<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) February 13, 1998
AMERIPATH, INC.
(Exact name of registrant as specified in its charter)
Delaware 000-22313 65-0642485
- ---------------------------------- ------------ ------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation or organization) File Number) Identification No.)
7289 Garden Road, Suite 200
Riviera Beach, FL 33404
----------------------------------------------------------------------
(Address, including zip code, of principal executive office)
(561) 845-1850
-------------------------------------------------------------
Registrant's telephone number, including area code
NOT APPLICABLE
- -------------------------------------------------------------------------------
(Former name, former address and fiscal year, if changed since last report)
<PAGE> 2
Item 2. Acquisition or Disposition of Assets
On February 13, 1998, AmeriPath, Inc. (the "Company") closed the acquisition of
the assets and business of Anatomic Pathology Associates, LLP, an Indianapolis,
Indiana based anatomic pathology practice (the "Seller"). The acquisition was
effective February 1, 1998.
Total consideration paid by the Company in connection with this acquisition
included cash of $8.3 million, funded by the Company's credit facility, 186,828
shares of the Company's common stock and the Company assumed certain liabilities
of the Sellers. In addition, the Company issued additional purchase price to the
former partners in the form of contingent notes. Payments under these notes are
contingent upon the achievement of stipulated levels of cumulative operating
earnings (as defined) by the acquired practice over a period of five years. As
of February 1, 1998, absent any adjustments, if the maximum levels of cumulative
operating earnings specified in the contingent notes were achieved, the Company
would be required to make aggregate maximum payments, including principal and
interest, of approximately $6.0 million over the next five years.
In connection with this acquisition, the former partners of the Seller have
signed five year employment agreements with AmeriPath APA, L.L.C., a newly
formed limited liability corporation that will carry on the provision of medical
services for the acquired practice. Pursuant to a management agreement between
AmeriPath Indiana, Inc. and AmeriPath APA, L.L.C., AmeriPath Indiana, Inc. will
manage the non-medical aspects of the practice for a management fee as specified
in the AmeriPath Management Agreement. The purchase agreement and the employment
agreements contain non-competition provisions pursuant to which the partners
agreed not to compete with the Company for the next five years from the date of
the acquisition.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired
Audited Financial Statements of Anatomic Pathology Associates,
LLP.
(1) Report of Gaither Rutherford & Co., LLP, Certified Public
Accountants and Consultants.
(2) Statement of Financial Position as of December 31, 1997.
(3) Statement of Income and Partners' Equity for the year ended
December 31, 1997.
(4) Statement of Cash Flows for the year ended December 31,
1997.
(5) Significant Accounting Policies
(6) Notes to the Financial Statements
(b) Pro Forma Financial Information
(1) AmeriPath, Inc. Unaudited Pro Forma Consolidated Balance
Sheet as of December 31, 1997.
(2) AmeriPath, Inc. Unaudited Pro Forma Consolidated Statement
of Operations for the year ended December 31, 1997.
(3) Notes to Unaudited Pro Forma Consolidated Financial
Information.
2
<PAGE> 3
(c) Exhibits
2.1 Asset Purchase Agreement, dated February 13, 1998, by
and among AmeriPath, Inc., Anatomic Pathology
Associates, LLP, Robert P. Hooker, M.D., Ralph F.
Winkler, M.D., Steven A. Clark, M.D., Edward R. Wills,
M.D. Robin A Helmuth, M.D., Garry A. Bolinger, M.D., T.
Max Warner II, M.D., F. Donald McGovern Jr., M.D.,
Richard O. McClure, M.D., Ann Moriarty, M.D., Janis K.
Fitzharris, M.D., Ph. D., James E. McDermott III, M.D.,
Robert A. Quirey, M.D., Isabelle A. Buehl, M.D. *
10.1 Management Agreement by and between AmeriPath APA,
L.L.C. and AmeriPath Indiana, Inc., dated February 1,
1998. *
23.1 Independent Auditors' Consent of Gaither Rutherford &
Co., LLP
* Previously filed
3
<PAGE> 4
Anatomic Pathology Associates, LLP
(A Partnership)
Audited Financial Statements
December 31, 1997
Table of Contents
<TABLE>
<S> <C>
Independent Auditors' Report 4
Financial Statements
Statement of Financial Position 5
Statement of Income and Partners' Equity 6
Statement of Cash Flows 7
Significant Accounting Policies 8
Notes to Financial Statements 9 - 11
</TABLE>
Independent Auditors' Report
Anatomic Pathology Associates, LLP
(A Partnership)
Indianapolis, Indiana
Dear Doctors
We have audited the accompanying statement of financial position of Anatomic
Pathology Associates, LLP (A Partnership) at December 31, 1997 and the related
statements of income and partner's equity and cash flows for the year then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free from material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of Anatomic Pathology Associates,
LLP (A Partnership) at December 31, 1997, and results of its operations and cash
flows for the year then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in the notes to the
financial statements, the Partners signed a memorandum of understanding in
November 1997 to sell the Partnership.
GAITHER RUTHERFORD & CO., LLP
/s/ Gaither Rutherford & Co., LLP
Certified Public Accountants
February 7, 1998
4
<PAGE> 5
Anatomic Pathology Associates, LLP
(A Partnership)
Statement of Financial Position
<TABLE>
<CAPTION>
At
December 31,
1997
----
<S> <C>
Assets
Current Assets
Cash $ 266,458.68
Accounts receivable - trade 2,415,646.53
Less allowance for doubtful accounts (1,199,940.43)
Prepaid expenses 53,165.27
----------------
Total Current Assets 1,535,330.05
----------------
Property, Plant and Equipment
Fixed assets at cost 725,354.65
Less accumulated depreciation (300,990.51)
----------------
Total Property, Plant and Equipment 424,364.14
----------------
Other Assets
Cash surrender value of partners' life insurance 307,076.37
----------------
Total Other Assets 307,076.37
----------------
Total Assets $ 2,266,770.56
================
Liabilities and Partners' Equity
Current Liabilities
Capital lease - current portion $ 4,143.10
Note payable - short term 377,244.96
Notes payable - current portion 45,096.52
Accounts payable - trade 17,393.16
Accrued expenses 120,749.67
----------------
Total Current Liabilities 564,627.41
----------------
Long-Term Liabilities
Capital lease - net of current portion 1,532.88
Notes payable - net of current portion 86,760.13
----------------
Total Long-Term Liabilities 88,293.01
----------------
Total Liabilities 652,920.42
Partners' Equity 1,613,850.14
----------------
Total Liabilities and Partners' Equity $ 2,266,770.56
================
</TABLE>
See accompanying significant accounting
policies and notes to financial statements.
5
<PAGE> 6
Anatomic Pathology Associates, LLP,
(A Partnership)
Statement of Income and Partners' Equity
<TABLE>
<CAPTION>
Year Ended
December 31,
1997
----
<S> <C>
Income $ 9,907,407.18
Contractual allowances and bad debts 3,853,620.25
----------------
Income, net of contractual allowances and bad debts 6,053,786.93
----------------
Laboratory expenses 930,247.15
General and administrative expenses 1,425,861.89
----------------
Total Expenses 2,356,109.04
----------------
Income from Operations 3,697,677.89
Other income and (expenses) (167,633.60)
----------------
Net income 3,530,044.29
Partners' Equity, beginning of year 1,556,966.95
Add
Increase in cash surrender value of life insurance 21,252.99
Less
Withdrawals and charges (3,494,414.09)
----------------
Partners' Equity, end of year $ 1,613,850.14
================
</TABLE>
See accompanying significant accounting
policies and notes to financial statements.
6
<PAGE> 7
Anatomic Pathology Associates, LLP
(A Partnership)
Statement of Cash Flows
<TABLE>
<CAPTION>
Year Ended
December 31,
1997
----
<S> <C>
Cash Flows from Operating Activities
Net income $ 3,530,044.29
----------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Change in provision for losses on accounts receivable 313,255.82
Depreciation 142,588.01
Loss on disposal of asset 1,664.48
Change in assets and liabilities:
Accounts receivable - trade (403,957.84)
Prepaid expenses (6,249.87)
Accounts payable - trade (12,706.18)
Accrued expenses 98,507.37
----------------
Total adjustments 133,101.79
----------------
Net cash provided by operating activities 3,663,146.08
----------------
Cash Flows from Investing Activities
Proceeds from sale of equipment 500.00
Capital expenditures (121,069.22)
Proceeds from surrender of life insurance policy 15,686.62
----------------
Net cash used by investing activities (104,882.60)
----------------
Cash Flows from Financing Activities
Payments on note obligation - Dr. Buehl (42,098.35)
Partners' drawings and charges (3,494,414.09)
Payments on notes payable (21,185.61)
Payments on capital leases (3,808.36)
----------------
Net cash used by financing activities (3,561,506.41)
----------------
Net Decrease in Cash and Cash Equivalents (3,242.93)
Cash and Cash Equivalents, at beginning of year 269,701.61
----------------
Cash and Cash Equivalents, at end of year $ 266,458.68
================
Other Disclosures
Interest paid $ 39,788.92
Supplemental Schedule of Noncash Investing and
Financing Activities
Increase in cash surrender value of life insurance through
capital Contributions $ 21,252.99
Increase in fixed assets through financing 303,697.96
</TABLE>
See accompanying significant accounting
policies and notes to financial statements.
7
<PAGE> 8
Anatomic Pathology Associates, LLP
(A Partnership)
Significant Accounting Policies
General
The Practice was formed for the purposes of performing anatomical procedures in
central Indiana. The Partnership began operations January 1, 1985.
The financial records of the Partnership include items which only relate to the
operations of the Partnership.
Income Recognition
The Partnership employs the accrual method of accounting for financial statement
purposes, while the cash basis is used for federal and state taxation purposes.
The differences in reporting income for tax return and financial statement
purposes has resulted in income for tax purposes to be $44,778.32 less for the
year ended December 31, 1997. The cumulative differences in reporting income is
$1,018,030.13 less for tax purposes than for the financial statements.
Receivables
The allowance for losses arising from uncollectible accounts receivable is based
on historical bad debt experience and on evaluation of periodic aging of the
accounts. The Partnership's accounts receivable are with clients in Northern and
Central Indiana.
Professional Billing
The Partnership bills all patients for 100 percent of the service provided
whether they are covered by Medicare, Medicaid, capitation contracts, or general
insurance. The portion which governmental programs and other contractual
arrangements do not reimburse the Partnership is included in "contractual
allowances and bad debts."
Cash Flows
For purposes of the statement of cash flows, the Partnership considers all
highly liquid debt instruments with a maturity of three months or less at
purchase to be cash equivalents.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Fair Value of Financial Instruments
The carrying value of cash, receivables and accounts payable approximates fair
value due to the short maturity of these instruments. The carrying value of
short and long-term debt approximates fair value based on discounting the
projected cash flows using market rates available for similar maturities. None
of the financial instruments are held for trading purposes.
8
<PAGE> 9
Anatomic Pathology Associates, LLP
(A Partnership)
Notes to Financial Statements
1. Fixed Assets
Fixed assets are carried at cost and include expenditures for major betterments.
Repairs and supplies are charged to expense when incurred.
Fixed assets include all fixed assets which are leased under capital leases.
<TABLE>
<CAPTION>
Asset Class 1997
- ----------- ----
<S> <C>
Automobiles $ 20,380.50
Leasehold improvements 25,920.70
Lab equipment 164,985.96
Office equipment 514,067.49
-------------
Total fixed assets 725,354.65
Less accumulated depreciation (300,990.51)
-------------
Net Book Value $ 424,364.14
=============
</TABLE>
Depreciation is calculated on the straight-line and accelerated methods.
Depreciation expense charged to operations for 1997 amounted to $142,588.01.
2. Capital Leases
All leased property under capital leases is shown on the financial statements as
fixed assets.
The following is a schedule of years of future minimum lease payments under
capital leases, together with the present value of the net minimum lease
payments at December 31, 1997:
<TABLE>
<CAPTION>
Years Ending December 31,
<S> <C>
1998 $ 4,752.00
1999 1,583.97
----------
Total net minimum lease payments 6,335.97
Less amount representing interest and other deferred charges (659.99)
----------
Present value of net minimum lease payments 5,675.98
Less current portion due within one year (4,143.10)
----------
Long-Term Obligations Under Capital Leases $ 1,532.88
==========
</TABLE>
The net book value of assets under capital lease is $4,032.00 at December 31,
1997.
Total interest charged to operations during the current year ended totaled
$39,788.92 of which $1,339.64 was attributable to the leased property under
capital leases.
3. Income Taxes
No provision for taxes on income is made in the Partnership's financial
statements since, as a Partnership, all taxable income and losses are allocated
to the partners for inclusion in their respective tax returns.
9
<PAGE> 10
4. Short-Term Notes Payable
In 1996, the Partnership entered into a draw note for $425,000 with Citizens
Bank of Central Indiana. As of December 31, 1997, the Partnership had drawn
$377,244.96 against the note. The interest rate is 8.50 percent and the note
matures March 10, 1998. This note is secured by business equipment and personal
guarantees of active partners at December 31, 1997.
5. Long-Term Notes Payable
The Partnership had the following long-term notes payable as of December 31,
1997:
<TABLE>
<CAPTION>
Current
Payee Total Portion
- ----- ----- -------
(A) Dr. Buehl
<S> <C> <C>
prime less 1%, adjusted annually, due 1/15/02 $100,787.58 $22,023.03
(A) Citizens Bank of Central Indiana 8.25%, due 5/8/99 31,069.07 23,073.49
----------- ----------
Total 131,856.65
Less current portion (45,096.52) $45,096.52
----------- ==========
Due After One Year $ 86,760.13
===========
</TABLE>
(A) Unsecured
The long-term debt matures as follows:
<TABLE>
<CAPTION>
Years Ending December 31,
<S> <C>
1998 $ 45,092.52
1999 31,669.38
2000 25,437.66
2001 27,355.10
2002 2,297.99
-----------
$131,856.65
===========
</TABLE>
6. Advertising Costs
The Partnership expenses all advertising and promotional expenses as incurred.
For the year ended December 31, 1997, the advertising expenses were $12,661.06.
7. Related Party Transactions
Dr. Isabelle A. Buehl retired as of August 31, 1996; therefore, the Partnership
will pay Dr. Buehl's accrual basis capital account to Dr. Buehl over 60 months
in monthly note payments. Additional information in long-term note payable note.
8. Commitments
The Partnership leases office area and laboratory space from 5940 Realty Company
(A Partnership). The 5940 Realty Company partners include Drs. Bolinger, Warner,
McGovern, McClure and Hooker which are also a majority of the partners of
Anatomic Pathology Associates, LLP. The lease agreement expires January 11,
2000. The annual base rental is $19,464.00 plus operating expenses and
utilities. For the year ended December 31, 1997, the Partnership paid 5940
Realty Company $42,187.51 for rent, operating expenses and utilities.
10
<PAGE> 11
The Partnership is required to make monthly payments to Dr. Buehl beginning
January 1997. The payment is equal to one-third of the profits or losses of the
Partnership that Dr. Buehl would have received had she continued as an active
working partner during the three year period ending December 31, 1999.
The Partnership entered into a services agreement with Quest Diagnostics. Quest
Diagnostics will provide computer and courier services to the Partnership for a
monthly fee of $12,528.00 and clinical laboratory services for a fee of $3.25
per slide processed. This agreement will cease effective April 1998.
9. Operating Lease Commitments
The Partnership is obligated on certain equipment leases that have not been
capitalized. The following is a schedule of future minimum lease payments on
these operating leases at December 31, 1997:
<TABLE>
<S> <C>
Years Ending December 31, 1998 $13,475.61
----------
$13,475.61
==========
</TABLE>
During the year ended December 31, 1997, the Partnership incurred $27,455.07 of
lease expense.
10. Employee Benefit Plan
The Partnership sponsors a defined contribution retirement plan covering
substantially all of its employees. The plan contains a cash or deferred
arrangement under Section 401(k) of the Internal Revenue Code. The Partnership's
contribution to the plan in 1997 was $16,928.15 for employees.
11. Concentrations of Credit Risk
The Partnership has cash at a local financial institution which is in excess of
the insured limit of the Federal Deposit Insurance Corporation (FDIC). These
deposits exceed available insurance by approximately $154,000. This financial
institution has not made any guarantees on these excess deposits in addition to
the FDIC guarantee.
Financial instruments which potentially subject the Partnership to
concentrations of credit risk include temporary cash investments and trade
receivables. Concentration of credit risk with respect to trade receivables is
limited due to the Partnership's large number of patients. Two processors of
medical claims do comprise approximately 27 percent of the December 31, 1997
patient net accounts receivable.
12. Subsequent Event
The Partners of the Partnership signed a memorandum of understanding November
26, 1997, to sell 100 percent of the Partnership interest of APA (including
accounts receivable and at least $175,000 in cash as well as the assumption of
all ordinary course of business liabilities). The buyer will not acquire the
cash surrender value of the selling partners' life insurance or any debt owed to
retired physicians.
13. Contingency
Effective April 30, 1998, Quest Diagnostics will not compensate APA in the form
of a medical directorship fee. This fee has historically been $10,000 per month.
Laboratory testing revenue in 1997 from Quest Diagnostics amounted to
approximately $120,000. This revenue will cease in April 1998, due to Quest
Diagnostics no longer having a presence in Indianapolis, Indiana.
11
<PAGE> 12
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
During 1997, the Company acquired or affiliated with five practices
(the"1997 Acquisitions") in five states: Florida, Texas, Indiana, Mississippi,
and Pennsylvania. On February 13, 1998, the Company completed the acquisition of
Anatomic Pathology Associates, LLP (APA) in Indianapolis, Indiana. The unaudited
pro forma consolidated statement of operations for the year ended December 31,
1997 gives effect to the 1997 Acquisitions and the 1998 acquisition of APA as if
such transactions had been completed on January 1, 1997. The unaudited pro forma
consolidated balance sheet reflects the 1997 Acquisitions and the 1998
acquisition of APA as if such transactions had occurred on January 1, 1997. The
unaudited pro forma consolidated financial information is based on the
consolidated financial statements of the Company, giving effect to the
assumptions and adjustments in the accompanying notes to the unaudited pro forma
consolidated financial information.
The unaudited pro forma consolidated financial information has been
prepared by management based on the historical financial statements of the
Company, the 1997 Acquisitions and APA as of and for the year ended December 31,
1997, adjusted where necessary to reflect the acquisitions and the Company's
accounting policies. This consolidated pro forma financial information is
presented for illustrative purposes and it does not purport to represent what
the consolidated results of operations or financial condition of the Company for
the period or at the date presented would have been had such transactions been
consummated as of such date and is not indicative of the results that may be
obtained in the future.
12
<PAGE> 13
AMERIPATH, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
Historical Pro Forma
--------------------- ---------------------------
Pro Forma Pro Forma
AmeriPath, Acquisition as
Inc. APA (a) Adjustments (b) Adjusted
---------- -------- ----------- --- --------
ASSETS
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 397 $ 266 $ 663
Accounts receivable, net 23,520 1,217 24,737
Inventories 268 268
Deferred tax asset 1,667 1,667
Other current assets 865 360 $(307) 918
-------- ------ ----- --------
Total current assets 26,717 1,843 (307) 28,253
-------- ------ ----- --------
Property and equipment, net 6,242 424 6,666
Goodwill, net 100,371 3,646 104,017
Identifiable intangibles, net 133,420 5,829 139,249
Other 2,477 2,477
-------- ------ ------ --------
TOTAL ASSETS $269,227 $2,267 $9,168 $280,662
======== ====== ====== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 11,869 $ 144 $ 200 $ 12,213
Current portion of long-term debt 2,720 2,720
-------- ------ ------- --------
Total current liabilities 14,589 144 200 14,933
-------- ------ ------ --------
Credit facility:
Revolving loan 6,605 8,743 15,348
Senior term loan 64,350 64,350
Subordinated notes 1,399 509 (403) 1,505
Deferred tax liability 37,467 37,467
-------- ------ ------ --------
Total long-term liabilities 109,821 509 8,340 118,670
-------- ------ ------ --------
Total common stockholders' equity 144,817 1,614 628 147,059
-------- ------ ------ --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
$269,227 $2,267 $9,168 $280,662
======== ====== ====== ========
</TABLE>
See accompanying notes to unaudited pro
forma consolidated financial information.
13
<PAGE> 14
AMERIPATH, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Historical Pro Forma
-------------------------------------------- --------------------------------
Pro Forma Pro Forma
AmeriPath, 1997 Acquisition As
Inc. Acquisitions (c) (APA) (c) Adjustments Adjusted
---------- ---------------- --------- ----------- --------
<S> <C> <C> <C> <C> <C>
Net revenue $108,406 $33,640 $6,954 $ (1,286) (d) $ 147,714
-------- ------- ------ -------- ---------
Operating costs:
Cost of services 48,833 15,652 930 (1,479) (e) 63,936
Selling, general and administrative
Expense 19,929 3,413 1,426 (404) (f) 24,364
Provision for doubtful accounts 10,892 2,910 900 14,702
Amortization expense 5,762 2,600 (g) 8,362
-------- ------- ------ -------- ---------
Total 85,416 21,975 3,256 717 111,364
-------- ------- ------ -------- ---------
Income from operations 22,990 11,665 3,698 (2,003) 36,350
Interest expense (8,763) (4,830) (h) (13,593)
Nonrecurring charge (1,289) (1,289)
Other expense, net (96) 56 (168) 160 (i) (48)
-------- ------- ------ -------- ---------
Income before income taxes 12,842 11,721 3,530 (6,673) 21,420
Provision for income taxes 5,522 92 3,607 (j) 9,221
-------- ------- ------ -------- ---------
Net income $ 7,320 $11,629 $3,530 $(10,280) $ 12,199
======== ======= ====== ======== =========
Net income per common share $ 0.53 $ 0.83
======== =========
Pro forma weighted average shares
outstanding 13,879 14,654
======== =========
</TABLE>
See accompanying notes to pro forma
consolidated financial information.
14
<PAGE> 15
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(a) Represents the historical balance sheet of APA as of December 31, 1997.
(b) Reflects the total estimated cost of $10.7 million for the APA acquisition
consisting of: (i) $8.3 million in cash; (ii) $2.2 million in common stock
(186,828 shares) and (iii) $200,000 of estimated transaction costs. The
entry also reflects the distribution of net assets of $307,000, related to
the cash surrender value of life insurance policies, to the former owners
of APA in accordance with the acquisition agreement. In addition, the
Company paid off certain notes payable totaling $403,414 in connection with
the acquisition. The aggregate purchase price has been allocated, on a
preliminary basis, to the net assets acquired based on their estimated fair
market value. The allocation of the purchase price is preliminary, while
the Company continues to obtain the information to determine the fair value
of the assets acquired and liabilities assumed.
(c) The 1997 Acquisitions and the APA acquisition columns represent their
historical results of operations prior to being acquired by the Company.
(d) Represents the reduction in net revenue associated with the loss of a lab
contract by one of the 1997 acquisitions.
(e) Represents the reduction of cost of services to reflect the physician
compensation, including bonuses and other compensation, to the amounts that
will be paid to these physicians after the acquisition, in accordance with
their employment agreements.
(f) To eliminate a nonrecurring expense directly related to one of the 1997
acquisitions.
(g) Represents additional amortization expense for both identifiable intangible
assets and goodwill based on the Company's preliminary allocation of the
purchase price, as if, the 1997 Acquisitions and the APA acquisition had
been completed on January 1, 1997.
(h) Represents interest expense related to amounts borrowed to finance the 1997
Acquisitions and the APA acquisition at an interest rate of 8.5%.
(i) Represents an adjustment to the amortization of deferred debt issuance
costs as if the Company's current credit facility was in place as of
January 1, 1997.
(j) Represents the incremental tax effect of the pro forma acquisition
adjustments related to the 1997 Acquisitions and the acquisition of APA. In
addition, the adjustment represents an income tax provision related to the
practices which did not provide for such taxes in their historical
financial statements because of the election to be taxed as partnerships or
Subchapter S corporations for federal income tax purposes.
SIGNATURES
Date: April 28, 1998 By: /s/ ROBERT P. WYNN
--------------------------
Robert P. Wynn
Executive Vice President
and Chief
Financial Officer
15
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Index Description
- ------------- --------------------------------------------------------------
<S> <C>
2.1 Asset Purchase Agreement, dated February 13, 1998, by and
among AmeriPath, Inc., Anatomic Pathology Associates, LLP,
Robert P. Hooker, M.D., Ralph F. Winkler, M.D., Steven A.
Clark, M.D., Edward R. Wills, M.D. Robin A Helmuth, M.D.,
Garry A. Bolinger, M.D., T. Max Warner II, M.D., F. Donald
McGovern Jr., M.D., Richard O. McClure, M.D., Ann Moriarty,
M.D., Janis K. Fitzharris, M.D., Ph. D., James E. McDermott
III, M.D., Robert A. Quirey, M.D., Isabelle A. Buehl, M.D. *
10.1 Management Agreement by and between AmeriPath APA, L.L.C. and
AmeriPath Indiana, Inc., dated February 1, 1998 *
23.1 Independent Auditors' Consent of Gaither Rutherford & Co., LLP
* Previously filed
</TABLE>
16
<PAGE> 1
Exhibit 23.1
Independent Auditors' Consent
We consent to the incorporation of our independent audit report dated February
7, 1998, for the year ended December 31, 1997, for Anatomic Pathology
Associates, LLP appearing in the Form 8-K/A of AmeriPath, Inc.
/s/ Gaither Rutherford & Co, LLP
Certified Public Accountants
April 28, 1998
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