<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, 1999
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: 21,448,940
outstanding as of February 11, 2000
<PAGE> 2
ADVANCE PARADIGM, INC.
INDEX TO QUARTERLY REPORT FORM 10-Q
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C>
Item 1. Financial Statements
A. Condensed Consolidated Balance Sheets as of
December 31, 1999 and March 31, 1999 2
B. Condensed Consolidated Statements of Operations
for the Three Months and Nine Months Ended
December 31, 1999 and 1998 3
C. Condensed Consolidated Statements of Cash
Flows for the Nine Months Ended
December 31, 1999 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 8
PART II. OTHER INFORMATION 13
SIGNATURES 15
</TABLE>
<PAGE> 3
ADVANCE PARADIGM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1999
-------------- -----------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 42,492,000 $ 49,624,000
Accounts receivable, net of allowance for doubtful accounts of
$371,000 and $389,000, respectively 107,582,000 182,346,000
Inventories 4,015,000 6,797,000
Prepaid expenses and other 1,651,000 4,065,000
-------------- --------------
Total current assets 155,740,000 242,832,000
PROPERTY AND EQUIPMENT, net of accumulated depreciation
and amortization of $8,540,000 and $11,965,000, respectively 15,155,000 26,183,000
INTANGIBLE ASSETS, net of accumulated amortization of
$2,191,000 and $5,106,000, respectively 105,041,000 102,126,000
OTHER ASSETS 897,000 3,042,000
-------------- --------------
Total assets $ 276,833,000 $ 374,183,000
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 148,979,000 $ 223,878,000
Accrued salaries and benefits 3,780,000 4,908,000
Income taxes payable ---- 2,083,000
Other accrued expenses 1,870,000 2,226,000
-------------- --------------
Total current liabilities 154,629,000 233,095,000
NONCURRENT LIABILITIES:
Long-term debt 50,000,000 50,000,000
Deferred income taxes 2,597,000 3,606,000
Other noncurrent liabilities 546,000 525,000
-------------- --------------
Total liabilities 207,772,000 287,226,000
-------------- --------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 50,000,000
shares authorized; 21,056,898 and 21,213,556
shares issued and outstanding, respectively 105,000 212,000
Additional paid-in capital 48,928,000 51,879,000
Retained earnings 20,028,000 34,866,000
-------------- --------------
Total stockholders' equity 69,061,000 86,957,000
-------------- --------------
Total liabilities and stockholders' equity $ 276,833,000 $ 374,183,000
============== ==============
</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,
--------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
1998 1999 1998 1999
--------------- --------------- --------------- ---------------
Revenues $ 200,205,000 $ 553,374,000 $ 545,645,000 $ 1,404,373,000
--------------- --------------- --------------- ---------------
Cost of operations:
Cost of revenues 192,161,000 538,065,000 523,030,000 1,361,930,000
Selling, general and
administrative expenses 3,498,000 5,937,000 10,073,000 16,116,000
--------------- --------------- --------------- ---------------
Total cost of operations 195,659,000 544,002,000 533,103,000 1,378,046,000
--------------- --------------- --------------- ---------------
Operating income 4,546,000 9,372,000 12,542,000 26,327,000
Interest income 695,000 178,000 2,169,000 630,000
Interest expense -- (974,000) -- (2,853,000)
--------------- --------------- --------------- ---------------
Income before income taxes 5,241,000 8,576,000 14,711,000 24,104,000
Provision for income taxes 1,991,000 3,259,000 5,590,000 9,160,000
--------------- --------------- --------------- ---------------
Net income $ 3,250,000 $ 5,317,000 $ 9,121,000 $ 14,944,000
=============== =============== =============== ===============
Basic
Net income per share $ 0.16 $ 0.25 $ 0.45 $ 0.71
=============== =============== =============== ===============
Weighted average
shares outstanding 20,622,152 21,213,556 20,320,088 21,174,499
=============== =============== =============== ===============
Diluted
Net income per share $ 0.14 $ 0.22 $ 0.39 $ 0.61
=============== =============== =============== ===============
Weighted average
shares outstanding 23,205,898 24,156,589 23,197,148 24,368,196
=============== =============== =============== ===============
</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,
------------------------------
<S> <C> <C>
1998 1999
------------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 9,121,000 $ 14,944,000
Adjustments to reconcile net income to
net cash provided by operating activities -
Depreciation and amortization 2,434,000 6,340,000
Provision for doubtful accounts 18,000 18,000
Change in certain assets and liabilities -
Accounts receivable (12,595,000) (74,782,000)
Inventories (3,190,000) (2,782,000)
Prepaid expenses
and other assets (177,000) (2,443,000)
Accounts payable, accrued expenses
and other noncurrent liabilities 38,190,000 79,454,000
------------ -------------
Net cash provided by operating activities 33,801,000 20,749,000
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (5,204,000) (14,453,000)
Purchase of subsidiary, net of cash acquired (24,701,000) --
------------ -------------
Net cash used for investing activities (29,905,000) (14,453,000)
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of Common Stock 724,000 836,000
Proceeds from borrowings -- 18,000,000
Payments on long-term obligations -- (18,000,000)
------------ -------------
Net cash provided by financing activities 724,000 836,000
------------ -------------
INCREASE IN CASH 4,620,000 7,132,000
CASH AND CASH EQUIVALENTS, beginning of period 58,342,000 42,492,000
------------ -------------
CASH AND CASH EQUIVALENTS, end of period $ 62,962,000 $ 49,624,000
============ =============
</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 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, 1999 and 1998 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, 1999. The results of operations
for the three month and nine month periods ended December 31, 1999 are not
necessarily indicative of the results to be expected for the full year or for
any future period.
The Company adopted SFAS 131, "Disclosure about Segments of an Enterprise
and Related Information," effective April 1, 1998. This pronouncement changes
the requirements under which public businesses must report segment information.
The objective of the pronouncement is to provide information about a company's
different types of business activities and different economic environments. SFAS
131 requires companies to select segments based on their internal reporting
system. The Company provides integrated health benefit management services to
its customers, and these services account for substantially all of its net
revenues. Such services are typically negotiated under one contract with the
customer. Therefore, the Company's operations will continue to be reported in
one segment.
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,
1998 1999 1998 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
BASIC
Numerator:
Net income $ 3,250,000 $ 5,317,000 $ 9,121,000 $14,944,000
============== =========== =========== ===========
Denominator:
Weighted average common
stock outstanding 20,622,152 21,213,556 20,320,088 21,174,499
============== =========== =========== ===========
Net income per share $ 0.16 $ 0.25 $ 0.45 $ 0.71
============== =========== =========== ===========
DILUTED
Numerator:
Net income $ 3,250,000 $ 5,317,000 $ 9,121,000 $14,944,000
============== =========== =========== ===========
Denominator:
Weighted average common 20,622,152 21,213,556 20,320,088 21,174,499
stock outstanding
Other dilutive securities:
Series B preferred stock -- -- 97,680 --
Options and warrants using the
treasury stock method 2,583,746 2,943,033 2,779,380 3,193,697
-------------- ----------- ----------- -----------
Weighted average shares outstanding 23,205,898 24,156,589 23,197,148 24,368,196
============== =========== =========== ===========
Net income per share $ 0.14 $ 0.22 $ 0.39 $ 0.61
============== =========== =========== ===========
</TABLE>
3. INCOME TAXES
In the three months and nine months ended December 31, 1998 and 1999, the
Company's recorded income tax expense approximated an effective tax rate of 38%.
4. ACQUISITIONS
On March 31, 1999, the Company acquired the outstanding stock of Foundation
Health Pharmaceutical Services ("FHPS") for $70 million in cash and warrants to
purchase 400,000 shares of its $0.01 par value common stock. The acquisition has
been accounted for using the purchase method of accounting and the results of
operations of FHPS have been included in the consolidated financial statements
of the Company since April 1, 1999. The
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<PAGE> 8
purchase price was allocated to Goodwill, certain customer contracts and other
intangible assets.
The following unaudited pro forma information presents the results of
operations of the Company as if the FHPS acquisition had taken place at the
beginning of the period presented (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
December 31, 1998 December 31, 1998
----------------- -----------------
<S> <C> <C>
Revenues $ 220,125 $ 610,813
Net income $ 3,247 $ 9,764
Net income per share:
Basic $ 0.16 $ 0.48
Diluted $ 0.14 $ 0.42
Weighted average shares outstanding:
Basic 20,622,152 20,320,088
Diluted 23,205,898 23,197,148
</TABLE>
5. CONCENTRATION OF BUSINESS
Effective April 1, 1999, the Company entered into a Pharmacy Benefit
Services Agreement with Foundation Health Systems, Inc. ("FHS"). Under the terms
of the Service Agreement the Company provides pharmacy services to FHS'
affiliated health plans. In the nine months ended December 31, 1999, the
revenues generated under the service contract with FHS and by the non-affiliated
FHPS customers accounted for approximately 41% of the Company's revenues.
6. DEBT
On March 31, 1999, the Company entered into a senior credit facility with a
group of lenders. The credit facility consists of a $75 million, three-year
revolving credit facility. The Company borrowed $50 million under the credit
facility to fund the acquisition of FHPS. As of December 31, 1999, $50 million
was outstanding under the credit facility.
7. STOCK SPLIT
On October 12, 1999, the Company announced a two-for-one stock split,
effected in the form of a stock dividend, of its common stock. The record date
was November 11, 1999 and the date of payment was November 30, 1999. Financial
information contained throughout this Form 10-Q has been adjusted to reflect the
impact of the stock split.
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<PAGE> 9
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,
------------------ ------------------
1998 1999 1998 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Data Services 68.1% 78.2% 67.7% 77.0%
Mail Services 15.8 8.9 16.3 9.4
Clinical Services 16.1 12.9 16.0 13.6
------ ------ ------ ------
Total Revenues 100.0 100.0 100.0 100.0
------ ------ ------ ------
Cost of operations:
Cost of revenues 96.0 97.2 95.9 97.0
Selling, general and administrative
expenses 1.7 1.1 1.8 1.1
------ ------ ------ ------
Total cost of operations 97.7 98.3 97.7 98.1
------ ------ ------ ------
Operating income 2.3 1.7 2.3 1.9
Interest income, net of expense .3 (.1) .4 (.2)
------ ------ ------ ------
Income before income taxes 2.6 1.6 2.7 1.7
Provision for income taxes (1.0) (.6) (1.0) (.7)
------ ------ ------ ------
Net income 1.6% 1.0% 1.7% 1.0%
====== ====== ====== ======
</TABLE>
THREE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO THREE MONTHS ENDED DECEMBER 31,
1998
REVENUES. Our revenues for the three months ended December 31, 1999
increased by $353.2 million, or 176%, compared to revenues for the three months
ended December 31, 1998. Approximately 84% of the increase in revenues was
attributable to a 70% 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 customers including the services agreement with
Foundation Health Systems, Inc. ("FHS"). Substantially all of the new customers
utilize our pharmacy network. In cases in which we have an independent
obligation to pay our network pharmacy providers, we include payments from our
plan sponsors for these benefits as revenues and payments to our pharmacy
providers as cost of revenues. Therefore, new customers that utilize our network
will generate higher revenues than new business where we merely administer the
customer's network. Approximately 11% 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. This increase was primarily
attributable to the acquisition of Foundation Health Pharmaceutical Services
("FHPS") and the addition of other new customers. The remaining 5% of the
increase was attributable to additional sales of our mail pharmacy services,
resulting from a 39% increase in the number of mail prescriptions dispensed.
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<PAGE> 10
COST OF REVENUES. Our cost of revenues for the three months ended December
31, 1999 increased by $345.9 million, or 180%, compared to the same period in
1998. This increase was attributable primarily to the additional costs
associated with our claims processing growth and the new customers that are
utilizing our retail pharmacy network, including the new business from FHS. As a
percentage of revenues, cost of revenues was approximately 97.2% in the three
months ended December 31, 1999 compared to 96.0% in the same period in 1998.
Revenues from claims processing services generate lower margins than revenues
from our other services.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Our selling, general and
administrative expenses for the three months ended December 31, 1999 increased
by $2.4 million, or 70%, compared to the same period in 1998. This increase was
primarily the result of our acquisition of FHPS and the related amortization
expense associated with the intangible assets acquired. In addition, further
expansion in management, sales and marketing contributed to the increase. In
spite of the increase, selling, general and administrative expenses as a
percentage of revenues decreased from 1.7% for the three months ended December
31, 1998 to 1.1% in the same period in 1999 as the result of greater economies
of scale and due to the increase in revenues associated with our claims
processing services. Additional revenues generated by customers utilizing our
network pharmacy providers typically do not result in an increase in selling,
general and administrative expenses.
INTEREST INCOME AND INTEREST EXPENSE. Interest expense, net of interest
income, for the three months ended December 31, 1999 increased $1.5 million
compared to the same period in 1998. Interest expense increased as the result of
the acquisition of FHPS on March 31, 1999 and the related bank borrowings
throughout the quarter ended December 31, 1999. No debt was outstanding in the
quarter ended December 31, 1998.
INCOME TAXES. For the three months ended December 31, 1999 and 1998 our
recorded income tax expense approximated an effective tax rate of 38%.
NET INCOME PER SHARE. We reported diluted net income per share of $.22 per
share for the three months ended December 31, 1999 compared to $.14 per share
for the same period in 1998. The weighted average shares outstanding were 23.2
million and 24.2 million for the three months ended December 31, 1998 and 1999,
respectively. The increase in the weighted average shares resulted primarily
from the increase in our stock price which has resulted in more options and
warrants becoming dilutive securities. (See Note 2 for calculation.)
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<PAGE> 11
NINE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO NINE MONTHS ENDED DECEMBER 31,
1998
REVENUES. Our revenues for the nine months ended December 31, 1999
increased by $858.7 million, or 157%, compared to revenues for the nine months
ended December 31, 1998. Approximately 83% of the increase in revenues was
attributable to a 66% 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 customers including the services agreement with
FHS. Substantially all of the new customers utilize our pharmacy network. In
cases in which we have an independent obligation to pay our network pharmacy
providers, we include payments from our plan sponsors for these benefits as
revenues and payments to our pharmacy providers as cost of revenues. Therefore,
new customers that utilize our network will generate higher revenues than new
business where we merely administer the customer's network. Approximately 12% 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. This increase was primarily attributable to the acquisition of FHPS and
the addition of other new customers. The remaining 5% of the increase was
attributable to additional sales of our mail pharmacy services, resulting from a
34% increase in the number of mail prescriptions dispensed.
COST OF REVENUES. Our cost of revenues for the nine months ended December
31, 1999 increased by $838.9 million, or 160%, compared to the same period in
1998. This increase was attributable primarily to the additional costs
associated with our claims processing growth and the new customers that are
utilizing our retail pharmacy network, including the new business from FHS. As a
percentage of revenues, cost of revenues was approximately 97.0% in the nine
months ended December 31, 1999 compared to 95.9% in the same period in 1998.
Revenues from claims processing services generate lower margins than revenues
from our other services.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Our selling, general and
administrative expenses for the nine months ended December 31, 1999 increased by
$6.0 million, or 60%, compared to the same period in 1998. This increase was
primarily the result of our acquisition of FHPS and the related amortization
expense associated with the intangible assets acquired. In addition, further
expansion in management, sales and marketing contributed to the increase. In
spite of the increase, selling, general and administrative expenses as a
percentage of revenues decreased from 1.8% for the nine months ended December
31, 1998 to 1.1% in the same period in 1999 as the result of greater economies
of scale and due to the increase in revenues associated with our claims
processing services. Additional revenues generated by customers utilizing our
network pharmacy providers typically do not result in an increase in selling,
general and administrative expenses.
INTEREST INCOME AND INTEREST EXPENSE. Interest expense, net of interest
income, for the nine months ended December 31, 1999 increased $4.4 million
compared to the same period in 1998. Interest expense increased as the result of
the acquisition of FHPS on March 31, 1999 and the related bank borrowings
throughout the nine months ended December 31, 1999. No debt was outstanding in
the quarter ended December 31, 1998.
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<PAGE> 12
INCOME TAXES. For the nine months ended December 31, 1999 and 1998 our
recorded income tax expense approximated an effective tax rate of 38%.
NET INCOME PER SHARE. We reported diluted net income per share of $.61 per
share for the nine months ended December 31, 1999 compared to $.39 per share for
the same period in 1998. The weighted average shares outstanding were 23.2
million and 24.4 million for the nine months ended December 31, 1998 and 1999,
respectively. The increase in the weighted average shares resulted primarily
from the increase in our 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, 1999, we had working capital of $9.7 million. Our net
cash provided by operating activities was $20.7 million for the nine months
ended December 31, 1999 resulting primarily from net income and also due to the
timing of receivables and payables resulting from our continued growth. During
the nine months ended December 31, 1999 we used cash of $14.5 million for
purchases of property, plant and equipment associated with the growth and
expansion of our systems and facilities.
Historically, we have been able to fund our operations and continued growth
through cash flow from operations. We anticipate that cash flow from operations,
combined with our current cash balances and amounts available under our credit
facility, will be sufficient to meet our internal operating requirements and
expansion programs, including capital expenditures, for at least the next 18
months. However, if we successfully continue our expansion, acquisition and
alliance plans, we may be required to seek additional debt or equity financing
in order to achieve these plans. As of December 31, 1999, $50.0 million was
outstanding under the credit facility.
YEAR 2000
On January 1, 2000, the Company's systems performed appropriately, and we
do not anticipate any Year 2000 compliance problems. However, we will continue
to monitor all Year 2000 related issues during the year.
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
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<PAGE> 13
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.
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<PAGE> 14
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 stockholders was held on November 10, 1999. At the close
of business on September 17, 1999, the record date of those entitled to vote at
the meeting, there were 10,578,578 shares of Common Stock issued and
outstanding.
Stephen L. Green and Michael D. Ware were re-elected directors of the Company to
serve until the Annual Meeting of Stockholders in 2002 and until their
respective successors are elected and qualified.
The stockholder vote for each director elected at the meeting was as follows:
<TABLE>
<CAPTION>
Votes Cast Votes
For Withheld
---------- --------
<S> <C> <C>
Stephen L. Green 9,366,998 115,985
Michael D. Ware 9,353,498 129,485
</TABLE>
The stockholders also voted to approve an Amendment to the Company's
Amended and Restated Certificate of Incorporation to increase the number of
authorized shares of common stock from 25,000,000 to 50,000,000 (9,313,155
affirmative votes; 163,234 negative votes; 6,594 abstention votes).
The stockholders also voted to approve an Amendment to the Advance
Paradigm, Inc. Amended and Restated Incentive Stock Option Plan to increase the
number of shares available for issuance thereunder from 2,359,000 to 3,359,000
(5,934,492 affirmative votes; 2,669,671 negative votes; 2,974 abstention votes).
The stockholders also voted to approve the Company's Corporate Officer
Incentive Plan (8,312,039 affirmative votes; 285,852 negative votes; 9,246
abstention votes).
The stockholders also voted to ratify the appointment of Arthur Andersen
LLP as the Company's independent accountants for the Company's current fiscal
year (9,469,204 affirmative votes; 11,075 negative votes; 2,704 abstention
votes)
Item 5 is not applicable.
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<PAGE> 15
Item 6. Exhibits and reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended December 31, 1999.
Exhibits required by Item 601 of Regulation S-K:
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBITS
- ----------- --------
<S> <C>
3.1* --- Amended and Restated Certificate of Incorporation
3.2**** --- Certificate of Amendment to the Amended and Restated Certificate of
Incorporation of the Company effective October 11, 1996
3.3**** --- Certificate of Amendment to the Amended and Restated Certificate of
Incorporation of the Company effective November 12, 1999
3.4* --- Amended and Restated Bylaws
4*** --- Form of Stock Certificate of common stock of the Company
22** --- Definitive Proxy Statement (as amended) pursuant to Section 14(a) of
the Securities Exchange Act of 1934
27**** --- Financial Data Schedule
</TABLE>
* Previously filed in connection with our Registration Statement on Form S-1
filed October 8, 1996 (No. 333-06931).
** Previously filed on October 22, 1999 (No. 000-21447).
*** Previously filed in connection with the Company's Annual report on Form 10-K
for the fiscal year ended March 31, 1997 (No. 000-21447)
**** Filed herewith.
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<PAGE> 16
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 11, 2000 By: /s/ DAVID D. HALBERT
------------------------------------------
David D. Halbert, Chief Executive Officer,
Chairman of the Board and President
Date: February 11, 2000 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> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBITS
- ----------------- --------
<S> <C>
3.1* --- Amended and Restated Certificate of Incorporation
3.2**** --- Certificate of Amendment to the Amended and Restated Certificate of
Incorporation of the Company effective October 11, 1996
3.3**** --- Certificate of Amendment to the Amended and Restated Certificate of
Incorporation of the Company effective November 12, 1999
3.4* --- Amended and Restated Bylaws
4*** --- Form of Stock Certificate of common stock of the Company
22** --- Definitive Proxy Statement (as amended) pursuant to Section 14(a) of
the Securities Exchange Act of 1934
27**** --- Financial Data Schedule
</TABLE>
* Previously filed in connection with our Registration Statement on Form S-1
filed October 8, 1996 (No. 333-06931).
** Previously filed on October 22, 1999 (No. 000-21447).
*** Previously filed in connection with the Company's Annual report on Form 10-K
for the fiscal year ended March 31, 1997 (No. 000-21447)
**** Filed herewith.
16
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
TO THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ADVANCE PARADIGM, INC.
Advance Paradigm, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY THAT:
FIRST: The corporation was originally incorporated under the name Advance
Pharmacy Services, Inc. and filed its original Certificate of Incorporation with
the Secretary of State of Delaware on July 27, 1993. The Amended and Restated
Certificate of Incorporation was filed on October 7, 1996.
SECOND: Article IV, Section 1 of the Amended and Restated Certificate of
Incorporation is hereby deleted and replaced in its entirety with the following:
"1. Designation. Up to 5,000 shares of the Company's Preferred Stock shall
be designated the "Series B Preferred Stock." All numbers relating to the
calculation of cumulative dividends, liquidation preference per share, or
redemption price per share of the Series B Preferred Stock shall be subject to
equitable adjustment in the event of any stock dividend, stock split,
combination, reorganization, recapitalizations, reclassification or other
similar event involving a change in the capital structure of the Series B
Preferred Stock."
THIRD: The foregoing amendment was declared advisable and proposed to the
corporation's stockholders by resolutions adopted by unanimous written consent
of the Board of Directors dated October 9, 1996.
FOURTH: Pursuant to resolution of its Board of Directors, the stockholders
of said corporation approved the amendment by resolutions adopted by unanimous
written consent of the stockholders of the corporation dated October 9, 1996.
FIFTH: Said amendment was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
<PAGE> 2
IN WITNESS WHEREOF, said Advance Paradigm, Inc. has caused this certificate
to be signed by David D. Halbert, its President and Chief Executive Officer, and
Danny Phillips, its Secretary, this 9th day of October, 1996.
ADVANCE PARADIGM, INC.
By: /s/ David D. Halbert
--------------------------------------
David D. Halbert, President and
Chief Executive Officer
ATTEST:
/s/ Danny Phillips
- -----------------------------------
Danny Phillips, Secretary
2
<PAGE> 1
EXHIBIT 3.3
CERTIFICATE OF AMENDMENT
TO THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ADVANCE PARADIGM, INC.
Advance Paradigm, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY THAT:
FIRST: The corporation was originally incorporated under the name
Advance Pharmacy Services, Inc. and filed its original Certificate of
Incorporation with the Secretary of State of Delaware on July 27, 1993. The
Amended and Restated Certificate of Incorporation was filed on October 7, 1996
and a Certificate of Amendment was filed on October 11, 1996.
SECOND: The first paragraph of Article IV of the Amended and Restated
Certificate of Incorporation is hereby deleted and replaced in its entirety with
the following:
"The aggregate number of shares of capital stock which the Company
shall have authority to issue is 55,000,000 shares of capital stock,
consisting of 50,000,000 shares of Common Stock, par value $0.01 per
share and five million (5,000,000) shares of which is Preferred Stock,
par value of $0.01 per share. Unless specifically provided otherwise
herein, the holders of such shares shall be entitled to one vote for
each share held in any stockholder vote in which any of such holders
is entitled to participate."
THIRD: The foregoing amendment was declared advisable and proposed to the
corporation's stockholders by resolutions adopted by unanimous written consent
of the Board of Directors dated October 8, 1999.
FOURTH: Pursuant to resolution of its Board of Directors, the stockholders
of said corporation approved the amendment at the Annual Meeting of Stockholders
held on November 10, 1999.
FIFTH: Said amendment was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
<PAGE> 2
IN WITNESS WHEREOF, Advance Paradigm, Inc. has caused this certificate to
be signed by David D. Halbert, its President and Chief Executive Officer, and
Danny Phillips, its Secretary, this 11th day of November, 1999.
ADVANCE PARADIGM, INC.
By /s/ DAVID D. HALBERT
------------------------------
David D. Halbert
President and Chief Executive Officer
ATTEST:
/s/ DANNY PHILLIPS
- ---------------------------
Danny Phillips
Secretary
<TABLE> <S> <C>
<ARTICLE> 5 <LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ADVANCE
PARADIGM, INC. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1999
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 49,624
<SECURITIES> 0
<RECEIVABLES> 182,735
<ALLOWANCES> 389
<INVENTORY> 6,797
<CURRENT-ASSETS> 242,832
<PP&E> 38,148
<DEPRECIATION> 11,965
<TOTAL-ASSETS> 374,183
<CURRENT-LIABILITIES> 233,095
<BONDS> 0
0
0
<COMMON> 212
<OTHER-SE> 86,745
<TOTAL-LIABILITY-AND-EQUITY> 374,183
<SALES> 0
<TOTAL-REVENUES> 1,404,373
<CGS> 0
<TOTAL-COSTS> 1,361,930
<OTHER-EXPENSES> 16,116
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,223
<INCOME-PRETAX> 24,104
<INCOME-TAX> 9,160
<INCOME-CONTINUING> 14,944
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,944
<EPS-BASIC> .71
<EPS-DILUTED> .61
</TABLE>
