<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ________
Commission File Number 0-21447
ADVANCE PARADIGM, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2493381
(State of Incorporation) (IRS Employer Identification Number)
545 E. John Carpenter Freeway, Suite 1570, Irving, Texas 75062
(Address of principal executive offices) (ZIP Code)
(972) 830-6199
(Registrant's Telephone Number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
Common stock, $.01 par value: 10,322,246
outstanding as of February 12, 1999
<PAGE> 2
ADVANCE PARADIGM, INC.
INDEX TO QUARTERLY REPORT FORM 10-Q
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C> <C>
Item 1. Financial Statements
A. Condensed Consolidated Balance Sheets as of
March 31, 1998 and December 31, 1998 2
B. Condensed Consolidated Statements of Operations
for the Three Months and Nine Months Ended
December 31, 1997 and 1998 3
C. Condensed Consolidated Statements of Cash
Flows for the Nine Months Ended
December 31, 1997 and 1998 4
D. Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION 12
SIGNATURES 13
</TABLE>
<PAGE> 3
ADVANCE PARADIGM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1998
-------------- -----------------
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 58,342,000 $ 62,962,000
Accounts receivable, net of allowance for doubtful accounts of
$247,000 and $365,000, respectively 68,335,000 81,792,000
Inventories 2,887,000 6,077,000
Prepaid expenses and other 1,487,000 1,544,000
------------ ------------
Total current assets 131,051,000 152,375,000
PROPERTY AND EQUIPMENT, net of accumulated depreciation
and amortization of $5,574,000 and $7,776,000, respectively 10,494,000 13,669,000
INTANGIBLE ASSETS, net of accumulated amortization of
$1,501,000 and $1,875,000, respectively 12,353,000 37,162,000
OTHER ASSETS 1,011,000 982,000
------------ ------------
Total assets $154,909,000 $204,188,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 97,495,000 $135,735,000
Accrued salaries and benefits 2,966,000 3,206,000
Income taxes payable 32,000 618,000
Other accrued expenses 2,196,000 1,307,000
------------ ------------
Total current liabilities 102,689,000 140,866,000
NONCURRENT LIABILITIES:
Deferred income taxes 1,285,000 2,367,000
Other noncurrent liabilities 371,000 546,000
------------ ------------
Total liabilities 104,345,000 143,779,000
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Series B convertible preferred stock, $.01 par value; 5,000 shares
authorized, 4,444 and 0 shares issued and
outstanding, respectively -- --
Common stock, $.01 par value; 25,000,000
shares authorized; 8,904,472 and 10,311,076
shares issued and outstanding, respectively 89,000 103,000
Additional paid-in capital 43,142,000 43,852,000
Retained earnings 7,333,000 16,454,000
------------ ------------
Total stockholders' equity 50,564,000 60,409,000
------------ ------------
Total liabilities and stockholders' equity $154,909,000 $204,188,000
============ ============
</TABLE>
See accompanying notes to financial statements.
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<PAGE> 4
ADVANCE PARADIGM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended December 31, Nine Months Ended December 31,
---------------------------------- ----------------------------------
1997 1998 1997 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues $ 128,151,000 $ 200,205,000 $ 324,061,000 $ 545,645,000
-------------- -------------- -------------- --------------
Cost of operations:
Cost of revenues 122,305,000 192,161,000 309,567,000 523,030,000
Selling, general and
administrative expenses 2,726,000 3,498,000 7,252,000 10,073,000
-------------- -------------- -------------- --------------
Total cost of operations 125,031,000 195,659,000 316,819,000 533,103,000
-------------- -------------- -------------- --------------
Operating income 3,120,000 4,546,000 7,242,000 12,542,000
Interest income 668,000 695,000 2,066,000 2,169,000
Interest expense (18,000) -- (60,000) --
-------------- -------------- -------------- --------------
Income before income taxes 3,770,000 5,241,000 9,248,000 14,711,000
Provision for income taxes 1,433,000 1,991,000 3,514,000 5,590,000
-------------- -------------- -------------- --------------
Net income $ 2,337,000 $ 3,250,000 $ 5,734,000 $ 9,121,000
============== ============== ============== ==============
Basic
- -----
Net income per share $ 0.26 $ 0.32 $ 0.64 $ 0.90
============== ============== ============== ==============
Weighted average
shares outstanding 8,813,670 10,311,076 8,725,487 10,160,044
============== ============== ============== ==============
Diluted
- -------
Net income per share $ 0.20 $ 0.28 $ 0.51 $ 0.79
============== ============== ============== ==============
Weighted average
shares outstanding 11,514,239 11,602,949 11,268,765 11,598,574
============== ============== ============== ==============
</TABLE>
See accompanying notes to financial statements.
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<PAGE> 5
ADVANCE PARADIGM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended December 31,
------------------------------
1997 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,734,000 $ 9,121,000
Adjustments to reconcile net income to
net cash provided by operating activities -
Depreciation and amortization 1,717,000 2,434,000
Provision for doubtful accounts 18,000 18,000
Change in certain assets and liabilities -
Accounts receivable (25,220,000) (12,595,000)
Inventories (755,000) (3,190,000)
Prepaid expenses
and other assets (1,939,000) (177,000)
Accounts payable, accrued expenses
and other noncurrent liabilities 30,103,000 38,190,000
------------ ------------
Net cash provided by operating activities 9,658,000 33,801,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (5,655,000) (5,204,000)
Purchase of subsidiary, net of cash acquired -- (24,701,000)
------------ ------------
Net cash used for investing activities (5,655,000) (29,905,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of Common Stock 171,000 724,000
Proceeds from borrowings 708,000 --
Payments on long-term obligations (783,000) --
------------ ------------
Net cash provided by financing activities 96,000 724,000
------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,099,000 4,620,000
CASH AND CASH EQUIVALENTS, beginning of period 51,172,000 58,342,000
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 55,271,000 $ 62,962,000
============ ============
</TABLE>
See accompanying notes to financial statements.
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<PAGE> 6
ADVANCE PARADIGM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements have
been prepared by the Company in accordance with generally accepted accounting
principles for interim financial information and substantially in the form
prescribed by the Securities and Exchange Commission (the "Commission") in
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of the
Company's management, the December 31, 1998 and 1997 unaudited interim financial
statements include all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of results for this interim period. In the
opinion of the Company's management, the disclosures contained in this Form 10-Q
are adequate to make the information presented not misleading when read in
conjunction with the Notes to Consolidated Financial Statements included in the
Company's Form 10-K for the year ended March 31, 1998. The results of operations
for the three month and nine month periods ended December 31, 1998 are not
necessarily indicative of the results to be expected for the full year or for
any future period.
2. NET INCOME PER SHARE
Net income per share is computed using the weighted average number of
common and dilutive shares outstanding during the period. A reconciliation of
the numerators and denominators of the basic and diluted per share computations
are as follows:
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<PAGE> 7
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31, NINE MONTHS ENDED DECEMBER 31,
1997 1998 1997 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
BASIC
Numerator:
- ---------
Net income $ 2,337,000 $ 3,250,000 $ 5,734,000 $ 9,121,000
Preferred stock dividends 50,000 -- 150,000 --
------------ ------------ ------------ ------------
$ 2,287,000 $ 3,250,000 $ 5,584,000 $ 9,121,000
============ ============ ============ ============
Denominator:
- -----------
Weighted average common
stock outstanding 8,813,670 10,311,076 8,725,487 10,160,044
============ ============ ============ ============
Net income per share $ 0.26 $ 0.32 $ 0.64 $ 0.90
============ ============ ============ ============
DILUTED
Numerator:
- ---------
Net income $ 2,337,000 $ 3,250,000 $ 5,734,000 $ 9,121,000
============ ============ ============ ============
Denominator:
- -----------
Weighted average common 8,813,670 10,311,076 8,725,487 10,160,044
stock outstanding
Other dilutive securities:
Series B preferred stock 1,111,111 -- 1,111,111 48,840
Options and warrants using the
treasury stock method 1,589,458 1,291,873 1,432,167 1,389,690
------------ ------------ ------------ ------------
Weighted average shares outstanding 11,514,239 11,602,949 11,268,765 11,598,574
============ ============ ============ ============
Net income per share $ 0.20 $ 0.28 $ 0.51 $ 0.79
============ ============ ============ ============
</TABLE>
3. ACQUISITION OF BAUMEL-EISNER
Effective December 1, 1998, the Company completed the acquisition of
Baumel-Eisner Neuromedical Institute ("Baumel-Eisner"), a
privately-held clinical trials company based in south Florida. The
Company paid $25 million cash in exchange for all outstanding shares of
Baumel-Eisner. The acquisition has been accounted for under the
purchase method and goodwill of approximately $24 million will be
amortized over 25 years.
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<PAGE> 8
4. INCOME TAXES
In the three months and nine months ended December 31, 1997 and 1998, the
Company recorded a provision for income taxes based upon an estimated, effective
tax rate of 38%.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following table sets forth certain consolidated financial data of the
Company, for the periods indicated, as a percentage of total revenues.
<TABLE>
<CAPTION>
Three Months Nine Months
Ended December 31, Ended December 31,
1997 1998 1997 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Data Services 68.5% 68.1% 66.1% 67.7%
Mail Services 14.7 15.8 16.7 16.3
Clinical Services 16.8 16.1 17.2 16.0
------ ------ ------ ------
Total Revenues 100.0 100.0 100.0 100.0
------ ------ ------ ------
Cost of operations:
Cost of revenues 95.5 96.0 95.5 95.9
Selling, general and administrative
expenses 2.1 1.7 2.2 1.8
------ ------ ------ ------
Total cost of operations 97.6 97.7 97.7 97.7
------ ------ ------ ------
Operating income 2.4 2.3 2.3 2.3
Interest income, net of expense .5 .3 .6 .4
------ ------ ------ ------
Income before income taxes 2.9 2.6 2.9 2.7
Provision for income taxes (1.1) (1.0) (1.1) (1.0)
------ ------ ------ ------
Net income 1.8% 1.6% 1.8% 1.7%
====== ====== ====== ======
</TABLE>
THREE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO THREE MONTHS ENDED
DECEMBER 31, 1997
REVENUES. Revenues for the three months ended December 31, 1998 increased
$72.1 million, or 56%, compared to revenues for the three months ended December
31, 1997. Approximately 67% of the increase in revenues was attributable to a
31% increase in the number of pharmacy claims processed during the period. The
increase in claims resulted from new contracts signed throughout the last twelve
months with new clients, as well as internal growth from existing clients.
Substantially all of the new clients utilize the Company's pharmacy network. In
cases in which the Company has an independent obligation to pay its network
pharmacy providers, the Company includes payments from its plan sponsors for
these benefits as revenues and payments to its pharmacy providers as cost of
revenues. Therefore, new clients that utilize the Company's network will
generate higher revenues than new business where the Company merely administers
the client's network. Approximately 18% of the increase in revenues was
attributable to additional sales of the Company's mail pharmacy services,
resulting from a 60% increase in the number of mail prescriptions dispensed. The
remaining 15% of the increase in revenues resulted from an increase in clinical
services revenues derived from formulary and disease management services as well
as clinical trials.
- 7 -
<PAGE> 9
COST OF REVENUES. Cost of revenues for the three months ended December 31,
1998 increased by $69.9 million, or 57%, compared to the same period in the
prior year. This increase was attributable primarily to the additional costs
associated with the Company's claims processing growth and the new clients that
are utilizing the Company's retail pharmacy network. As a percentage of
revenues, cost of revenues was approximately 96.0% in the three months ended
December 31, 1998 compared to 95.5% in the same period in the prior year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expense for the three months ended December 31, 1998 increased by
$772,000, or 28%, compared to the same period in the prior year. This increase
was the result of the Company's expansion of its sales and marketing activities,
as well as increases in administrative and support staff levels and salaries and
benefits in response to volume growth in all services. In spite of the increase,
selling, general and administrative expenses as a percentage of revenues
decreased from 2.1% for the three months ended December 31, 1997 to 1.7% in the
same period in 1998 as the result of greater economies of scale and due to the
increase in revenues associated with the Company's claims processing services.
Additional revenues generated by clients utilizing the Company's network
pharmacy providers typically do not result in an increase in selling, general
and administrative expenses.
INTEREST INCOME AND INTEREST EXPENSE. Interest income, net of interest
expense, for the three months ended December 31, 1998 increased $45,000 compared
to the same period in the prior year. The Company incurred no interest expense
in the three months ended December 31, 1998 since the Company had no outstanding
indebtedness during the period.
INCOME TAXES. For the three months ended December 31, 1998 and 1997, the
Company recorded income tax expense based upon an estimated, effective tax rate
of 38%.
NET INCOME PER SHARE. The Company reported diluted net income per share of
$.28 per share for the three months ended December 31, 1998 compared to $.20 per
share for the same period in the prior year. The weighted average shares
outstanding were 11.5 million and 11.6 million for the three months ended
December 31, 1997 and 1998, respectively. The increase in the weighted average
shares resulted primarily from the increase in the Company's stock price which
has resulted in more options and warrants becoming dilutive securities. (See
Note 2 for calculation.)
- 8 -
<PAGE> 10
NINE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO NINE MONTHS ENDED
DECEMBER 31, 1997
REVENUES. Revenues for the nine months ended December 31, 1998 increased
$221.6 million, or 68%, compared to revenues for the nine months ended December
31, 1997. Approximately 70% of the increase in revenues was attributable to a
33% increase in the number of pharmacy claims processed during the period. The
increase in claims resulted from new contracts signed throughout the last twelve
months with new clients, as well as internal growth from existing clients.
Substantially all of the new clients utilize the Company's pharmacy network. In
cases in which the Company has an independent obligation to pay its network
pharmacy providers, the Company includes payments from its plan sponsors for
these benefits as revenues and payments to its pharmacy providers as cost of
revenues. Therefore, new clients that utilize the Company's network will
generate higher revenues than new business where the Company merely administers
the client's network. Approximately 16% of the increase in revenues was
attributable to additional sales of the Company's mail pharmacy services,
resulting from a 58% increase in the number of mail prescriptions dispensed. The
remaining 14% of the increase in revenues resulted from an increase in clinical
services revenues derived from formulary and disease management services as well
as clinical trials.
COST OF REVENUES. Cost of revenues for the nine months ended December 31,
1998 increased by $213.4 million, or 69%, compared to the same period in the
prior year. This increase was attributable primarily to the additional costs
associated with the Company's claims processing growth and the new clients that
are utilizing the Company's retail pharmacy network. As a percentage of
revenues, cost of revenues was approximately 95.9% in the nine months ended
December 31, 1998 compared to 95.5% in the same period in the prior year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expense for the nine months ended December 31, 1998 increased by
$2.8 million, or 39%, compared to the same period in the prior year. This
increase was the result of the Company's expansion of its sales and marketing
activities, as well as increases in administrative and support staff levels and
salaries and benefits in response to volume growth in all services. In spite of
the increase, selling, general and administrative expenses as a percentage of
revenues decreased from 2.2% for the nine months ended December 31, 1997 to 1.8%
in the same period in 1998 as the result of greater economies of scale and due
to the increase in revenues associated with the Company's claims processing
services. Additional revenues generated by clients utilizing the Company's
network pharmacy providers typically do not result in an increase in selling,
general and administrative expenses.
- 9 -
<PAGE> 11
INTEREST INCOME AND INTEREST EXPENSE. Interest income, net of interest
expense, for the nine months ended December 31, 1998 increased $163,000 compared
to the same period in the prior year. The Company incurred no interest expense
in the nine months ended December 31, 1998 since the Company had no outstanding
indebtedness during the period. The increase also resulted from higher cash
balances invested in cash management programs which utilized the Company's
short-term excess cash to generate interest income through investment in money
market funds and high-grade commercial paper.
INCOME TAXES. For the nine months ended December 31, 1998 and 1997, the
Company recorded income tax expense based upon an estimated, effective tax rate
of 38%.
NET INCOME PER SHARE. The Company reported diluted net income per share of
$.79 per share for the nine months ended December 31, 1998 compared to $.51 per
share for the same period in the prior year. The weighted average shares
outstanding were 11.3 million and 11.6 million for the nine months ended
December 31, 1997 and 1998, respectively. The increase in the weighted average
shares resulted primarily from the increase in the Company's stock price which
has resulted in more options and warrants becoming dilutive securities. (See
Note 2 for calculation.)
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1998, the Company had working capital of $11.5 million.
During the quarter, working capital decreased by $25 million as the result of
the December 1998 acquisition of Baumel-Eisner. The Company's net cash provided
by operating activities was $33.8 million for the nine months ended December 31,
1998 due to the timing of the collection of certain receivables and the payment
of certain payables. During the nine months ended December 31, 1998 the Company
used cash of $5.2 million for purchases of property, plant and equipment
associated with the growth and expansion of the Company's systems and
facilities. In addition, the Company used cash of $25 million for the
acquisition of Baumel-Eisner. The Company anticipates that cash from operations,
combined with the proceeds remaining from its initial public offering will be
sufficient to meet the Company's internal operating requirements and expansion
programs, including capital expenditures, for at least the next 18 months.
YEAR 2000 READINESS DISCLOSURE
The Company's operations are dependent upon its computer systems and
information technology. In fiscal year 1998 the Company began addressing the
Year 2000 issue by forming a Year 2000 project team. Year 2000 compliance
relates to: technology, including but not limited to, information technology,
embedded systems, or any other electro-mechanical or processor-based system.
Such technology, when used in accordance with its associated documentation, is
capable of accurately processing, providing and/or receiving date data from,
into and between the twentieth and twenty-first centuries, and the years 1999
and 2000, including leap year calculations. In the quarter ending June 30, 1998,
the Company completed the "inventory" portion of its Year 2000 project. The
Company documented all internal hardware, software or equipment that was date
sensitive.
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<PAGE> 12
In the quarter ending September 30, 1998, the Company completed the second
stage of the Year 2000 project which involved assessing all of the items that
had been "inventoried" to determine whether they were Year 2000 compliant. This
assessment stage also included surveying all external vendors and customers that
transact business with the Company to determine whether their systems were Year
2000 compliant.
In the quarter ending December 31, 1998, the Company completed the third
stage of the Year 2000 project which involved the development of code to convert
systems that are not compliant to Year 2000 compliant systems. The final stage
involves the testing of all technical systems to verify Year 2000 compliance.
All systems are expected to be tested and implemented by the end of March 1999.
While implementation is scheduled to be complete by March 31, 1999, further
maintenance testing and certifications will continue through 1999. Contingency
planning has also begun in order to ensure non-interruption of business
processes in the event of unexpected problems.
The Company has and will incur internal and external personnel costs as
well as other expenses related to this project. Although the Company is still
evaluating the overall costs associated with the Year 2000 project, the Company
does not believe the associated costs are or will be material to the Company's
results of operations or financial condition. However, there can be no assurance
that the Company's efforts to address the Year 2000 issue will be entirely
successful. In addition, there can be no assurance that the software and systems
of other companies from which the Company transacts business will become Year
2000 compliant in a timely manner. Any such failures could have a material
adverse effect on the Company's systems and operations. The above information is
the Company's Year 2000 Readiness Disclosure. This disclosure is made pursuant
to and is intended to be covered by the provisions of the federal Year 2000
Information and Disclosure Act.
FORWARD-LOOKING STATEMENTS
This report contains or may contain forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934 including
statements of the Company's and management's expectations, intentions, plans and
beliefs, including those contained in or implied by "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Notes to
Condensed Consolidated Financial Statements. These forward-looking statements,
as defined in Section 21E of the Securities Exchange Act of 1934, are dependent
on certain events, risks and uncertainties that may be outside the Company's
control. These forward-looking statements may include statements of management's
plans and objectives for the Company's future operations and statements of
future economic performance; the Company's capital budget and future capital
requirements, and the Company's meeting its future capital needs; and the
assumptions described in this report underlying such forward-looking statements.
Actual results and developments could differ materially from those expressed in
or implied by such statements due to a number of factors, including, without
limitation, those described in the context of such forward-looking statements,
and the factors set forth in the Company's Form 10-K under the caption "Risk
Factors." All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by this section.
- 11 -
<PAGE> 13
PART II. OTHER INFORMATION
Items 1-3 are not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
The annual meeting of the stockholders was held on October 29, 1998. The
information relating to this meeting was reported in the Company's Form 10-Q for
the quarterly period ended September 30, 1998, filed November 12, 1998, and is
herein incorporated by reference.
Item 5 is not applicable.
Item 6. Exhibits and reports on Form 8-K.
The Company filed a report on Form 8-K dated December 16, 1998, relating to the
acquisition of Baumel-Eisner.
Exhibits required by Item 601 of S-K:
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBITS
- ----------- --------
<S> <C> <C>
3.1* --- Amended and Restated Certificate of Incorporation of
the Company
3.2* --- Amended and Restated Bylaws of the Company
10.1** --- Stock Purchase Agreement, by and among Advance
Paradigm, Inc., Baumel-Eisner Neuromedical Institute,
Inc., Barry Baumel, M.D. and Larry S. Eisner, M.D.,
dated effective as of December 1, 1998.
10.2*** --- Consulting Agreement effective as of December 15, 1998
by and between Advance Paradigm, Inc. and David A.
George.
27*** --- Financial Data Schedule
</TABLE>
* Previously filed in connection with the Company's Registration Statement on
Form S-1 filed October 8, 1996 (No. 333-06931).
** Previously filed in connection with the Company's Form 8-K dated December 16,
1998.
*** Filed herewith.
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<PAGE> 14
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.
ADVANCE PARADIGM, INC.
(Registrant)
Date: February 12, 1999 By: /s/ David D. Halbert
---------------------------------
David D. Halbert, Chief Executive Officer,
Chairman of the Board and President
Date: February 12, 1999 By: /s/ Danny Phillips
------------------------------------------
Danny Phillips, Chief Financial Officer,
Senior Vice President, Secretary and
Treasurer (Principal Financial and
Accounting Officer)
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<PAGE> 15
Exhibit Index
Exhibits required by Item 601 of S-K:
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBITS
- ----------- --------
<S> <C> <C>
3.1* --- Amended and Restated Certificate of Incorporation of
the Company
3.2* --- Amended and Restated Bylaws of the Company
10.1** --- Stock Purchase Agreement, by and among Advance
Paradigm, Inc., Baumel-Eisner Neuromedical Institute,
Inc., Barry Baumel, M.D. and Larry S. Eisner, M.D.,
dated effective as of December 1, 1998.
10.2*** --- Consulting Agreement effective as of December 15, 1998
by and between Advance Paradigm, Inc. and David A.
George.
27*** --- Financial Data Schedule
</TABLE>
* Previously filed in connection with the Company's Registration Statement on
Form S-1 filed October 8, 1996 (No. 333-06931).
** Previously filed in connection with the Company's Form 8-K dated December 16,
1998.
*** Filed herewith.
<PAGE> 1
Exhibit 10.2
CONSULTING AGREEMENT
THIS AGREEMENT, effective as of the 15th day of December, 1998, by and
between Advance Paradigm, Inc., a Delaware corporation ("Advance"), and David A.
George ("Consultant"). Advance and Consultant are sometimes jointly referred to
as the "Parties".
RECITALS
Advance provides knowledge and expertise in the pharmacy benefit management
business including, without limitation, formulary/rebate services, mail service
delivery, claims processing, retail network management, disease management,
demand management services, clinical trials and biomedical survey research
(collectively, the "Business"). Consultant provides knowledge and expertise in
the strategy, finances, business development, marketing and promotion of the
Business. Advance desires to utilize the Services of Consultant in the marketing
of Business and in a variety of capacities.
STATEMENT OF AGREEMENT
NOW THEREFORE, in consideration of the mutual promises hereafter set forth, the
Parties agree as follows:
1. Term of Agreement. The term of this Agreement shall commence as of the
effective date first set forth above and shall continue through March 14, 1999,
unless sooner terminated in accordance with Section 5 hereof.
2. Consulting Responsibilities. Consultant will apply his efforts to
enhance Advance's performance by providing the services listed below (the
"Services"). Approximately 40% of the business efforts of Consultant will be
devoted to performance of the Services.
o Primary focus will be applied to the sales and marketing
organization, including the development of strategies for
improved customer segmentation, product and pricing strategies,
organizational structure and recruitment.
o Support the acceleration of entry into the large employer market
segment through direct marketing efforts and the development of
direct marketing strategies and processes.
o Secondary focus will be placed on the ongoing strategic
positioning of the company, as it relates to clinical and
operational integration strategies and customer driven product
strategies.
o Consultant shall provide a summary report of the Services
performed under this Agreement to the CEO of Advance on a weekly
basis.
3. Relationship of the Parties.
a. Independent Contractor. The Parties hereto agree that this
Agreement does not create an employment, partnership or joint venture
relationship between Advance and Consultant. Consultant shall at all times, act,
perform his obligations and exercise his rights under this Agreement as an
independent contractor. Except as specifically set forth herein, this Agreement
does not prevent the Parties from entering into similar contracts with other
individuals or entities. Consultant shall not be required to maintain regular
business hours, but is only obligated to devote such time to Advance as he
determines in his good faith business judgment to perform the duties and
Services described herein.
b. Expenses. Reimbursement for reasonable expenses incurred by
Consultant in performance of the Services on behalf of Advance will be handled
as follows:
o Advance's policies and procedures for travel and entertainment
("T&E") will apply.
<PAGE> 2
o Routine T&E necessary to accomplish the objectives of this
Agreement will not require prior approval.
o Unique expenses beyond routine T&E must be authorized by the CEO
and will require prior approval.
4. Compensation and Accounting.
In consideration of the Services to be rendered by Consultant under
this Agreement, Advance hereby agrees to pay Consultant $15,000 per month in
equal installments every two weeks. Consultant will be responsible for the
payment of income or other taxes relating to such payments.
5. Termination. This Agreement may be terminated by either party upon 30
days written notice.
6. Confidentiality. To the extent that Consultant, in performance of the
Services, obtains proprietary knowledge of Advance's operations and processes,
Consultant shall keep such information confidential in the interests of Advance,
consistent with Consultant's duties as a Director of Advance.
7. No Conflicts. The execution, delivery and performance of this Agreement
by the Parties hereto does not and will not violate or be in conflict with,
result in a breach of or constitute a default under any commitment, arrangement
or agreement to which either Consultant or Advance, as the case may be, is a
Party.
8. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
9. General. This Agreement constitutes the entire agreement between the
Parties, superseding all prior oral or written agreements with respect to the
subject matter thereof, and may not be altered or amended except by a writing
signed by both Parties. No delay or omission in exercising any right hereunder
shall operate as a waiver of such right or any other right. Neither Party may
assign this Agreement without the prior written consent of the non-assigning
Party. This Agreement shall be binding upon and shall inure to the benefit of
the Parties hereto and their respective heirs, successors and assigns. This
Agreement may be executed in counterparts, each of which when executed, shall be
deemed an original, and all such counterparts shall together constitute one and
the same Agreement.
<PAGE> 3
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
in duplicate.
ADVANCE PARADIGM, INC.
/s/ David D. Halbert
------------------------------
David D. Halbert
Chairman, CEO
CONSULTANT
/s/ David A. George
------------------------------
David A. George
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ADVANCE
PARADIGM, INC. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1998.
</LEGEND>
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<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> DEC-31-1998
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0
0
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