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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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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): December 31, 1996
MEDAPHIS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 000-19480 58-1651222
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) 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 of Former Address, if Changed Since Last Report)
Exhibit Index Located on Page: 4
Total Number of Pages: 16
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THIS CURRENT REPORT ON FORM 8-K/A IS BEING FILED AS A RESULT OF THE
COMPANY'S RESTATEMENT OF ITS FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED
MARCH 31, 1996, JUNE 30, 1996, SEPTEMBER 30, 1996 AND DECEMBER 31, 1996. TO
THE EXTENT THIS AMENDED FILING IS INCONSISTENT WITH THE COMPANY'S CURRENT
REPORT ON FORM 8-K DATED DECEMBER 31, 1996 (THE "ORIGINAL FILING"), THE
ORIGINAL FILING IS HEREBY SUPERCEDED AND AMENDED.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 99.6 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 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 5. Other Events
On February 5, 1997, Medaphis Corporation (the "Company") issued the
press release attached hereto as Exhibit 99.1.
In addition, the Company has entered into the written agreement
attached hereto as Exhibit 99.2, executed by all of the financial institutions
that are parties thereto, on February 4, 1997, regarding the amendment and
restatement of its existing revolving credit facilities. In connection
therewith, the Company entered into one or more written agreements in the form
attached hereto as Exhibit 4.1, executed by the Company on February 4, 1997,
regarding the issuance of warrants to purchase up to an aggregate of 1,694,201
shares of the Company's common stock, par value $.01 per share.
Also, the Company has filed its 1995 consolidated financial statements
attached hereto as Exhibit 99.3. These financial statements were previously
filed as Exhibit 99.1 to the Company's Current Report on Form 8-K filed on July
9, 1996 (as amended by the Company's Current Report on Forms 8-K/A and 8-K/A-2,
filed on November 14, 1996 and January 10, 1997, respectively), as the Company's
supplemental consolidated financial statements.
The Company also has filed certain financial data attached hereto as
Exhibit 99.4, relating to its lines of business for the quarterly periods ended
March 31, 1996 and 1995, June 30, 1996 and 1995, September 30, 1996 and 1995,
and December 31, 1996 and 1995, respectively.
The Company also has filed the Safe Harbor Compliance Statement for
Forward-Looking Statements (the "Safe Harbor Statement") attached hereto as
Exhibit 99.5 in connection with its continuing effort to qualify its written
and oral forward-looking statements for the safe harbor protection of the
Private Securities Litigation Reform Act of 1995, 15 U.S.C.A. Sections 77z-2
and 78u-5 (Supp. 1996). The Safe Harbor Statement filed herewith supercedes
the Safe Harbor Statement filed as Exhibit 99 to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended September 30, 1996 and the Company
undertakes no obligation to update or revise the Safe Harbor Statement to
reflect future developments.
As a result of a review initiated by senior management and the Audit
Committee of the Board of Directors (the "Audit Committee") in March 1997 prior
to completion of the audit process for the Company's 1996 fiscal year,
information was developed that certain revenues and expenses may have been
recorded incorrectly between certain quarters during 1996. At the conclusion
of the review, the Company determined that there were certain accounting errors
and irregularities and that its interim financial statements for each fiscal
quarter of 1996 required restatement as set forth herein. These errors and
irregularities consisted primarily of the following: (1) incorrect quarterly
recording of revenues and the related costs and expenses for certain contracts;
(2) incorrect quarterly recording of certain liabilities for employee bonuses
and related expenses; (3) certain costs and expenses of certain acquired
companies, which were later determined not to be properly recordable, were
recognized by those companies in periods prior to their acquisitions, resulting
in an overstatement of the Company's earnings subsequent to those acquisitions;
and (4) incorrect depreciation of certain assets related to the Company's
comprehensive reengineering and consolidation project.
The Company has determined that all appropriate adjustments have been
made to its interim financial statements and that its consolidated financial
statements, taken as a whole, present fairly in all material respects the
Company's financial position, results of operations and cash flows for its
fiscal year ended December 31, 1996 in conformity with generally accepted
accounting principles. All adjustments were for inter-period transactions and
had no effect on the Company's 1996 annual pro forma net loss as previously
reported and as set forth herein.
Item 7. Exhibits
Exhibit No.
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4.1* Form of Warrant, dated February 4, 1997.
23.1* Consent of Deloitte & Touche LLP.
27* Financial Data Schedule (for SEC use only).
99.1 Text of press release of Medaphis Corporation, dated February
5, 1997.
99.2* Second Amended and Restated Credit Agreement, dated as of
February 4, 1997, among Medaphis Corporation, the lenders
listed therein, and the Agent.
99.3* Consolidated Financial Statements and Financial Statement
Schedule of Medaphis Corporation, as described in Item 5 of
this Current Report on Form 8-K.
99.4 Quarterly Consolidated Segment Data of Medaphis Corporation,
as described in Item 5 of this Current Report on Form 8-K.
99.5* Safe Harbor Compliance Statement for Forward-Looking
Statements.
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* Previously filed with Registrant's Current Report on Form 8-K filed on
February 18, 1997.
THIS FORM 8-K CONTAINS STATEMENTS WHICH MAY CONSTITUTE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED BY THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995. 15 U.S.C.A. SECTIONS 77Z-2 AND 78U-5 (SUPP. 1996). 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 FOR FORWARD-LOOKING STATEMENTS
INCLUDED AS EXHIBIT 99.6 TO THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1996, AND ARE HEREBY INCORPORATED 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.
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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: April 28, 1997
MEDAPHIS CORPORATION
By: /s/ Jerome H. Baglien
--------------------------
Jerome H. Baglien
Senior Vice President,
Chief Financial Officer
and Assistant Secretary
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INDEX
4.1* Form of Warrant, dated February 4, 1997.
23.1* Consent of Deloitte & Touche LLP.
27* Financial Data Schedule (for SEC use only).
99.1 Text of press release of Medaphis Corporation, dated February
5, 1997.
99.2* Second Amended and Restated Credit Agreement, dated as of
February 4, 1997, among Medaphis Corporation, the lenders listed
therein, and the Agent.
99.3* Consolidated Financial Statements and Financial Statement
Schedule of Medaphis Corporation, as described in Item 5 of
this Current Report on Form 8-K.
99.4 Quarterly Consolidated Segment Data of Medaphis Corporation, as
described in Item 5 of this Current Report on Form 8-K.
99.5* Safe Harbor Compliance Statement for Forward-Looking Statements.
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Previously filed with Registrant's Current Report on 8-K filed on February 18,
1997.
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EXHIBIT 99.1
FOR IMMEDIATE RELEASE:
Investor Contact: Melissa Coley
(770) 444-5348
Media Contact: Lisa La Magna
(770) 444-4476
MEDAPHIS ANNOUNCES 1997 TURNAROUND PLAN
To Focus on Core Business of
Business Management Services and Information Products
for Healthcare Providers;
Plans Divestitures of Non-Core Businesses
REPORTS FOURTH QUARTER AND FISCAL 1996 FINANCIAL RESULTS
Charges for Discontinued Reengineering Program and Related Assets
NEW EXECUTIVES AND BOARD MEMBER
AMENDED AND RESTATED CREDIT FACILITY
Increase and Extension of Facility
ATLANTA, GEORGIA, FEBRUARY 5, 1997 -- Medaphis Corporation [Nasdaq: MEDA]
today announced its 1997 operating plan aimed at refocusing the Company on its
core business of delivering business management services and information
products to healthcare providers, divesting Healthcare Recoveries, Inc. and
assessing alternatives for BSG Corporation. The Company also announced
revenues of $143.5 million for the fourth quarter and $608.3 million for the
year ended December 31, 1996. Pro forma net loss was ($100.1) million for the
quarter and ($123.6) million for the year, which includes $138.6 million in
fourth quarter and $179.8 million in full year restructuring and other charges.
Including restructuring and other charges for the relevant periods, pro forma
net loss per share was ($1.40) for the quarter and ($1.74) for the year;
excluding these charges, pro forma net loss per share would have been (0.27) and
(0.14), respectively.
Medaphis today announced the following steps:
- - Implementation of the Company's 1997 operating plan which is focused on the
core business and is driven by five basic elements:
(1) exiting non-core businesses promptly;
(2) achieving improved predictability of business results through
enhanced management accountability and controls;
(3) reducing costs and increasing efficiencies in the core business;
(4) singular emphasis on excellence in customer service; and
(5) implementing cross-selling initiatives.
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- - Abandonment of Medaphis' reengineering program in favor of reliance on
established technology and proven platforms and processes;
- - Agreement with Medaphis' lenders to restructure its credit facilities that
initially provide for increased liquidity to $285 million, up from $250
million, with step downs over the next 18 months consistent with the 1997 core
business operating plan needs and divestiture program;
- - Strengthening of Medaphis' senior management team by the appointment of key
executives who will help spearhead the 1997 operating plan;
- - Strengthening of Medaphis' outside director presence and governance role
through the addition of a new outside director, and the departure from the
Board of one management director; and
- - As part of the strategy to focus on the healthcare provider market, it is
currently contemplated that Medaphis will seek to divest its Healthcare
Recoveries, Inc. ("HRI") operating unit. Medaphis is also assessing
alternatives for BSG Corporation ("BSG").
David E. McDowell, Chairman and Chief Executive Officer, said, "1997 will be a
year of transition for Medaphis. We have refocused our mission on our core
business and an absolute dedication to customer service. Key building blocks
have been put in place to support our effort at continuous improvement
throughout the year. The job is now ours to take our established customer
base, our business management services strength and our information products
capabilities and make them work better. I am optimistic that Medaphis can do
this. And if we achieve our goals, even with increased restructuring and other
expenses and fees, we will return to a level of operating performance that
should be profitable for the year and going forward."
1997 OPERATING PLAN
Mr. McDowell said, "Medaphis' strengths and opportunities fall squarely within
the healthcare provider market. Physicians and hospitals are increasingly
seeking business and information management solutions to meet the challenges of
managed care, compliance mandates and government and industry initiatives
designed to influence or regulate the cost, quality or manner of care.
Medaphis has a group of highly skilled and experienced employees who understand
healthcare, a collection of healthcare information products that have been
recognized as 'best-in-class,' and a base of customers that includes almost
20,000 physicians and 2,500 hospitals. We intend to leverage these strengths
to become the leading provider of business and information management services
and products to doctors and hospitals."
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Medaphis also intends to implement a program aimed at achieving a higher
degree of predictability in Medaphis' core operations through enhanced
management accountability and controls. Mr. McDowell noted, "Enhanced
management accountability and refined planning processes, controls and
accounting practices will form the foundation of Medaphis' turnaround plan.
The Company will make greater use of subscription fee pricing for its products,
which benefits customers and is intended to smooth Medaphis' revenue streams."
The third cornerstone of the 1997 operating plan is to reduce costs and
increase efficiencies in the core business. Going forward, the Company intends
to adopt incremental improvements to processes and procedures using established
technology and proven platforms, and deploy other 'best practices,' as opposed
to a wide-scale reengineering effort. This approach has already proven
successful in certain of the Company's large processing centers.
The 1997 operating plan will also place renewed emphasis on excellence in
customer service. Client retention rates, satisfaction surveys and similar
service benchmarks will assume renewed importance at Medaphis and will be
embedded into Medaphis' operating philosophy and reporting and compensation
plans. This reflects the Company's transition from one focused on growth
through diversification to one focused on customer service and growth within
the healthcare provider market.
The final element of the 1997 plan is to implement strategies that increase
cross-selling opportunities to Medaphis' existing and potential customers.
Medaphis provides a broad range of discrete solutions for different practice
areas and administrative functions within hospitals, physician groups and
independent physician offices. These range from products for enterprise-wide
patient care information systems, enterprise-wide patient and staff scheduling
systems, and enterprise-wide radiology information management systems to
accounts receivables management and collections and other business management
services for physicians, hospitals and healthcare enterprises. Medaphis
believes that there are significant cross-selling opportunities among its
20,000 physician and 2,500 hospital customer base to be realized. During 1997
and beyond, Medaphis will seek to sell more 'complete solutions'.
1996 FINANCIAL RESULTS, ABANDONMENT OF REENGINEERING PROGRAM, RESTRUCTURING AND
OTHER CHARGES
For the three months ended December 31, 1996, revenue was $143.5 million as
compared with $144.7 million in the year-earlier period. Including
restructuring and other charges, the net loss for the fourth quarter was
($100.1) million compared with a pro forma net loss of ($1.2) million in 1995's
fourth quarter. Pro forma net loss per share was ($1.40), compared with a pro
forma net loss per share of ($0.02) in the prior year's quarter. Excluding
restructuring and other charges, pro forma net loss per share would have been
($0.27).
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For the twelve month period ended December 31, 1996, revenue was $608.3
million, compared with $559.9 million in 1995. Including restructuring and
other charges, the pro forma net loss for the twelve months was ($123.6)
million compared with ($8.5) million last year. Pro forma net loss per share
was ($1.74), as compared to pro forma net loss per share of ($0.15) last year.
Excluding restructuring and other charges, pro forma net loss per share would
have been ($0.14).
Prior year results have been restated to include the operating results of all
significant 1995 and 1996 mergers accounted for as poolings of interest.
Results for the year and quarter ended December 31, 1996 were impacted by the
Company's decision to abandon its reengineering program and shut down the
Imonics operating unit. As a result, the Company reported restructuring and
other charges of approximately $138.6 million during the fourth quarter. These
charges are comprised of a write-off of $69.1 million of capitalized software
and $20.4 million of impaired assets associated primarily with the abandoned
reengineering program, $38.2 million associated with the shut down of Imonics
(including $13 million in related goodwill), and $10.9 million of legal,
severance and other fees.
The Company's decision to abandon its reengineering program was reached at the
conclusion of a comprehensive assessment of the program begun during 1996. The
conclusions of the assessment were that it was not cost effective to continue
the development and deployment of the software and technology upon which the
reengineering program was based and that the reengineering software and
technology had no alternative useful application in the Company's operations.
EXECUTIVE APPOINTMENTS AND ELECTION OF NEW INDEPENDENT DIRECTOR
Mr. McDowell strengthened Medaphis' management team with today's announcement
of several key appointments, promotions, and changes to the executive team
charged with effecting the 1997 turnaround plan.
Jerome H. Baglien has been named Senior Vice President and Chief Financial
Officer. He comes to Medaphis from Keebler (a $1.5 billion in revenue baking
and distributing company), where he had been CFO since 1993. He has eight
years Big 6 accounting experience in addition to ten years in other finance and
accounting activities. His turnaround and operating experience and expertise
includes strategic planning, operations management, mergers and acquisitions,
financing, and internal accounting controls. Mr. Baglien replaces Michael R.
Cote, who has resigned to pursue other business and personal interests.
Michael Douglas, Vice Chairman and a Director since May 1996, has resigned in
response to increasing demands on his personal life. The Company has
eliminated this position, as the Company's new management team believes that
a flatter organizational structure better suits the Company's current business
strategy. Michael Drinkwater, President of MPSC, and James F. Richards,
President of MHSC, will report directly to Mr. McDowell.
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Patrick B. McGinnis, currently President of Medaphis Healthcare Information
Technology ("HIT"), will be returning to his previously held position of CEO of
HRI, where he plans to lead the company as an independent organization. Mr.
McGinnis founded HRI in 1988, and served as its Chief Executive Officer and
President until it was acquired by Medaphis in 1995. The Company has
identified a new president of HIT, which it expects to announce during the
first quarter of 1997.
William R. Spalding, formerly Senior Vice President and General Counsel, has
been promoted to Executive Vice President of Strategic Planning. Mr. Spalding,
formerly a partner in the law firm of King & Spalding, will now be responsible
for the Company's long-term strategic planning, including the divestiture of
non-strategic business units, financial and capital requirements and resolution
of outstanding claims against the Company. The Company has identified a new
general counsel which it expects to announce during the first quarter of 1997.
Daniel S. Connors Jr. has joined Medaphis as Senior Vice President-Personnel
and Administration. He brings over 30 years of management experience in the
services industry, domestically and overseas. He served most recently as Vice
President Strategic Implementation with D.F. Blumberg & Associates, Inc. Prior
to that, he was President and Chief Operating Officer of Technology Service
Solutions, an IBM/Eastman Kodak joint venture company. Mr. Connors has 27
years of executive experience at IBM, where he served in various capacities,
including Director of Personnel and Director of Quality and Business Process.
Medaphis also welcomes a new member to the Board of Directors. John C. Pope,
formerly President and COO of United Airlines, now holds the position of
Director Emeritus of UAL Corporation and United Airlines. Mr. Pope has held
management positions with American Airlines and General Motors Corporation and
currently sits on boards of several other national companies.
Mr. McDowell was appointed Medaphis' Chairman and CEO on October 31, 1996. He
joined Medaphis' Board of Directors in May 1996. He previously served as
President, Chief Operating Officer and director of McKesson Corporation, a
pharmaceutical distribution company with revenue of $13.2 billion. Mr.
McDowell joined McKesson in 1992 following a 29-year career with IBM, where he
held various positions including President and General Manager of IBM's
National Service Division, responsible for IBM's customer support services.
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AMENDED AND RESTATED CREDIT FACILITIES
Medaphis has agreed with its senior lenders to amend and restate the Company's
existing revolving credit facilities as of February 4, 1997. The newly
restructured credit facilities have been increased from $250 million to $285
million and extended through June 30, 1998. These facilities are secured by
substantially all of the Company's assets and guaranteed by substantially all
of the Company's subsidiaries. The loan commitments under the restructured
credit facilities will be reduced to $200 million on July 31, 1997 and to $150
million on January 31, 1998.
Mr. McDowell said, "This new agreement with our lenders will help Medaphis
continue to work toward building an operating and financial structure that
improves stability and financial flexibility to the benefit of our vendors,
customers, employees and shareholders. This agreement provides additional
liquidity and flexibility to support the implementation of the Company's 1997
business plan. We intend to reduce outstanding debt during 1997 and early
1998, both through the sale of non-core assets and subsidiaries which are not
part of our strategic vision for Medaphis and cash generated from operations.
We are pleased that our extended credit facilities have been structured to meet
the goals and objectives of the Medaphis business plan over the next eighteen
months."
Certain of the other material terms of the restructured credit facilities
include adjustment of the interest rates, fees and charges and other
compensation to be paid to the lenders by the Company, including the vesting of
certain warrant arrangements for 1% of the common stock of the Company on each
of January 1, 1998 and April 1, 1998; modification of the financial reporting
requirement to the lenders, restrictions on new acquisitions and certain
litigation settlement payments; and establishment of a maximum permitted
capital expenditures covenant for the fiscal quarter ending March 31, 1997 and
additional financial covenants for fiscal quarters ending on and after June 30,
1997. The Company also paid $2,925,000 in closing fees to its bankers in
connection with the restructured agreements and was not required to pay the
fees previously contemplated with the seventh modification of the facility.
This summary of certain terms of the Company's credit facilities is subject to
the specific terms of the agreement, which the Company intends to file with the
Securities and Exchange Commission.
SETTLEMENT OF 1995 SECURITIES LITIGATION
The Company also announced that it has reached an agreement in principle to
settle on a class-wide basis the securities litigation that was filed against
the Company in June, 1995 for $4.75 million, subject to court approval and
other customary conditions. The settlement would include the putative class
action lawsuit currently pending against the Company in the United States
District Court for the Northern District of Georgia relating to the Company's
pending federal investigation into billing and collection matters in its
Calabasas and Cypress, California, offices, and the related putative class
action lawsuit currently pending in the Superior Court of Cobb County, Georgia.
The Company expects to receive approximately $3.7 million from insurance to
fund a portion of the settlement.
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PLANNED DIVESTITURES AND ASSESSMENTS OF NON-CORE BUSINESSES
As part of its strategy to focus on the healthcare provider market, it is
currently contemplated that Medaphis will seek to divest its Healthcare
Recoveries, Inc. operating unit. Medaphis also is assessing alternatives for
BSG Corporation including, but not limited to, seeking a buyer, a spin-off
transaction, or other alternatives that involve more independence for BSG. Mr.
McDowell said, "These actions will reset the Company on its proper course,
which is to focus on its strengths and talents in the healthcare provider
market."
HRI, based in Louisville, Kentucky, is the largest provider of subrogation and
related recovery services to healthcare payors. Its clients include health
maintenance organizations, indemnity insurers, Blue Cross and Blue Shield
organizations, and third party administrators of healthplans. Each of HRI's
clients, and its potential customers, either itself extends healthcare coverage
to insureds, members, plan participants or plan beneficiaries, or administers
the healthcare coverage claims submitted by insureds.
HRI's services are designed to assist healthcare payors in recovering the
related benefits provided to insureds who are injured in accidents or under
other circumstances where a third-party, typically a property and casualty
insurer or an individual, is ultimately responsible for such medical benefits.
HRI utilizes proprietary software and various investigative techniques to
identify those claims where its clients have a recovery right against a third
party for the medical benefits provided to an insured and which warrant further
recovery of the costs of such services from such third party. It serves 50
major healthcare payors which cover 28 million lives throughout the U.S.
BSG, based in Austin, Texas, is a leading provider of information technology
and change management services to organizations seeking to transform their
operations through the strategic use of client/server and other advanced
technologies. For the year ended December 31, 1996, BSG had revenue of
approximately $113.8 million.
BSG focuses on customers in industries where technology enabled change and
reengineering can have a significant competitive impact. BSG seeks to
establish long-term alliances with its customers, enabling them to increase
revenue, raise productivity and improve product quality. BSG operates in
multiple vertical markets, including multi-unit retail, energy, financial
services, communications, pharmaceutical, healthcare, manufacturing and
transportation. BSG has worked with more than 100 customers including Bell
Atlantic, the American Federation of Television and Radio Artists (AFTRA),
McKesson, Phoenix Newspapers, Inc. and Dunkin Donuts.
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Medaphis is a leading provider of business management services and information
products to healthcare providers. Based in Atlanta, Georgia, Medaphis
currently serves approximately 20,000 physicians and 2,500 hospitals across the
nation.
This press release contains statements which constitiute "forward-looking
statements" within the meaning of the Securities Act of 1993 and the Securities
Exchange Act of 1934, as amended by the Private Securities Litigation Reform
Act of 1995. 15 U.S.C.A. Sections 77z-2 and 78u-5 (Supp. 1996). Those
forward-looking statements include the intent, belief, or current expectations
of the Company and members of its senior management team,as well as the
assumptions on which such statements are based. 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 include, but are
not limited to, the need to integrate recently acquired businesses, the status
of the Company's billing and accounts receivable management services
operations, continued availability of credit on terms and conditions acceptable
to the Company, the planned divestiture of non-strategic businesses, on-going
management initiatives designed to reduce costs and enhance efficiencies, the
Company's pending federal investigation and outstanding litigation, sales of
the Company's healthcare information technology products and prospective
changes in laws, regulations or policies affecting the Company's business
and/or operations. Additional factors that could have cause actual results to
differ materially from those contemplated by the forward-looking statements in
this press release may be found in the Company's public filings with the
Securities & Exchange Commission, which are incorporated by reference herein.
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.
# # #
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MEDAPHIS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------------------------ -----------------------------
1996 1995 1996 1995
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Revenue $ 143,471 $ 144,746 $ 608,313 $ 559,877
Salaries and wages 105,148 87,756 398,573 325,868
Other operating expenses 45,085 35,540 163,677 140,296
Depreciation 8,295 3,824 28,276 14,487
Amortization 4,990 4,680 20,016 18,048
Interest expense, net 3,566 1,575 11,585 10,062
Restructuring and other charges 138,587 9,200 179,768 54,950
-------------- -------------- -------------- -------------
305,671 142,575 801,895 563,711
Income (loss) before income taxes (162,200) 2,171 (193,582) (3,834)
Income taxes (62,144) 4,287 (68,961) 1,787
-------------- -------------- -------------- -------------
Net loss (100,056) (2,116) (124,621) (5,621)
Pro forma adjustments, principally income taxes - 966 979 (2,883)
-------------- -------------- -------------- -------------
Pro forma net loss $ (100,056) $ (1,150) $ (123,642) $ (8,504)
============== ============== ============== =============
Pro forma net loss per common share $ (1.40) $ (0.02) $ (1.74) $ (0.15)
============== ============== ============== =============
Weighted average shares outstanding 71,695 58,068 71,225 56,591
============== ============== ============== =============
====================================================================================================================================
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current assets $ 269,385 $ 223,165
Property and equipment 97,850 97,895
Deferred income taxes 42,379 -
Intangible assets 389,033 455,611
Other 16,977 18,935
------------ ------------
$ 815,624 $ 795,606
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 193,752 $ 127,935
Long-term debt and capital lease obligations 215,752 150,565
Deferred income taxes and other long-term obligations 13,830 32,425
Convertible subordinated debentures - 63,375
Stockholders' equity 392,290 421,306
------------ ------------
$ 815,624 $ 795,606
============ ============
</TABLE>
9
<PAGE> 1
EXHIBIT 99.4
MEDAPHIS CORPORATION
QUARTERLY CONSOLIDATED SEGMENT DATA
<TABLE>
<CAPTION>
1996 1995
--------------------------------------------------------------- --------------------
QUARTER ENDED QUARTER ENDED
--------------------------------------------------- --------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, TOTAL MARCH 31, JUNE 30,
--------- -------- ------------- ------------ --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE:
BSG Group............ $ 41,263 $ 35,376 $ 13,214 $ 24,135 $ 113,988 $ 23,362 $ 22,634
HIT.................. 16,212 28,796 19,904 16,734 81,646 11,879 15,961
Services............. 105,634 105,919 101,165 102,610 415,328 98,223 103,056
Corporate and
Eliminations....... (860) (372) (1,409) (8) (2,649) (371) (365)
-------- -------- -------- --------- --------- -------- --------
$162,249 $169,719 $132,874 $ 143,471 $ 608,313 $133,093 $141,286
======== ======== ======== ========= ========= ======== ========
OPERATING PROFIT(1):
BSG Group............ $ 14,241 $ 4,924 $(24,599) $ (9,548) $ (14,982) $ 3,067 $ 83
HIT.................. 3,597 15,743 5,686 623 25,649 2,480 2,657
Services............. 7,218 7,173 1,828 (1,765) 14,454 15,621 15,727
Corporate and
Eliminations....... (4,921) (5,180) (7,894) (9,355) (27,350) (2,386) (2,317)
-------- -------- -------- --------- --------- -------- --------
$ 20,135 $ 22,660 $(24,979) $ (20,045) $ (2,229) $ 18,782 $ 16,150
======== ======== ======== ========= ========= ======== ========
Interest expense,
net.................. $ 2,105 $ 2,630 $ 3,284 $ 3,566 $ 11,585 $ 3,947 $ 2,222
RESTRUCTURING AND OTHER
CHARGES:
BSG Group............ $ 200 $ 8,316 $ 14,193 $ 38,173 $ 60,882 $ -- $ --
HIT.................. (934) 5,250 (357) (2) 3,957 6,750 --
Services............. 676 3,323 5,515 88,178 97,692 25,000 --
Corporate............ -- -- 4,999 12,238 17,237 -- --
-------- -------- -------- --------- --------- -------- --------
$ (58) $ 16,889 $ 24,350 $ 138,587 $ 179,768 $ 31,750 $ --
======== ======== ======== ========= ========= ======== ========
Income before income
taxes................ $ 18,088 $ 3,141 $(52,613) $(162,198) $(193,582) $(16,915) $ 13,928
======== ======== ======== ========= ========= ======== ========
IDENTIFIABLE ASSETS:
BSG Group............ $ 95,308 $111,868 $ 82,715 $ 51,972 $ 51,972 $ 51,543 $ 54,469
HIT.................. 84,798 96,895 90,193 84,298 84,298 68,717 79,136
Services............. 657,880 667,748 669,936 594,738 594,738 535,770 551,582
Corporate............ 18,510 17,120 17,660 84,616 84,616 9,057 3,560
-------- -------- -------- --------- --------- -------- --------
$856,496 $893,631 $860,504 $ 815,624 $ 815,624 $665,087 $688,747
======== ======== ======== ========= ========= ======== ========
DEPRECIATION AND
AMORTIZATION:
BSG Group............ $ 1,744 $ 1,956 $ 1,930 $ 2,350 $ 7,980 $ 1,530 $ 1,612
HIT.................. 1,486 1,358 1,462 1,829 6,135 833 984
Services............. 7,486 8,263 8,185 8,564 32,498 5,249 5,519
Corporate............ 333 371 433 542 1,679 63 87
-------- -------- -------- --------- --------- -------- --------
$ 11,049 $ 11,948 $ 12,010 $ 13,285 $ 48,292 $ 7,675 $ 8,202
======== ======== ======== ========= ========= ======== ========
CAPITAL EXPENDITURES:
BSG Group............ $ 3,337 $ 5,042 $ 4,007 $ 990 $ 13,376 $ 1,815 $ 3,272
HIT.................. 966 897 831 510 3,204 492 456
Services............. 14,574 8,426 5,082 3,350 31,432 5,109 6,737
Corporate............ 590 703 337 1,493 3,123 3 548
-------- -------- -------- --------- --------- -------- --------
$ 19,467 $ 15,068 $ 10,257 $ 6,343 $ 51,135 $ 7,419 $ 11,013
======== ======== ======== ========= ========= ======== ========
<CAPTION>
1995
---------------------------------------
QUARTER ENDED
----------------------------
SEPTEMBER 30, DECEMBER 31, TOTAL
------------- ------------ --------
<S> <C> <C> <C>
REVENUE:
BSG Group............ $ 28,472 $ 24,147 $ 98,615
HIT.................. 13,918 18,763 60,521
Services............. 98,906 102,282 402,467
Corporate and
Eliminations....... (544) (446) (1,726)
-------- -------- --------
$140,752 $144,746 $559,877
======== ======== ========
OPERATING PROFIT(1):
BSG Group............ $ 4,316 $ (2,217) $ 5,249
HIT.................. 3,435 6,452 15,024
Services............. 8,042 12,746 52,136
Corporate and
Eliminations....... (2,493) (4,035) (11,231)
-------- -------- --------
$ 13,300 $ 12,946 $ 61,178
======== ======== ========
Interest expense,
net.................. $ 2,318 $ 1,575 $ 10,062
RESTRUCTURING AND OTHER
CHARGES:
BSG Group............ $ -- $ -- $ --
HIT.................. -- 1,200 7,950
Services............. 14,000 8,000 47,000
Corporate............ -- -- --
-------- -------- --------
$ 14,000 $ 9,200 $ 54,950
======== ======== ========
Income before income
taxes................ $ (3,018) $ 2,171 $ (3,834)
======== ======== ========
IDENTIFIABLE ASSETS:
BSG Group............ $ 64,587 $ 70,807 $ 70,807
HIT.................. 86,789 86,029 86,029
Services............. 564,051 628,522 628,522
Corporate............ 7,318 10,248 10,248
-------- -------- --------
$722,745 $795,606 $795,606
======== ======== ========
DEPRECIATION AND
AMORTIZATION:
BSG Group............ $ 1,469 $ 1,231 $ 5,842
HIT.................. 1,151 1,185 4,153
Services............. 5,419 5,828 22,015
Corporate............ 115 260 525
-------- -------- --------
$ 8,154 $ 8,504 $ 32,535
======== ======== ========
CAPITAL EXPENDITURES:
BSG Group............ $ 3,355 $ 4,485 $ 12,927
HIT.................. 248 651 1,847
Services............. 12,264 10,538 34,648
Corporate............ 405 608 1,564
-------- -------- --------
$ 16,272 $ 16,282 $ 50,986
======== ======== ========
</TABLE>
- ---------------
(1) Excludes interest and restructuring and other changes.
