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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 3, 2000
IMS HEALTH INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 001-14049 06-1506026
(State of (Commission File Number) (IRS Employer
incorporation) Identification No.)
200 Nyala Farms
WESTPORT, CT 06880
(Address of principal executive offices) (Zip Code)
(203) 222-4200
(Registrant's telephone number,
including area code)
N/A
(Former name or former address, if changed since last report)
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Item 1. Not Applicable.
Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
On October 3, 2000, Elbejay Acquisition Corp. ("Merger Sub"), a
Delaware corporation and a wholly owned subsidiary of The TriZetto Group,
Inc. ("TriZetto"), a Delaware corporation, was merged (the "Merger") with and
into ERISCO Managed Care Technologies, Inc. ("Erisco"), a New York
corporation and a wholly owned subsidiary of IMS Health Incorporated ("IMS"),
a Delaware corporation, pursuant to the Agreement and Plan of Reorganization,
dated as of May 16, 2000 (the "Merger Agreement"), by and among TriZetto,
Merger Sub, IMS, and Erisco. The Merger effectuated IMS's sale of Erisco to
TriZetto. In consideration of the Merger, TriZetto issued 12,142,857 shares
of common stock, par value $0.001 per share (the "TriZetto Common Stock"), of
TriZetto to IMS.
The transaction will be accounted for by IMS as a disposition of
Erisco in exchange for the acquisition of an approximately 36% interest in
TriZetto. The gross proceeds received by IMS, based on the closing share
price of TriZetto Common Stock on the Nasdaq National Market on October 2,
2000 ($15.125 per share), were approximately $183.7 million.
Except as otherwise provided in this Current Report on Form 8-K,
capitalized terms that are used but not otherwise defined in this Current Report
shall have the meanings assigned to such terms in the Merger Agreement, which is
incorporated herein by reference in its entirety.
As contemplated by the Merger Agreement, TriZetto's board of directors
appointed IMS's director-nominee, Victoria R. Fash, President and Chief
Executive Officer of IMS, to the TriZetto board of directors.
Additionally, as contemplated by the Merger Agreement, IMS and TriZetto
entered into a Stockholder Agreement and a Registration Rights Agreement in the
forms attached as exhibits to the Merger Agreement, and a Transitional Services
Agreement, Data Rights Agreement, and HealthWeb License Agreement in accordance
with the principal terms set forth in the Merger Agreement.
The Stockholder Agreement imposes certain restrictions on IMS. These
restrictions include, without limitation: (i) a standstill provision restricting
IMS from, among other things, acquiring additional shares of TriZetto Common
Stock until the earlier of the fourth anniversary of the Closing Date, or the
date on which a Change of Control (as defined in the Stockholder Agreement) of
TriZetto shall have occurred or TriZetto shall have publicly announced its
willingness to consider a transaction that would constitute a Change of Control;
(ii) a share transfer restriction that limits transfers of TriZetto Common Stock
by IMS until the earlier of the date two years after the Closing Date, the date
on which IMS beneficially owns less than 10% of the outstanding TriZetto Common
Stock measured as of the Closing Date, or the date on which a Change of Control
of TriZetto shall have occurred; (iii) a right of first refusal for TriZetto on
transfers by IMS of more than 10% of the outstanding TriZetto Common Stock
measured as of the time of the transfer commencing upon the termination of the
share transfer restriction period and continuing until the date on which IMS
beneficially owns less than 10% of the outstanding TriZetto Common Stock
measured as of the Closing Date (unless a Change of Control of TriZetto shall
have occurred); and (iv) a right of first offer for TriZetto on any transfer of
TriZetto Common Stock by IMS commencing upon the termination of the share
transfer
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restriction period and continuing until the date on which IMS beneficially owns
less than 10% of the outstanding TriZetto Common Stock measured as of the
Closing Date. The Stockholder Agreement also grants IMS, for so long as IMS
beneficially owns more than 10% of the outstanding TriZetto Common Stock
measured as of the Closing Date, (i) the right to designate one director-nominee
to the TriZetto Board of Directors and (ii) consent rights regarding certain
transactions by TriZetto, subject, in each case, to earlier termination of such
rights upon the occurrence of certain events.
Pursuant to the Registration Rights Agreement, IMS was granted
registration rights in respect of the shares of TriZetto Common Stock issued to
IMS in connection with the sale of Erisco.
Additionally, pursuant to Section 6.14 of the Merger Agreement,
TriZetto has adopted a Stockholder Protection Rights Agreement as set forth more
fully in the Merger Agreement.
The foregoing descriptions of the Merger Agreement, the Stockholder
Agreement, and the Registration Rights Agreement, are qualified in their
entirety by reference to the respective agreements, which are Exhibits 2.1,
99.1, and 99.2, respectively, hereto. The Merger Agreement was filed by IMS as
Exhibit 2.1 to its Current Report on Form 8-K filed May 17, 2000. The
Stockholder Agreement and the Registration Rights Agreement were filed by IMS as
Exhibits C and D to its Schedule 13D/A2 filed October 6, 2000. The Merger
Agreement, the Stockholder Agreement and the Registration Rights Agreement are
specifically incorporated herein by reference in response to this Item 2.
FORWARD-LOOKING STATEMENTS
This Current Report on Form 8-K, as well as information
included in oral statements or other written statements made or to be made by
IMS, contain statements which, in the opinion of IMS, may constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements appear in a number of places
in this report and include, but are not limited to, all statements relating
to plans for future growth and other business development activities as well
as capital expenditures, financing sources, dividends, divestitures, useful
lives of intangible assets and the effects of regulation and competition,
Euro conversion and all other statements regarding the intent, plans, beliefs
or expectations of IMS or its directors or officers. Stockholders are
cautioned that such forward-looking statements are not assurances for future
performance or events and involve risks and uncertainties that could cause
actual results and developments to differ materially from those covered in
such forward-looking statements. These risks and uncertainties include, but
are not limited to, risks associated with operating on a global basis,
including fluctuations in the value of foreign currencies relative to the
U.S. dollar, and the ability to successfully hedge such risks; to the extent
IMS seeks growth through acquisitions, alliances or joint ventures, the
ability to identify, consummate and integrate acquisitions, alliances and
ventures on satisfactory terms; the ability to develop new or advanced
technologies, systems and products for its business on time and on a
cost-effective basis including but not limited to those that use or are
related to the Internet; the ability to successfully maintain historic
effective tax rates; competition, particularly in the markets for
pharmaceutical information; regulatory, legislative and enforcement
initiatives, particularly in the area of medical privacy and tax; the ability
to timely and cost-effectively resolve any problems associated with the Euro
currency issue; the ability to obtain future financing on satisfactory terms;
deterioration in economic conditions, particularly in the pharmaceutical,
healthcare, or other industries in which customers may
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operate; consolidation in the pharmaceutical industry and the other industries
in which IMS's customers operate; conditions in the securities markets which may
affect the value or liquidity of portfolio investments and management's
estimates of lives of assets, recoverability of assets, fair market value,
estimates and liabilities and accrued income tax benefits and liabilities; and;
failure of third parties to convert their information technology systems to the
Euro currency in a timely manner and actions of government agencies and other
third parties with respect to Euro currency issues. Consequently, all the
forward-looking statements contained in this Current Report on Form 8-K are
qualified by the information contained herein, and by the material set forth
under the headings "Business" and "Factors that May Affect Future Results" in
IMS's Annual Report on Form 10-K for the year ended December 31, 1999. IMS is
under no obligation to publicly release any revision to any forward-looking
statement contained or incorporated herein to reflect any future events or
occurrences.
Items 3-6. Not Applicable
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements.
None
(b) Pro Forma Financial Information.
The following unaudited pro forma condensed consolidated statement of
financial position and income statements present pro forma financial information
for IMS giving effect to the sale of Erisco. The unaudited pro forma condensed
consolidated statement of financial position as of June 30, 2000 is presented as
if the sale had occurred as of that date. The unaudited pro forma condensed
consolidated income statement for the six months ended June 30, 2000 and for the
fiscal year ended December 31, 1999 are presented as if the sale of Erisco had
occurred at the beginning of each of the periods presented.
The unaudited pro forma condensed consolidated statement of financial
position and income statements have been derived from and should be read in
conjunction with the unaudited condensed consolidated financial statements and
notes thereto included in IMS's Quarterly Report on Form 10-Q for the period
ended June 30, 2000 and the audited consolidated financial statements and notes
thereto included in IMS's Annual Report on Form 10-K for the year ended December
31, 1999.
In addition, as reported in IMS's Current Report on Form 8-K dated
September 15, 2000, on August 31, 2000, IMS completed the spin-off of
Synavant Inc. ("Synavant"), a wholly owned subsidiary of IMS, by means of a
pro rata distribution to the shareholders of record of IMS on July 28, 2000.
Such shareholders were issued one share of Synavant common stock, par value
$.01 per share, for every twenty shares of IMS common stock, par value $.01
per share, held. The pro forma impact of the Synavant transaction is
separately disclosed in IMS's Current Report on Form 8-K filed with the
Securities and Exchange Commission on September 15, 2000. As indicated below,
these pro forma adjustments are also reflected in the following unaudited pro
forma condensed consolidated financial statements. The unaudited pro forma
financial information may not necessarily be indicative of what IMS's results
of operations or financial position would have been had the spin-off and/or
the sale been in effect for and as of the periods and date presented, nor is
such information necessarily indicative of IMS's results of operations or
financial position for or as of any future period or date. The unaudited pro
forma information does not reflect the operating results that would have been
incurred had TriZetto been accounted for as an equity investment as described
below.
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IMS HEALTH INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS OF JUNE 30, 2000
Dollar amounts in thousands
<TABLE>
<CAPTION>
UNAUDITED
PRO FORMA UNAUDITED UNAUDITED
ADJUSTED FOR PRO FORMA PRO FORMA
SYNAVANT ADJUSTMENTS FOR
SPIN-OFF(1) ERISCO SALE
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<S> <C> <C> <C>
ASSETS
TOTAL CURRENT ASSETS $559,646 ($5,478) $554,168
SECURITIES AND OTHER INVESTMENTS 197,554 130,000 327,554
PROPERTY, PLANT AND EQUIPMENT - NET 146,880 (4,284) 142,596
TOTAL OTHER ASSETS - NET 337,570 (18,639) 318,931
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TOTAL ASSETS $1,241,650 $101,599 $1,343,249
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SHORT TERM DEBT $344,728 $32,000 $376,728
OTHER CURRENT LIABILITIES 341,457 (21,054) 320,403
POST-RETIREMENT AND POST-EMPLOYMENT BENEFITS 27,498 0 27,498
OTHER LIABILITIES 120,849 (2,155) 118,694
TOTAL LIABILITIES 834,532 8,791 843,323
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COMMITMENTS AND CONTINGENCIES
MINORITY INTERESTS 127,802 0 127,802
TOTAL SHAREHOLDERS' EQUITY 279,316 92,808 372,124
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,241,650 $101,599 $1,343,249
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</TABLE>
(1) As reported in IMS's Current Report on Form 8-K filed on September 15, 2000.
See Notes to Unaudited Pro Forma Condensed Consolidated Statements.
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IMS HEALTH INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 2000
Dollar amounts in thousands, except per share data
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED UNAUDITED
PRO FORMA ADJUSTED PRO FORMA PRO FORMA
FOR SYNAVANT ADJUSTMENTS FOR
SPIN-OFF(1) ERISCO SALE
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<S> <C> <C> <C>
OPERATING REVENUE $628,895 $24,502 $604,393
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Operating Costs 242,179 8,272 233,907
Selling and Administrative Expenses 185,606 12,328 173,278
Depreciation and Amortization 36,138 1,955 34,183
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OPERATING INCOME 164,972 1,947 163,025
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Interest Income 1,977 1,977
Interest Expense (3,294) 1,120 (4,414)
Gains from Dispositions - Net 57,714 57,714
Other Expense - Net (13,361) (13,361)
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Non-Operating Income - Net 43,036 1,120 41,916
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Income Before Provision for Income Taxes 208,008 3,067 204,941
Provision for Income Taxes (65,911) (1,123) (64,788)
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NET INCOME $142,097 $1,944 $140,153
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BASIC EARNINGS PER SHARE OF COMMON STOCK $0.48 $0.01 $0.47
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DILUTED EARNINGS PER SHARE OF COMMON STOCK $0.47 $0.00 $0.47
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Average Number of Shares Outstanding - Basic 298,576,000 298,576,000
Dilutive Effect of Shares Issuable during the period 2,126,000 2,126,000
Under Stock Option Plans
Adjustment of shares applicable to exercised or 48,000 48,000
cancelled stock options during the period
Average Number of Shares Outstanding - Diluted 300,750,000 300,750,000
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</TABLE>
(1) As reported in IMS's Current Report on Form 8-K filed on September 15, 2000.
See Notes to Unaudited Pro Forma Condensed Consolidated Statements
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IMS HEALTH INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
Dollar amounts in thousands, except per share data
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED UNAUDITED
PRO FORMA PRO FORMA PRO FORMA
ADJUSTED FOR ADJUSTMENTS
SYNAVANT SPIN-OFF(1) FOR ERISCO SALE
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<S> <C> <C> <C>
OPERATING REVENUE $1,194,581 $48,224 $1,146,357
Operating Costs 471,569 11,645 459,924
Selling and Administrative Expenses 322,417 24,167 298,250
Depreciation and Amortization 72,260 4,300 67,960
OPERATING INCOME 328,335 8,112 320,223
Interest Income 8,027 8,027
Interest Expense (7,283) 2,240 (9,523)
Gains from Dispositions - Net 25,264 25,264
Other Expense - Net (16,823) 11 (16,834)
Non-Operating Income - Net 9,185 2,251 6,934
Income Before Provision for Income Taxes 337,520 10,363 327,157
Provision for Income Taxes (85,869) (4,136) (81,733)
Income from Continuing Operations 251,651 6,227 245,424
Income from Discontinued Operations, Net of Income 25,695 25,695
Taxes of $12,635 for December 31, 1999
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NET INCOME $277,346 $6,227 $271,119
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EARNINGS PER SHARE OF COMMON STOCK
BASIC
INCOME FROM CONTINUING OPERATIONS $0.81 $0.02 $0.79
INCOME FROM DISCONTINUED OPERATIONS 0.08 0.00 0.08
BASIC EARNINGS PER SHARE OF COMMON STOCK $0.89 $0.02 $0.87
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DILUTED
INCOME FROM CONTINUING OPERATIONS $0.79 $0.02 $0.77
INCOME FROM DISCONTINUED OPERATIONS 0.08 0.00 0.08
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DILUTED EARNINGS PER SHARE OF COMMON STOCK $0.87 $0.02 0.85
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Average Number of Shares Outstanding - Basic 311,976,000 0 311,976,000
Dilutive Effect of Shares Issuable during the period 5,703,000 5,703,000
Under Stock Option Plans
Adjustment of shares applicable to exercised or 1,506,000 0 1,506,000
cancelled stock options during the period
Average Number of Shares Outstanding - Diluted 319,185,000 0 319,185,000
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</TABLE>
(1) As reported in IMS's Current Report on Form 8-K filed on September 15, 2000.
See Notes to Unaudited Pro Forma Condensed Consolidated Statements
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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL
POSITION AND INCOME STATEMENTS
As consideration for its sale of Erisco to TriZetto, IMS received
12,142,857 shares of TriZetto Common Stock, which, based on the closing price of
such stock on the Nasdaq National Market of $15.125 on October 2, 2000, provided
total gross proceeds to IMS of $183,661.
Following the acquisition, IMS will account for its ownership
interest in TriZetto on an equity basis, recording its share of the TriZetto
operating results and the amortization of the goodwill and other acquired
intangibles. The allocation of the TriZetto purchase price has not yet been
fully determined. As such, the pro forma income statements, included herein,
do not reflect IMS's interest in the underlying operating results of its
approximately 36% ownership interest in TriZetto Common Stock, nor the
amortization of acquired intangible assets. The reported unaudited net losses
of TriZetto for the six months ended June 30, 2000 and the twelve months
ended December 31, 1999 were ($16,530) and ($7,927), respectively.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
The historical financial position has been derived from the
Unaudited Condensed Consolidated Financial Position, as reported in IMS's
Quarterly Report on Form 10-Q for the period ended June 30, 2000. The
historical financial position has been adjusted to reflect the spin-off of
Synavant on August 31, 2000. The pro forma adjusted financials are shown in
the column entitled "Unaudited Pro Forma Adjusted for Synavant Spin-off". The
pro forma impact of the Synavant transaction is separately disclosed in IMS's
Current Report on Form 8-K filed with the Securities and Exchange Commission
on September 15, 2000.
The unaudited pro forma adjustments reflect the sale of the assets
and liabilities related to the Erisco business, based on the historical book
values, as recorded by IMS as at June 30, 2000. These amounts are not
necessarily indicative of the book value of assets and liabilities sold on
October 3, 2000. In connection with the sale, IMS paid $32,000 of cash to
TriZetto. This has been included in these pro formas via an increase in IMS's
outstanding short-term debt and related interest expense.
IMS will record its equity investment in TriZetto of approximately
$130,000 in the fourth quarter of 2000. The equity investment will reflect
IMS's residual approximately 36% interest in the net assets of Erisco, IMS's
proportionate share of the tangible and intangible assets and the liabilities
of TriZetto and goodwill. Management is currently evaluating the net assets
acquired, including all intangibles and their respective amortization periods
(with preliminary estimates from 5 to 7 years). The actual values
attributable to goodwill and other intangibles will be based on consideration
received less disposition costs and the fair values of IMS's proportionate
interest in the tangible assets and liabilities of TriZetto on the date of
acquisition. It is currently expected that underlying intangible assets will
be a significant portion of the investment in TriZetto and the amortization
of such intangibles will be reflected in the future earnings of IMS. No
assurance can be given that the actual value of intangibles arising or the
amortization periods will not be more or less than the amount or periods
currently contemplated.
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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENTS
The historical condensed consolidated income statement for the six
month period ended June 30, 2000 has been derived from the Unaudited
Condensed Consolidated Income Statement, as reported in IMS's Quarterly
Report on Form 10-Q for the period ended June 30, 2000. The historical
condensed consolidated income statement for the twelve month period ended
December 31, 1999 has been derived from the Consolidated Income Statement as
reported in IMS's Annual Report on Form 10-K for the year ended December 31,
1999. The historical income statements have been adjusted to reflect the
spin-off of Synavant on August 31, 2000. The adjusted financials are shown in
the column entitled "Unaudited Pro Forma Adjusted for Synavant Spin-off". The
pro forma impact of the Synavant transaction is separately disclosed in IMS's
Current Report on Form 8-K filed with the Securities and Exchange Commission
on September 15, 2000.
The pro forma adjustments for the sale of Erisco reflect Erisco
revenue, operating expenses, operating income, non-operating income and
provision for taxes for the interim period ended June 30, 2000 and year ended
December 31, 1999. These amounts do not reflect certain carve-out adjustments
made in the preparation of Erisco's stand-alone audited financial statements
included in TriZetto's proxy statement relating to the Erisco transaction.
Such carve-out adjustments include primarily the tax provision on a separate
company basis and the allocation of certain corporate overhead costs.
Pro forma interest on the $32,000 short-term debt incurred to fund cash
to Erisco at the sale date has been reflected in the unaudited pro forma
condensed consolidated income statement. This interest expense would be $1,120
and $2,240 for the six months ended June 30, 2000 and the twelve months ended
December 31, 1999 respectively, based on an interest rate of 7%.
The adjustments to income taxes were computed on an IMS stand-alone
basis excluding the Erisco business.
As IMS is in the process of completing its assessment of the
purchase price allocation related to its acquired approximately 36% interest
in TriZetto, the pro forma income statements do not reflect the impact of the
amortization of goodwill and other acquired intangible assets and its
proportionate share of the operating results of TriZetto. As noted above, it
is currently expected that underlying intangible assets will be a significant
portion of the investment in TriZetto and the amortization of such
intangibles will be reflected in the future earnings of IMS.
(c) Exhibits.
The following documents are filed as Exhibits to this report:
2.1 Agreement and Plan of Reorganization, dated as of May 16, 2000, by and
among The TriZetto Group, Inc., Elbejay Acquisition Corp., IMS Health
Incorporated, and ERISCO Managed Care Technologies, Inc. (previously
filed as Exhibit 2.1 to IMS's Current Report on Form 8-K, filed May 17,
2000).
99.1 Stockholder Agreement, dated as of October 2, 2000, by and between The
TriZetto Group, Inc. and IMS Health Incorporated (previously filed as
Exhibit C to IMS's Schedule 13D/A2, filed October 6, 2000).
99.2 Registration Rights Agreement, dated as of October 2, 2000, by and
between The TriZetto Group, Inc. and IMS Health Incorporated
(previously filed as Exhibit D to IMS's Schedule 13D/A2, filed October
6, 2000).
Item 8-9. Not Applicable.
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SIGNATURE
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.
IMS HEALTH INCORPORATED
By: /s/ James C. Malone
----------------------------------
Name: James C. Malone
Title: Chief Financial Officer
Date: October 18, 2000
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EXHIBIT INDEX
2.1 Agreement and Plan of Reorganization, dated as of May 16, 2000, by and
among The TriZetto Group, Inc., Elbejay Acquisition Corp., IMS Health
Incorporated, and ERISCO Managed Care Technologies, Inc. (previously
filed as Exhibit 2.1 to IMS's Current Report on Form 8-K, filed May 17,
2000).
99.1 Stockholder Agreement, dated as of October 2, 2000, by and between The
TriZetto Group, Inc. and IMS Health Incorporated (previously filed as
Exhibit C to IMS's Schedule 13D/A2, filed October 6, 2000).
99.2 Registration Rights Agreement, dated as of October 2, 2000, by and
between The TriZetto Group, Inc. and IMS Health Incorporated
(previously filed as Exhibit D to IMS's Schedule 13D/A2, filed October
6, 2000).
