<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 6, 1996
MEDAPHIS CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE
----------------------------------------------
(State or other jurisdiction of incorporation)
000-19480
------------------------
(Commission File Number)
58-1651222
------------------------------------
(IRS Employer Identification Number)
2700 Cumberland Parkway
Suite 300
Atlanta, Georgia 30339
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 444-5300
--------------
Not applicable
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
Exhibit Index Located on Page: 6
Total Number of Pages: 12
<PAGE> 2
THIS CURRENT REPORT ON FORM 8-K/A IS BEING FILED AS A RESULT OF THE
COMPANY'S RESTATEMENT OF ITS CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE
MONTHS AND YEAR ENDED DECEMBER 31, 1995 AND AS OF MARCH 31, 1996 AND JUNE 30,
1996. TO THE EXTENT THIS AMENDED FILING IS INCONSISTENT WITH THE COMPANY'S
CURRENT REPORT ON FORM 8-K DATED MAY 6, 1996 (THE "ORIGINAL FILING"), THE
ORIGINAL FILING IS HEREBY SUPERSEDED AND AMENDED. TO THE EXTENT THE ORIGINAL
FILING IS UNAFFECTED BY THE RESTATEMENT, THE ORIGINAL FILING HAS NOT BEEN
UPDATED OR CORRECTED TO REFLECT EVENTS OCCURRING SUBSEQUENT TO THE DATE OF THE
ORIGINAL FILING.
This Form 8-K/A contains statements which may constitute
"forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Those statements include statements regarding the
intent, belief or current expectations of Medaphis Corporation and members of
its management team. Prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ materially from
those contemplated by such forward-looking statements. Important factors
currently known to management that could cause actual results to differ
materially from those in forward-looking statements are set forth in the Safe
Harbor Compliance Statement included as Exhibit 99 to the Form 10-Q filed on
November 14, 1996, and are hereby incorporated herein by reference. The Company
undertakes no obligation to update or revise forward-looking statements to
reflect changed assumptions, the occurrence of unanticipated events or changes
to future operating results over time.
Item 2. Acquisition or Disposition of Assets.
Medaphis Corporation, a Delaware corporation ("Medaphis"), acquired
all of the outstanding capital stock of BSG Corporation, a Delaware corporation
("BSG"), in a merger transaction (the "Merger") on May 6, 1996. The Merger was
consummated in accordance with the terms of that certain Merger Agreement (the
"Merger Agreement"), dated as of March 15, 1996, by and among Medaphis, BSG and
BSGSub, Inc., a Delaware corporation and a wholly owned subsidiary of Medaphis
("BSGSub"). Under the Merger Agreement, BSGSub was merged with and into BSG
with BSG surviving the Merger.
The aggregate consideration paid by Medaphis in connection with the
Merger was approximately 7.5 million shares of Medaphis common stock. In
addition, Medaphis assumed BSG stock options representing approximately 2.3
million additional shares of Medaphis common stock. The total consideration
paid in the Merger was determined through arm's length negotiations between
representatives of Medaphis and BSG. Neither Medaphis, BSGSub, nor any of
their affiliates had, nor to the knowledge of Medaphis or BSGSub did any
director or officer or any associate of any such director or officer of
Medaphis or BSGSub have, any material relationship with BSG prior to the
Merger.
Each outstanding share of BSG common stock (other than treasury shares
and shares held by stockholders who perfected their appraisal rights under
Delaware law) was exchanged into .23 of a share of Medaphis common stock in
the Merger. Medaphis filed a Registration Statement on Form S-4 under the
Securities Act of 1933, as amended, with the Securities and Exchange Commission
covering the shares of Medaphis common stock issued in connection with the
Merger.
BSG, headquartered in Austin, Texas, provides information technology
and change management services to organizations seeking to transform their
operations through the strategic use of client/server and other advanced
technologies.
Item 5. Other Events.
Medaphis has restated its consolidated financial statements for the
three months and year ended December 31, 1995. The restatement results
primarily from a software licensing agreement entered into by Imonics
Corporation, a wholly owned subsidiary of Medaphis, in December 1995 for
which Medaphis recognized associated license fee revenue in 1995. Subsequent
to the issuance of Medaphis' 1995 unaudited pro forma combined financial
statements in the Company's Current Report on Form 8-K dated May 6, 1996,
management discovered unauthorized correspondence which created a contingency
for the license fee payable under this agreement. Such contingency precluded
recognition of license fee revenue in 1995 associated with this agreement.
For additional information, the reader may wish to refer to the
Company's Current Report on Form 8-K/A dated June 29, 1996 filed on November
14, 1996, the Company's Current Report on Form 8-K/A-2 dated June 29, 1996
filed on January 10, 1997, the Company's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1996 filed on November 14, 1996, the
Company's Current Report on Form 8-K/A dated February 8, 1996 filed on January
10, 1997, the Company's Current Report on Form 8-K/A dated March 13, 1996 filed
on January 10, 1997, the Company's Current Report on Form 8-K/A dated April 3,
1996 filed on January 10, 1997, the Company's Current Report on Form 8-K/A
dated May 29, 1996 filed on January 10, 1997, the Company's Current Report on
Form 8-K/A dated June 29, 1996 filed on January 10, 1997, the Company's
Quarterly Report on Form 10-Q/A for the quarterly period ended March 31, 1996
filed on January 10, 1997, the Company's Quarterly Report on Form 10-Q/A for
the quarterly period ended June 30, 1996 and the Company's Annual Report on
Form 10-K/A for the fiscal year ended December 31, 1995 filed on January 10,
1997.
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<PAGE> 3
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) The following BSG Consolidated Financial Statements, together
with the independent auditors' reports thereon, are filed as
Exhibit 99.1:
(i) Consolidated Balance Sheets as of December 31, 1995
and 1994;
(ii) Consolidated Statements of Operations for the years
ended December 31, 1995, 1994 and 1993;
(iii) Consolidated Statements of Stockholders' Equity for
the years ended December 31, 1995, 1994 and 1993;
(iv) Consolidated Statements of Cash Flows for the years
ended December 31, 1995, 1994 and 1993; and
(v) Notes to Consolidated Financial Statements.
(b) The Unaudited Pro Forma Combined Financial Information of the
Registrant as of and for the three years ended December 31,
1995 and the notes thereto, are filed as Exhibit 99.2.
(c) Exhibits
2.1* Merger Agreement among Medaphis Corporation, BSGSub, Inc. and
BSG Corporation, dated as of March 15, 1996 (incorporated by
reference to Exhibit 2.1 to the Registrant's Registration
Statement on Form S-4, File No. 333-2506. The Exhibits and
Disclosure Letters which are referenced in the table of
contents and elsewhere in the Merger Agreement are hereby
incorporated by reference. Such Exhibits and Disclosure
Letters have been omitted for purposes of this filing, but
will be furnished supplementally to the Commission upon
request.).
2.2* Certificate of Merger, as filed by BSG on May 6, 1996, with
the Secretary of State of Delaware.
4.1* Form of Registration Rights Agreement among Medaphis, NFT
Ventures, Inc. and NP Ventures, Ltd. (incorporated by
reference to Exhibit 4.17 to the Registrant's Registration
Statement on Form S-4, File No. 333-2506).
23.1* Consent of Price Waterhouse LLP.
- 3 -
<PAGE> 4
99.1* Consolidated Financial Statements for BSG, as described in
Item 7(a) of this 8-K/A (incorporated by reference to Exhibit
99.4 of the Registrant's Current Report on Form 8-K dated
March 13, 1996).
99.2 Unaudited Pro Forma Combined Financial Statements, as
described in Item 7(b) of this 8-K/A (incorporated by
reference to Exhibit 99.3 of the Registrant's Current Report
on Form 8-K dated March 13, 1996, as amended by the
Registrant's Current Report on Form 8-K/A dated March 13,
1996).
99.3* Text of Press Release of Medaphis Corporation, dated March 15,
1996 (incorporated by reference to Exhibit 99.2 of the
Registrant's Form 8-K Current Report dated March 13, 1996).
99.4* Text of Press Release of Medaphis Corporation, dated May 7,
1996.
- -------------------
* Previously filed with Registrant's Current Report on Form 8-K dated May 6,
1996.
- 4 -
<PAGE> 5
Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Date: January 10, 1997
MEDAPHIS CORPORATION
By: /s/ Michael R. Cote
----------------------------------
Michael R. Cote
Senior Vice President -- Finance,
& Chief Financial Officer and
Assistant Secretary
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<PAGE> 6
INDEX
<TABLE>
<CAPTION>
Exhibit Page No.
- ------- --------
<S> <C>
2.1* Merger Agreement among Medaphis Corporation, BSGSub, Inc. and
BSG Corporation, dated as of March 15, 1996 (incorporated by
reference to Exhibit 2.1 to the Registrant's Registration
Statement on Form S-4, File No. 333-2506. The Exhibits and
Disclosure Letters which are referenced in the table of
contents and elsewhere in the Merger Agreement are hereby
incorporated by reference. Such Exhibits and Disclosure
Letters have been omitted for purposes of this filing, but will
be furnished supplementally to the Commission upon request.).
2.2* Certificate of Merger, as filed by BSG on May 6, 1996, with
the Secretary of State of Delaware.
4.1* Form of Registration Rights Agreement among Medaphis, NFT
Ventures, Inc., and NP Ventures, Ltd. (incorporated by reference
to Exhibit 4.17 to the Registrant's Registration Statement
on Form S-4, File No. 333-2506).
23.1* Consent of Price Waterhouse LLP.
99.1* Consolidated Financial Statements for BSG, as described in
Item 7(a) of this 8-K/A (incorporated by reference to Exhibit
99.4 of the Registrant's Current Report on Form 8-K dated
March 13, 1996).
99.2 Unaudited Pro Forma Combined Financial Statements, as
described in Item 7(b) of this 8-K/A (incorporated by
reference to Exhibit 99.3 of the Registrant's Current Report
on Form 8-K dated March 13, 1996, as amended by the
Registrant's Current Report on Form 8-K/A dated March 13,
1996).
99.3* Text of Press Release of Medaphis Corporation, dated March 15,
1996 (incorporated by reference to Exhibit 99.2 of the
Registrant's Form 8-K Current Report dated March 13, 1996).
99.4* Text of Press Release of Medaphis Corporation, dated May 7,
1996.
</TABLE>
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* Previously filed with Registrant's Current Report on Form 8-K dated May 6,
1996.
- 6 -
<PAGE> 1
EXHIBIT 99.2
UNAUDITED PRO FORMA COMBINED FINANCIAL
STATEMENTS OF MEDAPHIS CORPORATION
<PAGE> 2
UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION
The Unaudited Pro Forma Combined Financial Statements are based on the
historical presentation of the consolidated financial statements of Medaphis
and the historical presentation of the consolidated financial statements of BSG.
The Unaudited Pro Forma Combined Statement of Operations for the years ended
December 31, 1993, 1994 and 1995 give effect to (i) the Merger and the
merger with Rapid Systems as if they had occurred on January 1, 1993 and (ii)
certain pro forma adjustments related to the Atwork and MMS Mergers. The
Unaudited Pro Forma Combined Statement of Operations for the year ended
December 31, 1995 also give effect to the 1995 acquisitions, which include the
acquisition of Medical Management, Inc., Medical Billing Service, Computers
Diversified, Inc. and the Receivables Management Division of MedQuist Inc. (the
"1995 Acquisitions") as if each had occurred as of January 1, 1995. The
Unaudited Pro Forma Combined Balance Sheet as of December 31, 1995 gives effect
to the Merger and the merger with Rapid Systems as if they had
occurred on December 31, 1995. The Unaudited Pro Forma Combined Financial
Statements do not include the effects of the Decisions Support Group, Medical
Office Consultants, Inc., Consort, Billing and Professional Services, Inc., The
Halley Exchange, Inc., Medical Management Computer Sciences, Inc., CBT
Financial Services, Inc., and Intelligent Visual Computing, Inc. acquisitions,
as they are not considered significant individually or in the aggregate.
The Merger and the merger with Rapid Systems are to be accounted for
under the pooling-of-interests method of accounting. Each of the 1995
Acquisitions has been accounted for under the purchase method of accounting.
The total purchase price for each of these acquisitions has been allocated to
tangible and identifiable intangible assets and liabilities based upon
management's estimate of their respective fair market values with the excess of
cost over net assets acquired allocated to goodwill. The allocation of the
purchase price for certain of the 1995 Acquisitions is subject to recision when
additional information concerning asset and liability valuation is obtained.
Management believes the asset and liability valuations utilized for these
acquisitions will not be materially different from the pro forma information
presented herein.
Each of the Unaudited Pro Forma Combined Statements of Operations
includes the historical operating results of each of the acquired companies
included therein from the beginning of the period covered by such statement
until the earlier of the date of acquisition or the end of the period covered by
such statement.
The Unaudited Pro Forma Combined Financial Statements do not purport to
be indicative of the results that actually would have been obtained if the
combined operations had been conducted during the periods presented and they
are not necessarily indicative of operating results to be expected in future
periods. The Unaudited Pro Forma Combined Financial Statements and notes
thereto should be read in conjunction with the historical financial statements
and notes thereto of Medaphis, which are incorporated herein by reference and
the historical financial statements and notes thereto of BSG which are
incorporated herein by reference, and of certain of the 1995 Acquisitions,
contained in certain documents incorporated herein by reference.
Medaphis has restated its consolidated financial statements for the
three months and year ended December 31, 1995. The restatement results
primarily form a software licensing agreement entered into by Imonics
Corporation, a wholly owned subsidiary of Medaphis, in December 1995 for which
Medaphis recognized associated license fee revenue in 1995. Subsequent to the
issuance of Medaphis' 1995 unaudited pro forma combined financial statements in
the Company's Current Report on Form 8-K dated May 6, 1996, management
discovered unauthorized correspondence which created a contingency for the
license fee payable under this agreement. Such contingency precluded
recognition of license fee revenue in 1995 associated with this agreement.
For additional information, the reader may wish to refer to the
Company's Current Report on Form 8-K/A dated June 29, 1996 filed on November
14, 1996, the Company's Current Report on Form 8-K/A-2 dated June 29, 1996
filed on January 10, 1997, the Company's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1996 filed on November 14, 1996, the
Company's Current Report on Form 8-K/A dated February 8, 1996 filed on January
10, 1997, the Company's Current Report on Form 8-K/A dated March 13, 1996 filed
on January 10, 1997, the Company's Current Report on Form 8-K/A dated April 3,
1996 filed on January 10, 1997, the Company's Current Report on Form 8-K/A
dated May 29, 1996 filed on January 10, 1997, the Company's Current Report on
Form 8-K/A dated June 29, 1996 filed on January 10, 1997, the Company's
Quarterly Report on Form 10-Q/A for the quarterly period ended March 31, 1996
filed on January 10, 1997, the Company's Quarterly Report on Form 10-Q/A for
the quarterly period ended June 30, 1996 filed on January 10, 1997 and the
Company's Annual Report on Form 10-K/A for the fiscal year ended December 31,
1995 filed on January 10, 1997.
8
<PAGE> 3
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
-----------------------------------------------------------------------------------------
RAPID SYSTEMS MEDAPHIS BSG
PRO FORMA RAPID PRO FORMA PRO FORMA PRO FORMA PRO FORMA
MEDAPHIS ADJUSTMENTS SYSTEMS ADJUSTMENTS COMBINED BSG(11) ADJUSTMENTS COMBINED
-------- ----------- ------- -- -------- --------- ------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue ............................... $228,745 $ -- $4,335 $ -- $233,080 $23,902 $ -- $256,982
-------- ------ ------ ----- -------- ------- ----- --------
Salaries and wages .................... 130,778 (8,689)(1) 3,153 -- 125,242 22,360 -- 147,602
Other operating expenses .............. 59,017 -- 525 -- 59,542 4,970 -- 64,512
Depreciation .......................... 6,086 -- 13 -- 6,099 683 -- 6,782
Amortization .......................... 5,279 -- -- -- 5,279 38 -- 5,317
Interest expense, net ................. 6,556 -- (3) -- 6,553 (1) -- 6,552
-------- ------ ------ ----- -------- ------- ----- --------
Total expenses ............... 207,716 (8,689) 3,688 -- 202,715 28,050 -- 230,765
Income (loss) before income taxes ..... 21,029 8,689 647 -- 30,365 (4,148) -- 26,217
Income taxes .......................... 7,049 4,386 (5) -- 259 (7) 11,694 -- -- 11,694
-------- ------ ------ ----- -------- ------- ----- --------
Net income (loss) ..................... $ 13,980 $4,303 $ 647 $(259) $ 18,671 $(4,148) $ -- $ 14,523
======== ====== ====== ===== ======== ======= ===== ========
Net income per common share ........... $ 0.37 $ 0.48 $ 0.32
======== ======== ========
Weighted average shares outstanding ... 38,057 1,135 39,192 5,705 44,897(6)
======== ====== ======== ======= ========
</TABLE>
9
<PAGE> 4
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
-----------------------------------------------------------------------------------------
RAPID SYSTEMS MEDAPHIS BSG
PRO FORMA RAPID PRO FORMA PRO FORMA PRO FORMA PRO FORMA
MEDAPHIS ADJUSTMENTS SYSTEMS ADJUSTMENTS COMBINED BSG(11) ADJUSTMENTS COMBINED
-------- ----------- ------- -- -------- --------- ------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue ............................... $319,138 $ -- $8,558 $ -- $327,696 $45,907 $ -- $373,603
Salaries and wages .................... 178,442 (6,716)(1) 6,424 -- 178,150 35,001 -- 213,151
Other operating expenses .............. 80,096 -- 1,314 -- 81,410 7,954 -- 89,364
Depreciation .......................... 7,844 -- 45 -- 7,889 1,227 -- 9,116
Amortization .......................... 7,199 -- -- -- 7,199 548 -- 7,747
Interest expense, net ................. 6,251 -- 1 -- 6,252 (338) -- 5,914
Restructuring and other charges ....... 1,905 -- -- -- 1,905 -- -- 1,905
-------- ------ ------ ----- -------- ------- ----- --------
Total expenses ............... 281,737 (6,716) 7,784 -- 282,805 44,392 -- 327,197
Income before income taxes ........... 37,401 6,716 774 -- 44,891 1,515 -- 46,406
Income taxes .......................... 13,017 4,779 (5) -- 310 (7) 18,106 138 47 (8) 18,291
-------- ------ ------ ----- -------- ------- ----- --------
Net income ........................... $ 24,384 $1,937 $ 774 $(310) $ 26,785 $ 1,377 $ (47) $ 28,115
======== ====== ====== ===== ======== ======= ===== ========
Net income per common share ........... $ 0.54 $ 0.57 $ 0.52
======== ======== ========
Weighted average shares outstanding ... 45,550 1,135 46,685 6,959 53,644(6)
======== ====== ======== ======= ========
</TABLE>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-----------------------------------------------------------------------------------------------------
RAPID SYSTEMS MEDAPHIS BSG
MEDPAHIS PRIOR PRO FORMA RAPID PRO FORMA PRO FORMA PRO FORMA PRO FORMA
AS RESTATED(12) ACQUISITIONS ADJUSTMENTS SYSTEMS ADJUSTMENTS COMBINED BSG(11) ADJUSTMENTS COMBINED
--------------- ------------ ----------- ------- ------------ --------- ------- ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue.................... 463,321 $22,679 $ -- $14,722 $ -- $500,722 $69,663 $ -- 570,385
Salaries and wages......... 253,033 10,794 (2,925)(1) 10,629 -- 271,531 56,134 -- 327,665
Other operating expenses... 117,659 6,586 -- 2,501 -- 126,746 11,582 -- 138,328
Depreciation............... 12,055 628 -- 132 -- 12,815 2,023 -- 14,838
Amortization............... 13,894 580 75 (2) -- -- 14,549 883 -- 15,432
Interest expense, net...... 10,812 (16) 1,787 (3) 22 -- 12,605 (418) -- 12,187
Restructuring and other
charges.................. 54,950 -- (750)(4) -- -- 54,200 310 -- 54,510
-------- ------- ------- ------- ----- -------- ------- ----- -------
Total expenses.... 462,403 18,572 (1,813) 13,284 -- 492,446 70,514 -- 562,960
Income (loss) before
income taxes............. 918 4,107 1,813 1,438 -- 8,276 (851) -- 7,425
Income taxes............... 3,293 -- 5,070 (5) -- 575 (7) 8,938 194 175 (8) 9,307
-------- ------- ------- ------- ----- -------- ------- ----- -------
Net income (loss).......... (2,375) $ 4,107 $(3,257) $ 1,438 $(575) (662) $(1,045) $(175) (1,882)
======== ======= ======= ======= ===== ======== ======= ===== =======
Net income per common
share.................... 0.05 (0.01) (0.04)
======== ======== =======
Weighted average shares
outstanding.............. 49,412 1,135 50,547 2,815 53,362(6)
======== ======= ======== ======= =======
</TABLE>
10
<PAGE> 5
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------------------------------------------------------------------------
RAPID
SYSTEMS MEDAPHIS BSG
MEDAPHIS RAPID PRO FORMA PRO FORMA PRO FORMA PRO FORMA
AS RESTATED(12) SYSTEMS ADJUSTMENTS COMBINED BSG (11) ADJUSTMENTS COMBINED
--------------- ------- ----------- --------- -------- ----------- ---------
(IN THOUSANDS)
ASSETS
<S> <C> <C> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash
equivalents................................ $ 4,140 $ (459) $ -- $ 3,681 $ 795 $ -- $ 4,476
Restricted cash............................. 15,340 -- -- 15,340 -- -- 15,340
Accounts receivable, billed................. 63,996 3,207 -- 67,203 9,599 -- 76,802
Accounts receivable, unbilled............... 73,299 -- -- 73,299 5,296 -- 78,595
Other....................................... 13,744 98 -- 13,842 988 -- 14,830
-------- ------- ----------- --------- -------- ----------- ---------
Total current assets................. 170,519 2,846 -- 173,365 16,678 -- 190,043
Property and equipment....................... 90,957 719 -- 91,676 5,661 -- 97,337
Intangible assets............................ 446,640 -- -- 446,640 1,203 -- 447,843
Other........................................ 4,062 49 -- 4,111 899 -- 5,010
-------- ------- ----------- --------- -------- ----------- ---------
$712,178 $ 3,614 $ -- $ 715,792 $ 24,441 $ -- $ 740,233
======== ======= =========== ========= ======== =========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable............................ $ 16,447 $ 255 $ -- $ 16,702 $ 1,480 $ -- $ 18,182
Accrued compensation........................ 20,907 437 -- 21,344 1,240 -- 22,584
Accrued expenses............................ 64,015 235 500 (9) 64,750 2,743 6,250 (9) 73,743
Current portion of long-term debt........... 9,444 575 -- 10,019 399 -- 10,418
-------- ------- ----------- --------- -------- ----------- ---------
Total current liabilities............ 110,813 1,502 500 112,815 5,862 6,250 124,927
Long-term debt............................... 144,264 -- -- 144,264 6,301 -- 150,565
Other obligations............................ 18,901 20 -- 18,921 5 -- 18,926
Deferred income taxes........................ 12,199 -- -- 12,199 -- -- 12,199
Convertible subordinated debentures.......... 63,375 -- -- 63,375 -- -- 63,375
-------- ------- ----------- --------- -------- ----------- ---------
Total liabilities.................... 349,552 1,522 500 351,574 12,168 6,250 369,992
Stockholders' Equity:
Common stock................................ 506 1 10 (10) 517 33 43 (10) 593
Paid in capital............................. 362,109 -- (10) (10) 362,099 21,935 43 (10) 383,991
Retained earnings (accumulated
deficit).................................... 11 2,091 (500) (9) 1,602 (9,695) (6,250) (9) (14,343)
-------- ------- ----------- --------- -------- ----------- ---------
Total stockholders'
equity...................................... 362,626 2,092 (500) 364,218 12,273 (6,250) 370,241
-------- ------- ----------- --------- -------- ----------- ---------
$712,178 $ 3,614 $ -- $ 715,792 $ 24,441 $ -- $ 740,233
======== ======= =========== ========= ======== =========== =========
</TABLE>
11
<PAGE> 6
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(1) The pro forma adjustment to salaries and wages represents the
elimination of distributions that are non-recurring net of the compensation
expected to be paid to the former shareholders of Atwork and shareholders and
executive officers of MMS and the companies acquired in certain of the 1995
Acquisitions pursuant to employment contracts with Medaphis.
(2) The pro forma adjustment to amortization expense represents the
change in amortization expense recorded in conjunction with the 1995
Acquisitions, which results from the adjustments to intangible assets recorded
as part of the purchase price allocations and conforming the historical
amortization policies to those of Medaphis, whereby goodwill is amortized using
the straight-line method generally over 25-40 years, client lists are
amortized over their estimated useful lives of 7-20 years and capitalized
software is amortized over its estimated useful life of 4-7 years.
(3) The pro forma adjustment to interest expense represents the
interest expense on indebtedness incurred by Medaphis (which accrued at an
annual rate of approximately 7.75% in 1995) in connection with the 1995
Acquisitions, net of reductions in interest expense for obligations not assumed
by Medaphis or for obligations that Medaphis assumed and refinanced under the
Medaphis Senior Credit Facility to obtain lower interest rates.
(4) The pro forma adjustment to restructuring and other charges
represents the elimination of distributions that are non-recurring net of the
compensation to be paid to the former shareholders of Atwork pursuant to
employment contracts with Medaphis.
(5) The pro forma adjustment to income taxes represents (i) the
imputed tax expense on the operating results of Atwork, MMS and Consort at
statutory rates in effect during the periods presented (as Atwork, MMS and
Consort were "S" corporations for income tax purposes and therefore did not
provide for federal income taxes), (ii) the tax impact of applying Medaphis'
pro forma effective tax rate to the income of certain of the 1995 Acquisitions
(which were not "S" corporations for income tax purposes) as well as the pro
forma adjustments and (iii) the reversal of the adjustment recorded to
historical income taxes for the change in the tax status of Atwork, MMS and
Consort in 1995.
(6) The pro forma weighted average shares outstanding give effect
to (i) the additional shares of Medaphis Common Stock to be issued and common
stock equivalents assumed in connection with the Merger and (ii) the additional
shares of Medaphis Common Stock expected to be issued in connection with the
Rapid Systems acquisition.
(7) The pro forma adjustment to income taxes for Rapid Systems
represents the imputed tax expense on the operating results of Rapid Systems
at statutory rates in effect during the periods presented as Rapid Systems was
an "S" corporation and therefore did not provide for federal income taxes.
(8) The pro forma adjustment to income taxes for BSG represents the
imputed tax expense on the operating results of one of BSG's subsidiaries at
statutory rates in effect during the periods presented as the subsidiary was
an "S" corporation and therefore did not provide for federal income taxes.
(9) The pro forma adjustment to accrued expenses and retained
earnings represents the estimated costs associated with the Merger and the
Rapid Systems acquisition.
(10) The pro forma adjustments to common stock and paid-in capital
represent the adjustments necessary to give effect to the issuance of Medaphis
common stock to effect the Merger and the Rapid Systems acquisition.
(11) Certain BSG amounts have been reclassified in order to conform
to Medaphis' presentation and exclude the results of BSG's discontinued
operations.
(12) Medaphis has restated its consolidated financial statements for
the three months and year ended December 31, 1995. The restatement results
primarily from a software licensing agreement entered into by Imonics
Corporation, a wholly owned subsidiary of Medaphis, in December 1995 for which
Medaphis recognized associated license fee revenue in 1995. Subsequent to the
issuance of Medaphis' 1995 unaudited pro forma combined financial statements in
the Company's Current Report on Form 8-K dated May 6, 1996, management
discovered unauthorized correspondence which created a contingency for the
license fee payable under this agreement. Such contingency precluded
recognition of license fee revenue in 1995 associated with this agreement.
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