<PAGE>
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) September 15, 1997
--------------------------------
InSight Health Services Corp.
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
Delaware 0-28622 33-0702770
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(STATE OR OTHER JURISDICTION (COMMISSION (I.R.S EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
4400 MacArthur Boulevard, Suite 800, Newport Beach, CA 92660
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(714) 476-0733
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
N/A
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
(a) Financial statements of business acquired.
The financial statements of Desmond L. Fischer, M.D. ,(d/b/a/
Chattanooga Outpatient Center) required by this item are attached.
(b) PRO FORMA FINANCIAL INFORMATION.
The Unaudited Pro Forma Condensed Financial Statements are
presented which reflect the acquisition of certain assets of Desmond
L. Fischer, M.D., (d/b/a/ Chattanooga Outpatient Center) (COC) by
InSight Health Services Corp. ("Registrant") through its wholly owned
subsidiary, InSight Health Corp. ("InSight"). The Unaudited Pro
Forma Condensed Financial Statements are provided for informational
purposes only and are not necessarily indicative of the results that
actually would have occurred had the acquisition been in effect for
the period presented.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet is
based on the historical balance sheet as of March 31, 1997 and is
presented as if the acquisition had been consummated at that date.
The Unaudited Pro Forma Condensed Consolidated Statement of Income is
based on the historical statements of operations of each of InSight
and COC for the nine months ended March 31, 1997, and reflects certain
adjustments to give effect to the acquisition as if it had occurred on
July 1, 1996.
Pro forma adjustments are based on the purchase method of
accounting and a preliminary allocation of the purchase price.
However, changes to the adjustments included in the Unaudited Pro
Forma Combined Financial Statements are expected as evaluations of
assets and liabilities are completed and additional information
becomes available. Accordingly, the final allocated values will
differ from the amounts used to calculate the adjustments in the
Unaudited Pro Forma Condensed Consolidated Statement of Income.
(c) Exhibits.
99.1 (a) Chattanooga Outpatient Center Financial Statements
(Unaudited) for the Year Ended June 30, 1997.
2
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(b)(i) PRO FORMA FINANCIAL INFORMATION
INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
As reported Pro Forma Pro Forma
March 31, 1997 Adjustments March 31, 1997
-------------- ----------- --------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,504 $ - $ 6,504
Trade accounts receivable 13,841 - 13,841
Other current assets 2,914 - 2,914
--------- --------- ---------
Total current assets 23,259 - 23,259
PROPERTY AND EQUIPMENT 30,309 1,100 (A) 31,409
OTHER ASSETS 18,975 9,839 (B) 28,814
--------- --------- ---------
$ 72,543 $ 10,939 $ 83,482
--------- --------- ---------
--------- --------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and other accrued expenses $ 13,154 - $ 13,154
Current portion of equipment and other notes 11,716 802 (C,D) 12,518
Current portion of deferred gain on debt
restructure 821 - 821
--------- --------- ---------
Total current liabilities 25,691 802 26,493
--------- --------- ---------
LONG-TERM LIABILITIES:
Equipment and other notes, less current
portion 37,103 10,137 (C,D) 47,240
Deferred gain on debt restructure, less
current portion 902 - 902
Other long-term liabilities 766 - 766
--------- --------- ---------
Total long-term liabilities 38,771 10,137 48,908
--------- --------- ---------
MINORITY INTEREST 1,929 - 1,929
--------- --------- ---------
STOCKHOLDERS' EQUITY
Convertible Series A preferred stock 6,750 - 6,750
Common stock 3 - 3
Additional paid-in capital 23,100 - 23,100
Accumulated deficit (23,701) - (23,701)
--------- --------- ---------
Total stockholders' equity 6,152 - 6,152
--------- --------- ---------
$ 72,543 $ 10,939 $ 83,482
--------- --------- ---------
--------- --------- ---------
</TABLE>
SEE NOTES TO UNAUDITED PROFORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
INSIGHT HEALTH INSIGHT HEALTH
SERVICES CORP. SERVICES CORP.
AND SUBSIDIARIES AND SUBSIDIARIES
AS REPORTED COC PRO FORMA
FOR THE NINE FOR THE NINE FOR THE NINE
MONTHS ENDED MONTHS ENDED PRO FORMA MONTHS ENDED
MARCH 31, 1997 MARCH 31, 1997 ADJUSTMENTS MARCH 31, 1997
--------------- -------------- ----------- ------------------
<S> <C> <C> <C> <C>
REVENUES
Contract services $ 35,186 $ - $ - $ 35,186
Patient services 31,153 3,342 - 34,495
Other 1,790 161 - 1,951
-------- ------ -------- --------
Total revenues 68,129 3,503 - 71,632
-------- ------ -------- --------
COSTS OF OPERATIONS
Cost of services 37,386 1,768 - 39,154
Provision for doubtful accounts 1,116 87 - 1,203
Equipment leases 13,822 - - 13,822
Depreciation and amortization 7,203 516 369(A) 8,088
-------- ------ -------- --------
Total costs of operations 59,527 2,371 369 62,267
-------- ------ -------- --------
GROSS PROFIT 8,602 1,132 (369) 9,365
CORPORATE OPERATING EXPENSES 5,343 - - 5,343
-------- ------ -------- --------
INCOME FROM COMPANY OPERATIONS 3,259 1,132 (369) 4,022
EQUITY IN EARNING OF
UNCONSOLIDATED PARTNERSHIPS 364 - - 364
-------- ------ -------- --------
OPERATING INCOME (LOSS) 3,623 1,132 (369) 4,386
INTEREST EXPENSE, Net 2,741 92 724(B) 3,557
-------- ------ -------- --------
INCOME BEFORE TAXES 882 1,040 (1,093) 829
INCOME TAX EXPENSE 134 - - 134
-------- ------ -------- --------
NET INCOME $ 748 $1,040 $ (1,093) $ 695
-------- ------ -------- --------
INCOME PER COMMON SHARE:
Net income $ .014 $ .013
-------- --------
Weighted average number of
common shares outstanding 5,444,308 5,444,308
</TABLE>
SEE NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
(b)(iii) INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
NOTE 1: UNAUDITED PRO FORMA BALANCE SHEET ADJUSTMENTS
The Unaudited Pro Forma Condensed Consolidated Balance Sheet of the
Registrant as of March 31, 1997, gives affect to the following pro forma
adjustments:
(A) To record the property and equipment acquired at their estimated
fair value. The property and equipment will be depreciated over
one to five years.
(B) To record the goodwill related to the assets acquired. The
goodwill will be amortized over an assumed 20 year period.
(C) To record the assumption of the current and long-term portions of
the long-term debt, related to the property and equipment
acquired.
(D) To record the current and long-term portions of the $9,000,000
debt borrowed from General Electric Medical Systems (GEMS).
NOTE 2: UNAUDITED PRO FORMA STATEMENT OF INCOME ADJUSTMENTS
The Unaudited Pro Forma Condensed Consolidated Statement of Income of the
Registrant for the nine months ended March 31, 1997, gives affect to the
following pro forma adjustments:
(A) To record the amortization of the goodwill associated with the
acquisition over an assumed 20 year period.
(B) To record interest expense on the long-term debt borrowed from
GEMS associated with the acquisition at a rate of 10.25 percent
per annum.
5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: September 15, 1997
INSIGHT HEALTH SERVICES CORP.
BY: /S/ E. LARRY ATKINS
------------------------------------------
E. Larry Atkins
President and Chief Executive Officer
6
<PAGE>
CHATTANOOGA OUTPATIENT CENTER
(A PROPRIETORSHIP)
FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
F-1
<PAGE>
CHATTANOOGA OUTPATIENT CENTER
(A PROPRIETORSHIP)
BALANCE SHEET
JUNE 30, 1997
(UNAUDITED)
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- ------------------------------------------------------------------------------
ASSETS
------
CURRENT ASSETS
- --------------
Cash $ 360,300
Accounts receivable, less allowance for
uncollectible accounts of $33,751 1,134,401
Prepaid expenses and other assets 26,693
----------
Total current assets 1,521,394
----------
NET PROPERTY AND EQUIPMENT 2,174,272
- -------------------------- ----------
OTHER ASSETS
- ------------
Intangible assets, net of accumulated amortization 125,754
----------
TOTAL ASSETS $3,821,420
- ------------ ----------
----------
LIABILITIES AND PROPRIETOR'S EQUITY
-----------------------------------
CURRENT LIABILITIES
- -------------------
Accounts payable and accrued expenses $ 712,092
Current maturities of long-term liabilities and
obligations under capital leases 128,897
Notes payable 88,904
----------
Total current liabilities 929,893
----------
LONG-TERM LIABILITIES 1,716,675
- --------------------- ----------
PROPRIETOR'S EQUITY 1,174,852
- ------------------- ----------
TOTAL LIABILITIES AND PROPRIETOR'S EQUITY $3,821,420
- ----------------------------------------- ----------
----------
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE>
CHATTANOOGA OUTPATIENT CENTER
(A PROPRIETORSHIP)
STATEMENT OF INCOME
YEAR ENDED JUNE 30, 1997
(UNAUDITED)
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- ------------------------------------------------------------------------------
REVENUES
- --------
Net patient service revenue $4,456,332
Other revenue 214,838
----------
Total revenues 4,671,170
----------
COSTS OF OPERATIONS
- -------------------
Cost of services 2,356,774
Provision for doubtful accounts 116,082
Depreciation and amortization 688,192
----------
Total costs of operations 3,161,048
----------
GROSS PROFIT 1,510,122
- ------------
Interest expense, net 122,329
----------
NET INCOME $1,387,793
- ---------- ----------
----------
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
CHATTANOOGA OUTPATIENT CENTER
(A PROPRIETORSHIP)
STATEMENT OF CHANGES IN PROPRIETOR'S EQUITY
YEAR ENDED JUNE 30, 1997
(UNAUDITED)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
BALANCE - Beginning of year $1,620,697
Net income 1,387,793
Proprietor withdrawals (1,833,638)
----------
BALANCE - End of year $1,174,852
----------
----------
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
CHATTANOOGA OUTPATIENT CENTER
(A PROPRIETORSHIP)
STATEMENT OF CASH FLOWS
YEAR ENDED JUNE 30, 1997
(UNAUDITED)
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- -------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
Net income $1,387,793
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 688,192
Decrease in accounts receivable 108,978
Decrease in prepaid expenses and other assets 1,607
Increase in accounts payable and accrued expenses 64,096
---------
Net cash provided by operating activities 2,250,666
---------
---------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Purchase of property and equipment (118,927)
---------
Net cash used by investing activities (118,927)
---------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Proceeds from short-term borrowings 88,904
Principal payments on borrowings and capital lease obligations (129,266)
Distributions to proprietor (1,833,638)
---------
Net cash used by financing activities (1,874,000)
---------
INCREASE IN CASH AND CASH EQUIVALENTS 257,739
- -------------------------------------
Cash and cash equivalents - beginning of fiscal year 102,561
---------
Cash and cash equivalents - end of fiscal year $ 360,300
---------
---------
SUPPLEMENTAL CASH FLOW INFORMATION
- ----------------------------------
Cash paid for interest $127,484
---------
---------
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
CHATTANOOGA OUTPATIENT CENTER
(A PROPRIETORSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
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- -------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Desmond L. Fischer, M.D. d/b/a the Chattanooga Outpatient Center (the
Center) is a proprietorship which provides diagnostic imaging, treatment
and related services to its patients in the Chattanooga, Tennessee area.
REVENUE RECOGNITION
Revenues from patient services are recognized when services are provided
and are presented net of related contractual adjustments.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
CASH EQUIVALENTS
For purposes of the statement of cash flows, the Center considers highly
liquid investments with original maturities of three months or less to
be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are depreciated and amortized on the
straight-line method using the following estimated useful lives:
Building and improvements 15 to 25 years
Vehicles 3 years
Computer and office equipment 5 to 7 years
Diagnostic and related equipment 5 to 7 years
Equipment under capital leases Term of lease
F-6
<PAGE>
CHATTANOOGA OUTPATIENT CENTER
(A PROPRIETORSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
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- -------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The Center capitalizes expenditures for betterments and major renewals.
Maintenance, repairs and minor replacements are charged to operations as
incurred. When assets are sold or otherwise disposed of, the cost and
related accumulated depreciation are removed from the accounts, and any
resulting gain or loss is included in the results of operations.
INTANGIBLE ASSETS
Intangibles consist of loan costs and goodwill and is being amortized
over seven years. Amortization expense charged to operations amounted to
approximately $50,000 for the year ended June 30, 1997.
INCOME TAXES
The Center does not provide for income taxes as operations for the
Center are reported on the income tax return for the sole proprietor.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Center has a number of financial instruments, none of which are held
for trading purposes. Fair value of financial instruments are estimated
using available market information and other valuation methodologies.
The fair value of the Center's financial instruments is estimated to
approximate the related book value.
SOLE PROPRIETORSHIP
The accompanying financial statements reflect the financial position and
results of operations of Desmond L. Fisher, M.D. d/b/a the Chattanooga
Outpatient Center, a proprietorship. The financial statements do not
include the personal assets and liabilities of the proprietor or
accounts of any other businesses in which he may be involved.
CONTINGENT RISK REGARDING CASH BALANCES
From time to time the Center has on deposit in institutions whose
accounts are insured by agencies of the United States Government, funds
which total in excess of the insured maximum of $100,000. As of June 30,
1997 this at-risk amount was $316,662; however, this at-risk amount is
subject to significant fluctuations on a daily basis throughout the year.
F-7
<PAGE>
CHATTANOOGA OUTPATIENT CENTER
(A PROPRIETORSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
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- ------------------------------------------------------------------------------
NOTE 2 - LONG-TERM LIABILITIES
Long-term liabilities at June 30, 1997 consist of:
Notes payable to bank $1,839,313
Obligation under capital lease 6,259
----------
1,845,572
Less current maturities of long-term
liabilities and obligations under capital
leases 128,897
----------
$1,716,675
----------
----------
The note payable to bank is payable in monthly installments of $18,011
through August, 1997 and $21,879 commencing September 1997 through August,
2007. Interest is payable at 6.15% through August 1977 and 7.65%
thereafter. The note is collateralized by land, building and certain
equipment. Interest expense totaled $127,484 for the year ended June 30,
1997.
The capital lease is for certain medical equipment and has been fully
paid in August, 1997.
Aggregate annual principal payments applicable to long-term liabilities,
are as follows:
1998 $ 128,897
1999 135,181
2000 145,893
2001 157,453
2002 169,930
Thereafter 1,108,218
----------
$1,845,572
----------
----------
NOTE 3 - RETIREMENT SAVINGS PLAN
The Center sponsors a defined contribution plan which began in January,
1989 for all employees who elect to participate. The Center makes
contributions into the plan as a percentage of the amount an employee
contributes with the maximum employer annual contribution being $900 per
employee. The Center recognized expense related to its contribution to
the plan of approximately $8,588.
F-8
<PAGE>
CHATTANOOGA OUTPATIENT CENTER
(A PROPRIETORSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
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- ------------------------------------------------------------------------------
NOTE 4 - COMMITMENT AND CONTINGENCIES
In the normal course of business the Center is exposed as a potential
responsible party to claims related to services rendered. As of the date
of these financial statements, management is not aware of any claims or
potential claims that are likely to have a material effect on the
financial statements.
The Center provides administrative services for a nuclear cardiology
group under a fixed fee management agreement expiring December 31, 1997.
Revenues related this agreement amounted to $188,700 for the year ending
June 30, 1997.
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment consist of:
Land $ 670,373
Buildings and improvements 1,314,195
Computer and office equipment 83,719
Vehicles 12,086
Diagnostic and related equipment 2,761,374
Equipment under capital leases 214,691
----------
5,056,438
Less accumulated depreciation and amortization 2,882,166
----------
$2,174,272
----------
----------
NOTE 6 - NOTE PAYABLE
The Center has established with a local bank a letter of credit arrangement
in a total amount of $301,000. Borrowings against the letter of credit bear
interest at the prime rate, currently 8.5%. The letter of credit expires
May 1, 1998. Drawings against the line of credit totaled $88,904 at June
30, 1997.
NOTE 7 - SUBSEQUENT EVENT
On July 1, 1997 the operations of the Center were sold to InSight Health
Services Corp. along with certain operating assets and liabilities. InSight
provides diagnostic imaging, treatment and related services to hospitals,
physicians and their patients throughout the United States.
F-9
