained earnings - 1,561
Accumulated other comprehensive loss (93) (306)
----- -----
Total stockholders' equity 1,522 1,256
----- -----
Total liabilities and stockholders' equity/Partners' capital $ 2,702 $ 2,748
===== =====
See accompanying notes
15
Infinity Infusion, Care, Ltd.
Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended
March 31,
2002 2001
------- -------
OPERATING ACTIVITIES:
Net income $ 800 $ 814
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2 1
Provision for doubtful accounts 116 157
Changes in operating assets and liabilities:
Accounts receivable 41 (284)
Inventory (86) (79)
Accounts payable and accrued expenses 270 515
Other liabilities (158) (13)
----- -----
NET CASH PROVIDED BY OPERATING ACTIVITIES 985 1,111
INVESTING ACTIVITIES:
Net change in marketable securities available-for-sale 194 35
----- -----
NET CASH PROVIDED BY INVESTING ACTIVITIES 194 35
FINANCING ACTIVITIES:
Payments on short-term loan - (350)
Payments on long-term loan - (23)
Proceeds from short-term borrowing 150 -
Distributions to stockholders (1,250) (550)
----- -----
NET CASH USED IN FINANCING ACTIVITIES (1,100) (923)
----- -----
NET INCREASE IN CASH AND CASH EQUIVALENTS 79 223
CASH AND CASH EQUIVALENTS (OVERDRAFT) AT BEGINNING OF PERIOD 46 (183)
----- -----
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 125 $ 40
===== =====
See accompanying notes
16
Infinity Infusion Care, Ltd.
Notes to Condensed Financial Statements
March 31, 2002 and 2001
Note 1. Basis of Presentation
The condensed financial statements are unaudited and reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the financial position and
operating results for the interim period. The condensed financial statements
should be read in conjunction with the audited financial statements for the year
ended December 31, 2001 and Notes thereto. The results of operations for the
three months ended March 31, 2002 are not necessarily indicative of the results
to be expected for the entire fiscal year ending December 31, 2002.
Note 2. Subsequent Event
In June 2002, Infinity Infusion Care, Ltd. was purchased by Curative Health
Services, Inc. ("Curative"). The aggregate purchase price was $24 million,
which consisted of $18 million in cash and $6 million in promissory notes,
which bear interest at a rate of 3 percent per annum, mature on June 28, 2007,
and are convertible into an aggregate of 373,111 shares of Curative's common
stock at a price per share of $16.08.
17
Item 7. (b) Pro Forma Financial Information
Curative Health Services, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Financial Statements
As of March 31, 2002 and for the Year Ended December 31, 2001 and
Three Months Ended March 31, 2002
Contents
Unaudited Pro Forma Condensed Consolidated Statement of Operations
for the year ended December 31, 2001.......................................20
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
three months ended March 31, 2002..........................................21
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
March 31, 2002.............................................................22
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.....23
18
Curative Health Services, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Financial Statements
In February 2002, the Company acquired Apex Therapeutic Care, Inc. ("Apex") for
$60 million. Approximately $40 million of the purchase price was paid in shares
of the Company's common stock with the remainder paid in cash and a $5 million
promissory note. The Company and the former shareholders of Apex amended and
restated the promissory note on May 30, 2002 to change the terms relating to a
business performance criteria, add a convertible feature and ultimately adjust
the principal amount of the promissory note to $3.7 million.
In June 2002, the Company acquired Infinity Infusion Care, Ltd. ("Infinity") for
$24 million, consisting of $18 million in cash and $6 million in convertible
notes.
The unaudited pro forma financial data presented give effect to the completed
acquisitions of Apex and Infinity, both of which were completed in 2002. The pro
forma financial data is based on the Company's historical financial statements
and the historical financial statements of Apex and Infinity. Certain historical
amounts have been reclassified to conform to current presentation.
The acquisitions have been accounted for in the pro forma financial data using
the purchase method of accounting. Accordingly, the assets acquired and
liabilities assumed have been recorded at their fair values.
The unaudited pro forma condensed consolidated statements of operations for the
year ended December 31, 2001 and the three months ended March 31, 2002 give
effect to the acquisitions of Apex and Infinity as if they had been consummated
on January 1, 2001. The unaudited pro forma consolidated balance sheet as of
March 31, 2002 gives effect to the acquisition of Infinity as if it occurred on
March 31, 2002.
The pro forma adjustments are based upon available information and assumptions
that the Company believes were reasonable at the time made. The unaudited pro
forma condensed consolidated financial statements do not purport to present the
Company's financial position or results of operations had the acquisitions
occurred on the dates specified, nor are they necessarily indicative of the
financial position or results of operations that may be achieved in the future.
19
Curative Health Services, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 2001
(in thousands, except per share data)
Curative Health Apex Infinity Consolidated Pro
Services, Inc. Therapeutic Infusion Pro Forma Forma Statement
and Subsidiaries Care, Inc. Care, Inc. Adjustments of Operations
----------------- ------------- ------------- ----------------- ------------------
Revenues:
Services $ 44,862 $ - $ - $ - $ 44,862
Products 36,776 54,536 11,225 (6,675)(a) 95,862
------- ------ ------ ----- -------
Total revenues 81,638 54,536 11,225 (6,675) 140,724
Costs and operating expenses:
Cost of services 25,887 - - - 25,887
Cost of product sales 29,779 37,821 4,676 (6,429)(a) 65,847
Selling, general and administrative 51,466 9,553 2,753 - 63,772
------- ------ ------ ----- -------
Total costs and operating expenses 107,132 47,374 7,429 (6,429) 155,506
------- ------ ------ ----- -------
(Loss) income from operations (25,494) 7,162 3,796 (246) (14,782)
Interest income 816 3 - 90 (b) 909
Interest expense - (275) (66) (1,125)(c) (1,466)
Loss on sale of securities, net - - (41) - (41)
------- ------ ------ ----- -------
(Loss) income before taxes (24,678) 6,890 3,689 (1,281) (15,380)
Income tax (benefit) provision (2,473) 2,774 133 1,189 (d) 1,623
------- ------ ------ ----- -------
Net (loss) income $ (22,205) $ 4,116 $ 3,556 $(2,470) $ (17,003)
======= ====== ====== ===== =======
Net loss per common share, basic $ (3.09) $ (1.69)
======= =======
Net loss per common share, diluted $ (3.09) $ (1.69)
======= =======
Weighted average common shares, basic 7,193 2,865 10,058
======= ====== =======
Weighted average common shares, diluted 7,193 2,865 10,058
====== ====== =======
20
Curative Health Services, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Three Months Ended March 31, 2002
(in thousands, except per share data)
Curative
Health (1) Infinity Consolidated
Services, Apex Infusion Pro Forma
Inc. and Therapeutic Care, Pro Forma Statement of
Subsidiaries Care, Inc. Ltd. Adjustments Operations
------------------------------------------------------------------------
Revenues:
Services $ 8,895 $ - $ - $ - $ 8,895
Products 13,869 8,150 2,531 (158)(a) 24,392
------ ----- ----- --- ------
Total revenues 22,764 8,150 2,531 (158) 33,287
Costs and operating expenses:
Cost of services 3,917 - - - 3,917
Cost of product sales 10,339 5,358 961 (151)(a) 16,507
Selling, general & administrative 4,924 1,789 768 - 7,481
------ ----- ----- --- ------
Total costs and operating expenses 19,180 7,147 1,729 (151) 27,905
------ ----- ----- ---- ------
Income (loss) from operations 3,584 1,003 802 (7) 5,382
Interest and other income 36 - - - 36
Interest expense (137) (32) (2) (284)(e) (455)
------ ----- ----- --- ------
Income (loss) before taxes 3,483 971 800 (291) 4,963
Income tax provision 1,433 - - 708 (d) 2,141
------ ----- ----- ---- ------
Net income (loss) $ 2,050 $ 971 $ 800 $ (999) $ 2,822
====== ===== ===== === ======
Net income per common share, basic $ 0.21 $ 0.25
====== ======
Net income per common share, diluted $ 0.19 $ 0.23
====== ======
Weighted average common shares, basic 9,653 1,557 11,210
====== ===== ======
Weighted average common shares, diluted 10,962 1,557 12,519
====== ===== ======
(1) For the period from January 1, 2002 through February 28, 2002, the date of
acquisition, excluding approximately $4.0 million of net charges directly
attributable to the sale of Apex Therapeutic Care, Inc. to Curative Health
Services, Inc. (primarily stock compensation and related charges and
inter-affiliate sales and cost of sales).
21
Curative Health Services, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Balance Sheet
March 31, 2002
(in thousands)
Curative
Health Infinity
Services, Infusion Consolidated
Inc. and Care, Pro Forma Pro Forma
Subsidiaries Ltd. Adjustments Balance Sheet
------------ --------- ----------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 5,518 $ 125 $ (5,643)(f) $ -
Accounts receivable, net 25,073 1,806 - 26,879
Marketable securities available for sale, net - 231 (231)(g) -
Deferred tax assets 6,846 - - 6,846
Inventory 11,398 455 - 11,853
Prepaids and other assets 783 - - 783
------- ----- ----- -------
Total current assets 49,618 2,617 (5,874) 46,361
Property and equipment, net 3,650 63 - 3,713
Intangibles subject to amortization, net 1,530 - 275 (f) 1,805
Intangibles not subject to amortization 332 - 46 (f) 378
Goodwill 82,809 18 22,114 (f) 104,941
Other assets 2,789 4 - 2,793
------- ---- ------ -------
Total assets $ 140,728 $ 2,702 $ 16,561 $ 159,991
======= ===== ====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 15,323 $ 472 $ - $ 15,795
Accrued expenses 17,580 107 - 17,687
Note payable - 500 (500)(g) -
Other current liabilities - 101 - 101
------- ---- ------ -------
Total current liabilities 32,903 1,180 (500) 33,583
Long-term liabilities 10,557 - 18,583 (f) 29,140
------- ----- ------ -------
Total liabilities 43,460 1,180 18,083 62,723
Stockholders' equity 97,268 1,522 (1,522)(f) 97,268
------- ----- ----- -------
Total liabilities and stockholders' equity $ 140,728 $ 2,702 $ 16,561 $ 159,991
======= ===== ====== =======
22
Curative Health Services, Inc. and Subsidiaries
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
Details of the pro forma adjustments relating to the acquisitions of Apex
Therapeutic Care, Inc. and Infinity Infusion Care, Inc. are as follows:
a) To eliminate affiliate sales, cost of sales and profit.
b) To record interest income on $2.0 million loan given to former shareholder
as part of Apex Therapeutic Care, Inc. purchase.
c) To record interest expense on $5.0 million sellers' note (rate of 4.4
percent per annum) issued as part of Apex Therapeutic Care, Inc. purchase
and interest expense on $6.0 million convertible note and $10.0 million
term loan facility (rates of 3 percent and of 7.25 percent per annum,
respectively) issued as part of Infinity Infusion Care, Ltd. purchase.
d) To record additional tax provision based on the Company's effective tax
rate of 40 percent.
e) To record interest expense on $3.7 million convertible note (rate of 4.4
percent per annum) issued as part of Apex Therapeutic Care, Inc. purchase
and $6.0 million convertible note, $10.0 million term loan facility and a
$2.4 million revolver (rates of 3 percent, of 7.25 percent and 5.25 percent
per annum, respectively) issued as part of Infinity Infusion Care, Ltd.
purchase.
f) To record the effect of the purchase of Infinity Infusion Care, Ltd. on
cash balances, equity accounts and long-term debt. The purchase price
allocation and amounts allocated to goodwill and other intangibles are
final.
The purchase price consisted of:
Cash paid to Seller $ 18,000
Note to Seller 6,000
Acquisition costs 226
------
Total $ 24,226
======
The cash paid consisted of:
Term loan $ 10,000
Cash on hand 5,643
Revolving loan borrowing 2,357
------
Total $ 18,000
======
23
Curative Health Services, Inc. and Subsidiaries
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
(f) (continued)
The purchase price was allocated as follows:
Goodwill $ 22,114
Intangibles 321
Net liabilities not assumed 269
Net equity 1,522
------
Total $ 24,226
======
The pro forma adjustment to long-term liabilities consists of:
Term loan $ 10,000
Note to seller 6,000
Revolving loan borrowing 2,357
Acquisition costs 226
------
Total $ 18,583
======
g) To eliminate assets not acquired and liabilities not assumed.
24
Signature
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, hereunto duly authorized.
CURATIVE HEALTH SERVICES, INC.
Date: July 9, 2003 By: /s/ Thomas Axmacher
---------------
Thomas Axmacher
Chief Financial Officer
25
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Forms S-3 Nos. 333-102965, 333-89254 and 333-83342) pertaining to shares to
be sold by certain selling shareholders, in the Registration Statement
(Forms S-8 Nos. 333-98253 and 333-60852) pertaining to the Curative Health
Services, Inc. 2000 Stock Incentive Plan, in the Registration Statement
(Forms S-8 Nos. 333-98251 and 333-73376) pertaining to the Curative Health
Services, Inc. 2001 Broad-Based Stock Incentive Plan and Non-Qualified
Stock Option Agreements for David Lawson, Steven Michurski, and Beth Oliver,
in the Registration Statement (Forms S-8 Nos. 333-65753 and 333-60854)
pertaining to the Curative Health Services, Inc. Non-Employee Director
Stock Option Plan, as amended, in the Registration Statement (Forms S-8
Nos. 333-65751, 33-65712, 33-54880, 33-45553 and 33-44414) pertaining to
the Curative Health Services, Inc. and Subsidiaries 1991 Stock Option Plan,
as amended, in the Registration Statement (Form S-8 No. 33-65710) pertaining
to the Curative Health Services, Inc. and Subsidiaries Director Share
Purchase Program, and in the Registration Statement (Form S-8 No. 33-85188)
pertaining to the Curative Health Services, Inc. and Subsidiaries Employee
401(k) Savings Plan of our report dated May 15, 2002, with respect to the
financial statements of Infinity Infusion Care, Inc. as of and for the year
ended December 31, 2001 included in the Current Report on Form 8-K of Curative
Health Services, Inc.
/s/ Ernst & Young LLP
New York, New York
July 8, 2003