<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): June 29, 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: 5
Total Number of Pages: __
<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 JUNE 29, 1996 (THE "ORIGINAL FILING"), THE
ORIGINAL FILING IS HEREBY SUPERSEDED AND AMENDED. TO THE EXTENT THE ORGINAL
FILING IS UNAFFECTED BY THE RESTATEMENT, THE ORIGINAL FILING HAS NOT BEEN
UPDATED OR CORRECTED TO REFLECT EVENTS OCCURING 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 guarauntees 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 Health Data Sciences Corporation, a
Delaware corporation ("HDS"), in a merger transaction (the "Merger") on June
29, 1996. The Merger was consummated in accordance with the terms of that
certain Amended and Restated Merger Agreement (the "Merger Agreement"), dated
as of May 23, 1996, by and among Medaphis, HDS and HDSSub, Inc., a Delaware
corporation and a wholly owned subsidiary of Medaphis ("HDSSub"). Under the
Merger Agreement, HDSSub was merged with and into HDS with HDS surviving the
Merger.
The aggregate consideration paid by Medaphis in connection with the
Merger was approximately 6,212,000 shares of Medaphis common stock. In
addition, Medaphis assumed HDS stock options representing approximately 433,000
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 HDS. Neither Medaphis, HDSSub, nor any of
their affiliates had, nor to the knowledge of Medaphis or HDSSub did any
director or officer or any associate have, any material relationship with HDS
prior to the Merger.
Each outstanding share of HDS common stock (other than treasury shares
and shares held by stockholders who perfected their appraisal rights under
Delaware law) was exchanged into .7912 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.
HDS, headquartered in San Bernardino, California, is a developer and
supplier of healthcare information systems to institutions, payors, healthcare
networks, and providers. HDS offers a product line generally known as
ULTICARE(R), an integrated information system which addresses a healthcare
enterprise's information needs through the integrated monitoring, scheduling,
documentation, and control of patient care activities. To accomplish this,
patient care workstations are situated throughout the enterprise: at patient
bedsides, at nursing stations, in ancillary departments (laboratory, radiology,
pharmacy, etc.), in physician offices and with mobile health workers such as
home care staff. HDS forms relationships throughout the organization,
especially with senior management of integrated delivery systems (whether
payor, provider, or practitioner based). HDS has extensive experience in most
phases of patient care automation: nursing, physicians, laboratories,
radiology, pharmacy, case management, and quality assurance, among others. HDS
customers include hospitals, integrated healthcare enterprises, health
maintenance organizations, municipal healthcare systems and elder care
organizations.
Item 5. Other Events.
Medaphis has restated its supplemental consolidated financial
statements for the three months and year ended December 31, 1995, and as of
March 31, 1996. 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 June 29, 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 6, 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
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.
<PAGE> 3
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) The following HDS Financial Statements, together with the
independent auditors' reports thereon, are included as Exhibit
99.1:
(i) Consolidated Balance Sheets as of March 31, 1996 and 1995
(audited);
(ii) Consolidated Statements of Operations for the fiscal years
ended March 31, 1996, 1995 and 1994 (audited);
(iii) Consolidated Statements of Stockholders' Equity for the
fiscal years ended March 31, 1996, 1995 and 1994
(audited);
(iv) Consolidated Statements of Cash Flows for the years ended
March 31, 1996, 1995 and 1994 (audited); and
(v) Notes to Consolidated Financial Statements.
(b) The Unaudited Pro Forma Combined Financial Information of the
Registrant for the years ended December 31, 1995, 1994 and 1993,
the three months ended March 31, 1996, and as of March 31,
1996, and the notes thereto, is included herein as Exhibit 99.2.
(c) Exhibits
2.1* Amended and Restated Merger Agreement among Medaphis
Corporation, HDSSub, Inc. and Health Data Science Corporation,
dated as of May 23, 1996.
2.2* Certificate of Merger, as filed by HDS on July 1, 1996, with the
Secretary of State of Delaware.
23.1* Consent of Deloitte & Touche LLP.
99.1* Financial Statements for HDS, as described in Item 7(a) of this
8-K.
99.2 Pro Forma Financial Statements, as described in Item 7(b) of
this 8-K.
99.3* Text of Press Release of Medaphis Corporation, dated May 24,
1996.
99.4* Text of Press Release of Medaphis Corporation, dated July 1,
1996.
- --------------------------------------------------------------------------------
* Previously filed with Registrant's Current Report on Form 8-K dated June 29,
1996.
-3-
<PAGE> 4
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
-4-
<PAGE> 5
INDEX
-----
<TABLE>
<CAPTION>
Exhibit Page No.
- ------- --------
<S> <C> <C>
2.1* Amended and Restated Merger Agreement among Medaphis ----
Corporation, HDSSub, Inc. and Health Data Sciences
Corporation, dated as of May 23, 1996.
2.2* Certificate of Merger, as filed by HDS on July 1, 1996, with the ----
Secretary of State of Delaware.
23.1* Consent of Deloitte & Touche LLP. ----
99.1* Financial Statements for HDS, as described in Item 7(a) of this 8-K. ----
99.2 Pro Forma Financial Statements, as described in Item 7(b) of this 8-K. ----
99.3* Text of Press Release of Medaphis Corporation, dated May 24, 1996. ----
99.4* Text of Press Release of Medaphis Corporation, dated July 1, 1996. ----
</TABLE>
- ------------------------------
* Previously filed with Registrant's Current Report on Form 8-K dated June 29,
1996,
-5-
<PAGE> 1
EXHIBIT 99.2
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 HDS. The
Unaudited Pro Forma Combined Statements of Operations for the years ended
December 31, 1993, 1994 and 1995 and the three months ended March 31, 1996 give
effect to (i) the Merger as if it had occurred on January 1, 1993 and (ii)
certain pro forma adjustments related to the Atwork, MMS, Rapid Systems and BSG
mergers. The Unaudited Pro Forma Combined Statement of Operations for the year
ended December 31, 1995 also gives 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 March 31, 1996 gives effect
to the Merger as if it had occurred on March 31, 1996. The Unaudited Pro Forma
Combined Financial Statements do not include the effects of the Decisions
Support Group, Medical Office Consultants, Inc., Consort Technologies, Inc.
("Consort"), Billing and Professional Services, Inc., The Halley Exchange, Inc.,
Medical Management Computer Sciences, Inc., CBT Financial Services, Inc.,
Intelligent Visual Computing, Inc. and The MEDICO Group, Ltd. acquisitions, as
they are not considered significant individually or in the aggregate.
The Merger is 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 the fair value of net assets acquired
allocated to goodwill. The allocation of the purchase price for certain of the
1995 Acquisitions is subject to revision 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.
For purposes of preparing the Unaudited Pro Forma Combined Statements of
Operations for the years ended December 31, 1993 and 1994, HDS's operating
results for the years ended March 31, 1994 and 1995 were combined with Medaphis'
operating results for the years ended December 31, 1993 and 1994, respectively.
The Unaudited Pro Forma Combined Statement of Operations for the year ended
December 31, 1995 was prepared by combining Medaphis' 1995 operating results
with HDS's 1995 operating results, which were restated to a calendar year basis.
Accordingly, HDS's operating results for the three months ended March 31, 1995
were duplicated in each of the years ended December 31, 1994 and 1995. HDS's
revenues and net income for that three-month period were $12,716,000 and
$6,314,000, respectively.
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 supplemental consolidated financial statements
and notes thereto of Medaphis, which are incorporated herein by reference, and
the historical financial statements and notes thereto of HDS, which are included
elsewhere herein, and the historical financial statements and notes thereto of
certain of the companies acquired in the 1995 Acquisitions, which are contained
in certain documents incorporated herein by reference.
Medaphis has restated its supplemental consolidated financial statements
for the three months and year ended December 31, 1995, and as of March 31,
1996. 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 June 29, 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 6, 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
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.
<PAGE> 2
UNAUDITED PRO FORMA COMBINED
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
------------------------------------------------------------------------
MEDAPHIS HDS
PRO FORMA PRO FORMA PRO FORMA PRO FORMA
MEDAPHIS ADJUSTMENTS COMBINED HDS(9) ADJUSTMENTS COMBINED
-------- ----------- --------- ------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Revenue............................... $259,575 $ -- $259,575 $19,763 $-- $279,338
Salaries and wages.................... 158,703 (8,689)(1) 150,014 5,670 -- 155,684
Other operating expenses.............. 66,412 -- 66,412 5,157 -- 71,569
Depreciation.......................... 6,960 -- 6,960 232 -- 7,192
Amortization.......................... 5,317 -- 5,317 2,561 -- 7,878
Interest expense, net................. 6,517 -- 6,517 56 -- 6,573
Restructuring and other charges....... -- -- -- -- -- --
-------- ----------- --------- ------- ----------- ---------
Total expenses............... 243,909 (8,689) 235,220 13,676 -- 248,896
Income (loss) before taxes............ 15,666 8,689 24,355 6,087 -- 30,442
Income taxes.......................... 7,049 4,655(5) 11,704 -- -- 11,704
-------- ----------- --------- ------- ----------- ---------
Net income (loss)..................... $ 8,617 $ 4,034 $ 12,651 $ 6,087 $-- 18,738
========= =========== ========== ======= =========== ==========
Net income per common share........... $ 0.19 $ 0.28 0.36
========= ========== ==========
Weighted average shares outstanding... 45,505 45,505 6,540 52,045 (6)
========= ========== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
----------------------------------------------------------------------
MEDAPHIS HDS
PRO FORMA PRO FORMA PRO FORMA PRO FORMA
MEDAPHIS ADJUSTMENTS COMBINED HDS(9) ADJUSTMENTS COMBINED
-------- ----------- --------- ------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Revenue................................. $376,870 $ -- $376,870 $22,115 $-- $398,985
Salaries and wages...................... 221,575 (6,716)(1) 214,859 5,402 -- 220,261
Other operating expenses................ 90,836 -- 90,836 4,589 -- 95,425
Depreciation............................ 9,269 -- 9,269 114 -- 9,383
Amortization............................ 7,748 -- 7,748 2,943 -- 10,691
Interest expense, net................... 5,896 -- 5,896 30 -- 5,926
Restructuring and other charges......... 1,905 -- 1,905 -- -- 1,905
-------- ----------- --------- ------- ----------- ---------
Total expenses................. 337,229 (6,716) 330,513 13,078 -- 343,591
Income (loss) before taxes.............. 39,641 6,716 46,357 9,037 -- 55,394
Income taxes............................ 13,155 5,147(5) 18,302 3,000 -- 21,302
-------- ----------- --------- ------- ----------- ----------
Net income (loss)....................... $ 26,486 $ 1,569 $ 28,055 $ 6,037 $-- $ 34,092
========= =========== ========== ======= =========== ==========
Net income per common share............. $ 0.48 $ 0.51 $ 0.56
========= ========== ==========
Weighted average shares outstanding..... 54,623 54,623 6,540 61,163 (6)
========= ========== ======= ==========
</TABLE>
<PAGE> 3
UNAUDITED PRO FORMA COMBINED
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------------------------------------------------------------
MEDAPHIS HDS
MEDAPHIS PRIOR PRO FORMA PRO FORMA PRO FORMA PRO FORMA
(AS RESTATED)(10) ACQUISITIONS ADJUSTMENTS COMBINED HDS(9) ADJUSTMENTS COMBINED
-------- ------------ ----------- --------- ------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $547,706 $ 22,679 $ -- $ 570,385 $22,249 $ -- $ 592,634
Salaries and wages...... 320,057 10,794 (2,925)(1) 327,926 5,330 -- 333,256
Other operating
expenses.............. 132,144 6,586 -- 138,730 10,091 -- 148,821
Depreciation............ 14,346 628 -- 14,974 85 -- 15,059
Amortization............ 14,753 580 75(2) 15,408 3,135 -- 18,543
Interest expense, net... 10,417 (16) 1,787(3) 12,188 (201) -- 11,987
Restructuring and other
charges............... 54,950 -- (750)(4) 54,200 -- -- 54,200
-------- ------------ ----------- --------- ------- ----------- ---------
Total expenses.... 546,667 18,572 (1,813) 563,426 18,440 -- 581,866
Income (loss) before
taxes................. 1,039 4,107 1,813 6,959 3,809 -- 10,768
Income taxes............ 3,487 -- 5,648(5) 9,135 1,524 10,659
-------- ------------ ----------- --------- ------- ----------- ---------
Net income (loss)....... $ (2,448) $ 4,107 $(3,835) $ (2,176) $ 2,285 $ -- $ 109
======== ========= ========= ======== ======= ========= ========
Net income per common
share................. $ (0.04) $ (0.04) $ 0.00
======== ======== ========
Weighted average shares
outstanding........... 61,520 61,520 6,540 68,060(6)
======== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1996
------------------------------------------------------------------------
MEDAPHIS HDS
PRO FORMA PRO FORMA PRO FORMA PRO FORMA
MEDAPHIS ADJUSTMENTS COMBINED HDS(9) ADJUSTMENTS COMBINED
-------- ----------- --------- ------ ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Revenue......................... $159,869 $ -- $ 159,869 $3,743 $ -- $ 163,612
Salaries and wages.............. 88,963 -- 88,963 1,564 -- 90,527
Other operating expenses........ 38,618 -- 38,618 760 -- 39,378
Depreciation.................... 4,917 -- 4,917 33 -- 4,950
Amortization.................... 4,023 -- 4,023 886 -- 4,909
Interest expense, net........... 2,242 -- 2,242 (137) -- 2,105
Restructuring and other
charges....................... 150 -- 150 -- -- 150
-------- ----------- --------- ------ --------- ---------
Total expenses........ 138,913 -- 138,913 3,106 -- 142,019
Income (loss) before taxes...... 20,956 -- 20,956 637 -- 21,593
Income taxes.................... 8,613 (354)(5) 8,259 255 -- 8,514
-------- ----------- --------- ------ --------- ---------
Net income (loss)............... $ 12,343 $ 354 $ 12,697 $ 382 $ -- 13,079
======== ========= ======== ====== ======= ========
Net income per common share..... $ 0.18 $ 0.18 $ 0.17
======== ======== ========
Weighted average shares
outstanding................... 69,164 69,164 6,540 75,704
======== ======== ====== ========
</TABLE>
<PAGE> 4
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------------------------------------
HDS PRO
MEDAPHIS FORMA PRO FORMA
(AS RESTATED)(10) HDS(9) ADJUSTMENTS COMBINED
----------------- -------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................ $ 3,308 $ 14,167 $ -- $ 17,475
Restricted cash.................................. 16,473 -- -- 16,473
Accounts receivable, billed...................... 95,311 7,544 -- 102,855
Accounts receivable, unbilled.................... 84,174 10,834 -- 95,008
Other............................................ 17,757 106 -- 17,863
-------- -------- ----------- ---------
217,023 32,651 -- 249,674
Property and equipment............................. 120,202 687 -- 120,889
Intangible assets.................................. 462,508 7,768 -- 470,276
Other.............................................. 4,039 13,937 -- 17,976
-------- -------- ----------- ---------
$803,772 $ 55,043 $ -- $ 858,815
======== ======== ========= ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable................................. $ 9,431 $ 5,244 $ -- $ 14,675
Accrued compensation............................. 30,865 992 -- 31,857
Accrued expenses................................. 59,528 2,726 4,750(7) 67,004
Current portion of long-term debt................ 10,651 -- -- 10,651
-------- -------- ----------- ---------
Total current liabilities................ 110,475 8,962 4,750 124,187
Long-term debt..................................... 191,823 -- -- 191,823
Other obligations.................................. 17,710 -- -- 17,710
Deferred income taxes.............................. 20,658 1,300 -- 21,958
Convertible subordinated debentures................ -- -- -- --
-------- -------- ----------- ---------
Total liabilities........................ 340,666 10,262 4,750 355,678
Stockholders' Equity:
Preferred Stock.................................. 16 366 (366)(8) 16
Common stock..................................... 609 274 (213)(8) 670
Paid-in capital.................................. 454,387 42,134 579(8) 497,100
Retained earnings (accumulated deficit).......... 8,094 2,007 (4,750)(7) 5,351
-------- -------- ----------- ---------
Total stockholders' equity............... 463,106 44,781 (4,750) 503,137
-------- -------- ----------- ---------
$803,772 $ 55,043 $ -- $ 858,815
======== ======== ========= ========
</TABLE>
<PAGE> 5
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, Consort, Rapid Systems and a
company acquired by BSG prior to BSG's merger with Medaphis, at statutory rates
in effect during the periods presented (as Atwork, MMS, Consort, Rapid Systems
and such company acquired by BSG 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 the
additional shares of Medaphis Common Stock to be issued and common stock
equivalents assumed in connection with the Merger.
(7) The pro forma adjustment to accrued expenses and retained earnings
represents the estimated costs associated with the Merger.
(8) The pro forma adjustments to preferred stock, common stock and paid-in
capital represent the adjustments necessary to give effect to the issuance of
Medaphis Common Stock to effect the Merger.
(9) Certain HDS amounts have been reclassified in order to conform to
Medaphis' presentation.
(10) Medaphis has restated its supplemental consolidated financial
statements for the three months and year ended December 31, 1995, and as of
March 31, 1996. 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 June 29, 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.
