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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 30, 1998
MEDAPHIS CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 000-19480 58-1651222
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
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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
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Total Number of Pages: 9
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Item 2. Acquisition or Disposition of Assets.
On November 30, 1998, the Registrant completed the sale (the "Sale") to
NCO Group, Inc. ("NCO") of all the issued and outstanding shares of capital
stock of Medaphis Services Corporation ("MSC"). The Sale was consummated in
accordance with the terms of that certain Stock Purchase Agreement (the "Sale
Agreement"), dated October 15, 1998, between Registrant and NCO. The Sale
represents the disposition by the Registrant of its Hospital Services division.
The consideration paid to Registrant in connection with the Sale was $107.5
million in cash. The Sale Agreement includes a purchase price adjustment based
on closing date tangible net worth and additional considerations of up to $10.0
million payable, subject to the achievement of various operational targets in
1999. The total consideration paid in the Sale was determined through arm's
length negotiations between representatives of the Registrant and NCO. Neither
Registrant, NCO, nor any of their affiliates had, nor to the knowledge of
Registrant or NCO did any director or officer or any associate of any such
director or officer of Registrant or NCO have, any material relationship with
NCO prior to the Sale.
MSC, headquartered in Norcross, Georgia, provides business management
services, primarily to hospitals throughout the United States, including:
automated patient billing, past due and delinquent accounts receivable
collection and patient eligibility programs.
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Item 7. Financial Statements and Exhibits.
(b) Unaudited Pro Forma Condensed Financial Information of the Registrant
for the year ended December 31, 1997 and for the nine months ended and
as of September 30, 1998 and the notes thereto.
(c) Exhibits
2.1 Stock Purchase Agreement dated as of October 15, 1998, between
Registrant and NCO Group, Inc. (incorporated by reference to
Exhibit 2.1 to Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1998)
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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: December 15, 1998
MEDAPHIS CORPORATION
BY: /s/ JAMES W. FITZGIBBONS
----------------------------------------
James W. FitzGibbons
Vice President and Controller
(Principal Accounting Officer)
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INDEX
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2.1 Stock Purchase Agreement dated as of October 15, 1998, between Registrant and NCO Group, Inc. (incorporated by
reference to Exhibit 2.1 to Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998)
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UNAUDITED PRO FORMA
CONDENSED FINANCIAL INFORMATION
The Unaudited Pro Forma Condensed Financial Statements are based on the
historical presentation of the consolidated financial statements of Medaphis
Corporation ("Medaphis" or the "Company"). The Unaudited Pro Forma Condensed
Statement of Operations for the year ended December 31, 1997 and the nine months
ended September 30, 1998 give effect to the Sale as if it had occurred on
January 1, 1997. The Unaudited Pro Forma Condensed Balance Sheet as of September
30, 1998 gives effect to the sale as if it had occurred on September 30, 1998.
The Unaudited Pro Forma Condensed Financial Statements do not purport to be
indicative of the results that actually would have been obtained if the
condensed operations had occurred during the periods presented and they are not
necessarily indicative of operating results to be expected in future periods.
The Unaudited Pro Forma Condensed Financial Statements and notes thereto should
be read in conjunction with the audited historical financial statements and
notes thereto of Medaphis, which are incorporated herein by reference.
For additional information, the reader may wish to refer to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997 filed on
February 2, 1998 (amended by Form 10-K/A filed June 22, 1998) and the Company's
Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 1998,
filed on May 14, 1998, June 30, 1998, filed on August 14, 1998 and September 30,
1998, filed on November 16, 1998.
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UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
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MEDAPHIS
(1) PRO FORMA PRO FORMA
MEDAPHIS MSC ADJUSTMENTS CONDENSED
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Revenue..................................... $ 590,746 $ (97,095) -- $ 493,651
------------- ------------- ------------ ------------
Salaries and wages.......................... 377,363 (58,506) -- 318,857
Other operating expenses.................... 171,493 (23,660) -- 147,833
Depreciation ............................... 29,355 (3,387) -- 25,968
Amortization................................ 24,137 (2,028) -- 22,109
Interest expense, net....................... 23,260 (6) (9,129)(2) 14,125
Litigation settlements...................... 52,500 -- -- 52,500
Restructuring and other charges............. 22,640 -- -- 22,640
------------- ------------- ------------- ------------
Total expenses......................... 700,748 (87,587) (9,129) 604,032
------------- ------------- ------------- ------------
Income (loss) before income taxes........... (110,002) (9,508) 9,129 (110,381)
Income tax expense (benefit)................ (16,773) (3,910) 3,633 (3) (17,050)
------------- ------------- ------------- ------------
Income (loss) from continuing operations.... $ (93,229) $ (5,598) $ 5,496 $ (93,331)
============= ============= ============= ============
Basic and diluted loss from continuing
operations per common share................ $ (1.28) $ (1.28)
============= ============
Weighted average shares outstanding......... 72,679 72,679
============= ============
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FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
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MEDAPHIS
(1) PRO FORMA PRO FORMA
MEDAPHIS MSC ADJUSTMENTS CONDENSED
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Revenue..................................... $ 408,543 $ (81,081) -- $ 327,462
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Salaries and wages.......................... 268,517 (46,152) -- 222,365
Other operating expenses.................... 127,790 (23,175) -- 104,615
Depreciation................................ 23,562 (3,695) -- 19,867
Amortization................................ 18,040 (1,569) -- 16,471
Interest expense, net....................... 18,413 (3) (7,389)(2) 11,021
Litigation settlements...................... 41,375 -- -- 41,375
Intangible asset impairment................. 390,641 -- -- 390,641
Restructuring and other charges............. 6,018 (238) -- 5,780
------------- ------------- ------------ ------------
Total expenses......................... 894,356 (74,832) (7,389) 812,135
Income (loss) before income taxes........... (485,813) (6,249) 7,389 (484,673)
Income tax expense (benefit)................ 65,157 (2,562) 2,941 (3) 65,536
-------------- ------------- ------------ ------------
Income (loss) from continuing operations.... $ (550,970) $ (3,687) $ 4,448 $ (550,209)
============== ============= ============ ============
Basic and diluted loss from continuing
operations per common share................ $ (7.21) $ (7.20)
============= ============
Weighted average shares outstanding......... 76,442 76,442
============= ============
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UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
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MEDAPHIS
(1) PRO FORMA PRO FORMA
MEDAPHIS MSC ADJUSTMENTS CONDENSED
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ASSETS
Current Assets:
Cash.................................... $ 13,181 $ (2,413) $ 54,619 (4) $ 65,387
Restricted cash......................... 5,634 (5,413) -- 221
Accounts receivable, billed............. 89,183 (14,377) -- 74,806
Accounts, receivable, unbilled.......... 67,765 (14,200) -- 53,565
Other................................... 8,894 (579) -- 8,315
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Total current assets.................. 184,657 (36,982) 54,619 202,294
Property and equipment................... 70,755 (12,395) -- 58,360
Intangible assets........................ 102,837 (52,986) -- 49,851
Other.................................... 14,316 (3,210) (3,002)(5) 8,104
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$ 372,565 $(105,573) $ 51,617 $ 318,609
========== ========= ======== =========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Accounts payable....................... $ 10,455 $ (1,784) $ -- $ 8,671
Accrued compensation................... 34,767 (5,692) -- 29,075
Accrued expenses....................... 49,394 (6,643) -- 42,751
Accrued litigation settlement.......... 12,500 -- -- 12,500
Current portion of long-term debt...... 2,012 (35) (956)(6) 1,021
Deferred income taxes.................. 2,392 -- -- 2,392
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Total current liabilities............ 111,520 (14,154) (956) 96,410
Long-term debt.......................... 222,238 (170) (47,000)(7) 175,068
Accrued litigation settlements.......... 28,875 -- -- 28,875
Other obligations....................... 3,983 -- -- 3,983
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Total liabilities.................... 366,616 (14,324) (47,956) 304,336
---------- --------- -------- ---------
Stockholders' Equity:
Common stock........................... 787 -- -- 787
Paid-in capital........................ 739,630 (57,942) 57,942 (8) 739,630
Accumulated deficit.................... (734,468) (33,307) 41,631 (8) (726,144)
---------- --------- -------- ---------
Total stockholders' equity........... 5,949 (91,249) 99,573 14,273
---------- --------- -------- ---------
$ 372,565 $(105,573) $ 51,617 $ 318,609
========== ========= ======== =========
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NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
(1) The MSC adjustments represent the business segment's statement of
operations and balance sheet on a stand alone basis.
(2) Per the terms of the Company's various credit facilities, Medaphis was
required to reduce its debt outstanding with all proceeds from asset
sales. Therefore, the pro forma adjustments to interest expense, net in
1997 and 1998 represents the reduction in interest expense as a result of
less debt outstanding in both years and additional interest income in
1998.
The following shows the components of the interest adjustments:
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FOR THE YEAR ENDED DECEMBER 31, 1997
Average debt outstanding reduction ...................... $98,799
Annualized effective interest rate ...................... 9.24%
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Interest expense adjustment ............................. $ 9,129
=======
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
Average debt outstanding reduction 1998 (January) ....... $98,799
Effective interest rate (11% x 1/12) .................... 0.9%
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906
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Average debt outstanding reduction (February -
September) ............................................ 37,624
Effective interest rate (8.25% x 2/3) ................... 5.5%
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2,069
Bank fees ............................................... 280
-------
Interest expense adjustment.............................. 3,255
Interest income adjustment ($65.3 million at 9.5% for
nine months) .......................................... 4,134
-------
Total adjustment ........................................ $ 7,389
=======
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(3) The pro forma adjustment to income tax expense represents the impact of
applying Medaphis' pro forma statutory tax rate to the pro forma
adjustments.
(4) The pro forma adjustment to cash represents the net proceeds received
from the sale of $54.6 million.
(5) The pro forma adjustment to other assets represents the write-off of the
deferred financing costs incurred in conjunction with the Company's
Credit Facility.
(6) The pro forma adjustment to the current portion of long term debt
represents the extinguishment of certain capital leases required to be
paid off as a result of the sale transaction.
(7) The pro forma adjustment to long term debt represents the payoff of the
Company's Credit Facility.
(8) The pro forma adjustments to equity reflect the projected net gain
associated with the sale transaction.
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