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: 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. CRA MANAGED CARE, INC. FORM 8-K ITEM 7(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED FOCUS HEALTHCARE MANAGEMENT, INC. Financial Statements as of December 31, 1994 and 1995 Together with Auditor's Report 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 FOCUS HEALTHCARE MANAGEMENT, INC. Balance Sheets Assets March 31, December 31, 1996 1994 1995 (Unaudited) 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 =========== =========== =========== Liabilities and Shareholder's Equity 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 =========== =========== =========== The accompanying notes are an integral part of these financial statements. FOCUS HEALTHCARE MANAGEMENT, INC. Statements of Operations For the Three Months (Predecessor) (Focus) Ended For the Years Ended December 31, March 31, 1993 1994 1995 1996 (Unaudited) 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) =========== =========== =========== ============ The accompanying notes are an integral part of these financial statements. FOCUS HEALTHCARE MANAGEMENT, INC. Statements of Cash Flows (Predecessor) (Focus) For the Three For the Years Ended December 31, Months Ended 1993 1994 1995 March 31, 1996 (Unaudited) 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 $ - $ - $ - =========== ============ =========== ========== The accompanying notes are an integral part of these financial statements. FOCUS HEALTHCARE MANAGEMENT, INC. Statements of Shareholder's Equity (Deficit) Redeemable Additional Preferred Common Stock Paid-in Accumulated Treasury Stock Shares Amount Capital Deficit Stock Total 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 ============== ========== ========= =========== ============ ============ =========== The accompanying notes are an integral part of these financial statements. 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 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: 1994 1995 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 ========== ========== 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: Capital Operating Leases Leases 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 ======== (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. 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: Current- Federal $ - State 18,000 -------- 18,000 -------- Deferred- Federal 339,000 State 38,000 -------- 377,000 -------- $395,000 ======== 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. 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. CRA MANAGED CARE, INC. FORM 8-K ITEM 7(b) PRO FORMA FINANCIAL INFORMATION 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. March 31, 1996 ------------------------------------------------- Pro Forma Pro Forma ASSETS CRA Focus Adjustments Combined ------------------------------------------------- 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 ================================ ============ See accompanying Notes to Consolidated Pro Forma Financial Statements 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. Year ended December 31, 1995 ------------------------------------------------ Pro Forma Pro Forma CRA Focus Adjustments Combined ------------------------------------------------ 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 ------------------------------------------------ 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 ========== ============ See accompanying Notes to Consolidated Pro Forma Financial Statements. 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: 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 ------- 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. CRA Managed Care, Inc. NOTES TO CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS (Amounts in thousands - unaudited) (7) The pro forma adjustment included: Year ended Three months ended December 31, 1995 March 31, 1996 ------------------ ------------------- 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) ----- ----- (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. 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 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.