<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
DATE OF REPORT - APRIL 5, 1996
(Date of earliest event reported)
MHM SERVICES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 1-12238 52-1223048
(State of incorporation) (Commission file number) (IRS employer
identification
number)
7601 LEWINSVILLE ROAD, SUITE 200, MCLEAN, VIRGINIA 22102
(Address of principal executive offices, zip code)
AREA CODE (703) 749-4600
(Telephone number)
<PAGE>
MHM Services, Inc. (the "Registrant") filed a Current Report on Form 8-K,
dated April 17, 1996, reporting under Item 2 the sale by a subsidiary of the
Registrant of Oakview Treatment Center on April 5, 1996. Such Current Report
is hereby amended by the inclusion of the following information:
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Not Applicable.
(b) Pro Forma Financial Information Page 3
(c) Exhibits.
2.1 Asset Purchase Agreement, dated as of February 8, 1996, by and
between Oakview Limited Partnership, Columbia Health Associates
Limited Partnership and Glass Mental Health Foundation, a Maryland
non-profit corporation, together with the First, Second, Third,
Fourth and Fifth Amendments to the Asset Purchase Agreement.(1)
2.2 Purchase Money Note No. 1 in the principal amount of
$1,875,000.(1)
2.3 Purchase Money Note No. 2 in the principal amount of $275,000.(1)
99.1 Press Release issued by the Registrant on April 8, 1996.(1)
___________________________
(1) Filed with the Registrant's Current Report on Form 8-K, dated
April 17, 1996.
2
<PAGE>
INTRODUCTION TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL INFORMATION
The following unaudited pro forma balance sheet as of March 31, 1996 and
unaudited pro forma statement of operations for the year ended September 30,
1995 and the six months ended March 31, 1996 give effect to the sale of
six of the Registrant's freestanding facilities, acquisitions by the Extended
Care Services Division and the elimination of the Registrant's interest in
a joint venture, as described below. As a result of such adjustments, the
unaudited proforma financial information reflects primarily the operations of
the Registrant's Extended Care Services Division, as well as corporate overhead
allocated thereto, and the retained accounts receivable relating to the
Hospitals.
SALE OF FREESTANDING FACILITIES
The pro forma financial information reflects the sale of six of the
Registrant's freestanding facilities. The components of the freestanding
facilities included in the pro forma financial information are as follows:
- BHC SALE - The Registrant sold five of its freestanding behavioral
health facilities to BHC on May 31, 1996 for approximately $10,223,000
consisting of $8,865,000 in cash and $1,358,000 in assumed
liabilities.
- OAKVIEW TREATMENT CENTER - The Registrant sold Oakview Treatment
Center for a sales price of $2,200,000, evidenced by two promissory
notes payable to the Registrant. Based upon the Registrant's
accounting policy relating to the carrying value of long-lived assets,
the Registrant has previously recorded a write-down relating to the
recoverability of certain assets related to Oakview Treatment Center
at September 30, 1995.
The estimated pre-tax loss of $4,352,000 on the sale of the six facilities
was included in the historical balance sheet dated March 31, 1996.
ACQUISITIONS
The pro forma financial information reflects acquisitions completed in July
1995 and December 1995. The financial impact of both acquisitions are included
in the historical balance sheet as of March 31, 1996. The pro forma statements
of operations for the year ended September 30, 1995 and the six months ended
March 31, 1996 reflect the acquisitions as if they occurred on October 1, 1994.
The amounts under the heading "Acquisitions" in
<PAGE>
the pro forma statements of operations, reflect the following acquisitions:
- In July 1995, the Registrant's Extended Care Services Division
acquired certain assets of a California based provider of behavioral
healthcare services to residents of extended care facilities. The
purchase price was approximately $500,000 and was allocated to the
fair value of the net assets acquired, with the excess of $190,000
being recorded as goodwill.
- In December 1995, the Registrant's Extended Care Services Division
acquired the operations of several behavioral healthcare clinics in
Massachusetts. The purchase price was approximately $488,000 and was
allocated to the fair value of the net assets acquired, with the
excess of $355,000 being recorded as goodwill.
The acquisitions noted above were paid for with cash and notes payable. The
acquisitions have been accounted for as purchases and the operations related to
these acquisitions are included in the Registrant's consolidated results of
operations from the respective dates of acquisition. The amounts included in
the pro forma statement of operations prior to the respective dates of
acquisition were based upon historical results as reflected in unaudited
financial statements provided by the sellers for the applicable periods.
DEBT REPAYMENTS
Both Scenario 1 and Scenario 2 reflect the repayment of the principal
amounts outstanding under the Registrant's revolving credit facility, which was
approximately $1,436,000 as of March 31, 1996 (and approximately $2,341,000 as
of May 31, 1996) (and related early termination fees of approximately at
$174,000), and extinguishment of a portion of the indebtedness not to be
assumed by BHC paid at Closing, which is $553,000 (and related early
termination fees of $139,000), which consists primarily of indebtedness
secured by certain assets (particularly a facility and certain equipment) to
be acquired by BHC. The unaudited pro forma financial information labeled
"Scenario 1" does not give any effect to the possible use of a portion of the
proceeds of the sale of the Hospitals to repay any of the outstanding
principal balance of a note payable to MEDIQ Incorporated (the "MEDIQ Note").
The unaudited pro forma financial information labeled "Scenario 2" reflects
the repayment of $6,880,000 of the outstanding principal balance of the MEDIQ
Note with the remainder of the proceeds from the sale of the Hospitals and
existing cash resources, with the remaining balance of $4,236,000 of the
MEDIQ Note reclassified as a current liability.
- 2 -
<PAGE>
OTHER
The pro forma statements of operations eliminate the equity in earnings of
a joint venture and the gain on the sale of the Registrant's interest in such
joint venture, which was sold in March 1995. In addition, the pro forma
financial information does not reflect any change in the Registrant's
interest in the results of operations of the Extended Care Services Division
which might result from the exercise of a purchase warrant issued by a
subsidiary of the Registrant in connection with an acquisition in July 1995.
Such warrant provides the holder thereof, upon the occurrence of certain
events (such as an initial public offering of such subsidiary), the right
(subject to certain vesting conditions) until July 1998 to acquire 9,000
shares (subject to adjustment under certain circumstances) of the common
stock of such subsidiary at a purchase price of $1.00 per share (subject to
adjustment under certain circumstances). Such subsidiary currently has
1,000,000 and 100,000 shares of its common stock, par value $.01 per share,
authorized and issued, respectively.
The unaudited pro forma balance sheet and the unaudited statement of
operations do not necessarily reflect the financial position or results of
operations of the Registrant which would have actually resulted had the events
referred to above been consummated as of the dates indicated, nor are they
necessarily indicative of the results of future operations. The unaudited pro
forma financial information should be read in conjunction with the notes
thereto and the Registrant's other filings with the Securities and Exchange
Commission.
- 3 -
<PAGE>
<TABLE>
<CAPTION>
MHM Services, Inc.
and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year Ended September 30, 1995
(Scenario 1 - Assumes the MEDIQ Note will be Repaid in Accordance with its Original Terms)
(In thousands except per share data)
Pro Forma Adjustments
---------------------------------------------------------
Sale of Six
Freestanding Debt Other
Historical Facilities (1) Acquisitions (2) Repayments Adjustments Pro Forma
---------- -------------- ---------------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net revenues $40,584 (29,647) 3,988 $14,925
Costs and expenses:
Operating 28,918 (21,311) 2,740 10,347
General and administrative 10,085 (6,180) 480 4,385
Provision for bad debt 3,942 (3,305) 435 1,072
Depreciation and amortization 1,603 (1,296) 75 382
Write-down of long term assets 2,228 (2,228) 0
Other (credits) charges:
Equity in earnings of joint
venture (835) 835 (3) 0
Gain on sale of investment
in Joint Venture (3,542) 3,542 (3) 0
Interest expense - MEDIQ 1,171 1,171
Interest expense - other 366 (242) (94)(4) 30
Other (223) 102 121 (5) 0
------- ------- ----- ---- ------ -------
Income (loss) before income taxes (3,129) 4,813 258 94 (4,498) (2,462)
Income tax expense (benefit) 894 (894)(6) 10
------- -------
Loss before non-recurring
item directly attributable
to the transaction $(4,023) $(2,472)
------- -------
------- -------
Earnings per share $ (1.22) $ (0.75)
------- -------
------- -------
Weighted average shares outstanding 3,310 3,310
------- -------
------- -------
</TABLE>
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Notes to Pro Forma Adjustments
(1) Reflects the elimination of the operating results of six freestanding
hospitals as if they had been sold as of October 1, 1994. One freestanding
facility remains (Mountain Crest).
(2) Reflects the operating results of the acquired assets and clinics for a
full year based upon historical results as reflected in unaudited financial
statements provided by the sellers for the applicable periods.
(3) Reflects the elimination of the operating results of the Joint Venture.
(4) Reflects the elimination of interest expense as a result of debt
repayments.
(5) Reflects the elimination of prior interest income as a result of
eliminating the operating results of the joint venture.
(6) Due to the current net operating loss, there is no current or deferred
federal tax provision. The Company has a current state tax provision
of $10,000, resulting from state tax liabilities of certain of the
Company's subsidiaries.
- 4 -
<PAGE>
<TABLE>
<CAPTION>
MHM Services, Inc.
and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Six months ended March 31, 1996
(Scenario 1- Assumes the MEDIQ Note will be Repaid in Accordance with its Orginal Terms)
(In thousands except per share data)
Pro-Forma Adjustments
---------------------------------------------
Sale of Six
Freestanding Debt
Historical Facilities (1) Acquisitions (2) Repayments Pro-Forma
---------- -------------- ---------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Net revenues $22,502 (16,670) 778 $ 6,610
Costs and expenses:
Operating 15,919 (11,908) 590 4,601
General and administrative 5,631 (3,793) 108 1,946
Provision for bad debt 2,846 (1,084) 96 1,858
Depreciation and amortization 714 (555) 15 174
Other (credits) charges:
Loss on sale of facilities 4,352 (4,352) 0
Interest expense - MEDIQ 572 572
Interest expense - other 194 (31) (153) (3) 10
Other (54) (54)
------- ------- --- ---- -------
Income (loss) before income taxes (7,672) 5,053 (31) 153 (2,497)
Income tax expense (benefit) (175) 175 (4) 3
------- -------
Loss before non-recurring item directly
attributable to the transaction $(7,497) $(2,500)
------- -------
------- -------
Earnings per share $ (2.27) $ (0.76)
------- -------
------- -------
Weighted average shares outstanding 3,310 3,310
------- -------
------- -------
</TABLE>
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Notes to Pro Forma Adjustments
(1) Reflects the elimination of the operating results of six freestanding
facilities. One freestanding facility remains (Mountain Crest).
(2) Reflects the operating results of the acquired clinics for the six months
ended March 31, 1996 derived from the unaudited financial statements of the
previous owner for the nine months ended September 30, 1995.
(3) Reflects the elimination of interest expense as a result of debt
repayments.
(4) Due to the current net operating loss, there is no current federal or
deferred tax provision. The Company has a curent state tax provision of
$3,000, resulting from state tax liabilities of certain of the Company's
subsidiaires.
- 5 -
<PAGE>
<TABLE>
<CAPTION>
MHM Services, Inc.
and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Balance Sheet
March 31, 1996
(Scenario 1 Assumes the MEDIQ Note will be Repaid in Accordance with its Original Terms)
(In thousands except per share data)
Pro Forma Adjustments
-------------------------------
Sale of Six
Freestanding Debt
Historical Facilities Repayments Pro-Forma
---------- ------------ ---------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,116 8,865 (1) (2,302) (2) $ 6,880
(284) (1)
(515) (1)
Accounts receivable, net 7,616 7,616
Prepaid expenses 245 (121) (1) 124
Other current assets 611 (59) (1) 375
Income Taxes Refundable 675
------- ------- ------- -------
Total current assets 9,588 7,886 (2,302) 15,670
Assets held for sale 10,147 (10,147) (1) 0
Property, plant and equipment, net 621 621
Goodwill, net 1,596 1,596
Notes receivable 1,480 1,480
Other assets 1,802 (43) (1) (168) (2) 1,591
------- ------- ------- -------
Total Assets $25,234 (2,304) (2,470) $20,958
------- ------- ------- -------
------- ------- ------- -------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 2,407 (596) (1) $ 1,811
Accrued expenses 3,128 (483) (1) 3,143
Accrued expenses-sale of facilities 1,520 (799) (1) (72) (2) 649
Accrued payroll 551 (279) (1) 272
Accrued expenses - MEDIQ 386 386
Current maturities of long-term debt 1,269 (28) 1,241
------- ------- ------- -------
Total current liabilities 9,261 (2,157) (100) 7,502
Long-term debt, less current maturities:
MEDIQ 10,350 10,350
Other 2,298 (1,961) (2) 337
Other liabilities 27 27
Stockholders' equity 3,298 (147) (1) (409) (2) 2,742
------- ------- ------- -------
Total liabilities and stockholders' equity $25,234 (2,304) (2,470) $20,958
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
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<PAGE>
- ---------------
Notes to Pro-Forma Adjustments
(1) Reflects the sale of the Hospitals to BHC for approximately $10,223,000
consisting of cash of $8,865,000 and $1,358,000 in assumed liabilities of
the Hospitals and payments of approximately $515,000 for transaction costs
and payments of approximately $284,000 for repairs to two of the Company's
Hospitals (which amount was placed in escrow at Closing).
(2) For federal tax purposes, the loss from the sale of the six freestanding
facilities, when combined with the loss from operations, is anticipated
to result in a net operating loss of approximately $9,600,000 of which
approximately $2,000,000 can be carried back against historical federal
income taxes paid for the year ended September 30, 1995, resulting
in an anticipated cash refund of $675,000. The remaining net loss
of approximately $7,600,000 is anticipated to be available to carry
over to future periods to offset future income tax liabilities. Based
upon historical operating losses, the balance sheet does not reflect
any anticipated tax benefit which may be derived from such net operating
loss or any state net operating loss carryovers. In addition, based upon
the loss from the sale of the six freestanding facilities, the pro forma
adjustments reflect the elimination of net deferred tax assets.
(3) Reflects the use of a portion of the proceeds for the repayment of debt of
$2,302,000 (including early termination fees of approximately at $313,000)
at March 31, 1996 and write-off of loan amortization costs of $168,000.
- 7 -
<PAGE>
<TABLE>
<CAPTION>
MHM Services, Inc.
and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year Ended September 30, 1995
(Scenario 2 Assumes Partial Repayment of the MEDIQ Note with existing cash resources and proceeds from the Sale)
(In thousands except per share data)
Pro Forma Adjustments
---------------------------------------------------------
Sale of Six
Freestanding Debt Other
Historical Facilities (1) Acquisitions (2) Repayments Adjustments Pro Forma
---------- -------------- ---------------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net revenues $40,584 (29,647) 3,988 $14,925
Costs and expenses:
Operating 28,918 (21,311) 2,740 10,347
General and administrative 10,085 (6,180) 480 4,385
Provision for bad debt 3,942 (3,305) 435 1,072
Depreciation and amortization 1,603 (1,296) 75 382
Write-down of long term assets 2,228 (2,228) 0
Other (credits) charges:
Equity in earnings of joint venture (835) 835 (3) 0
Gain on sale of investment in Joint Venture (3,542) 3,542 (3) 0
Interest expense - MEDIQ 1,171 (747) (4) 424
Interest expense - other 366 (242) (94) (4) 30
Other (223) 102 121 (5) 0
------- ------- ----- ---- ------ -------
Income (loss) before income taxes (3,129) 4,813 258 841 (4,498) (1,715)
Income tax expense (benefit) 894 (894) (6) 71
-------- -------
Loss before non-recurring item directly
attributable to the transaction $ (4,023) $(1,786)
-------- -------
-------- -------
Earnings per share $ (1.22) $ (0.54)
-------- -------
-------- -------
Weighted average shares outstanding 3,310 3,310
-------- -------
-------- -------
</TABLE>
- ---------------
Notes to Pro Forma Adjustments
(1) Reflects the elimination of the operating results of six freestanding
hospitals as if they had been sold as of October 1, 1994. One freestanding
facility remains (Mountain Crest).
(2) Reflects the operating results of the acquired assets and clinics for a
full year based upon historical results as reflected in unaudited financial
statements provided by the sellers for the applicable periods.
(3) Reflects the elimination of the operating results of the Joint Venture.
(4) Reflects the elimination of interest expense as a result of debt
repayments. MEDIQ interest was calculated using a blancea of $4,236,000 at
an annual interest rate of 10%.
(5) Reflects the elimination of prior interest income as a result of
eliminating the operating results of the joint venture.
(6) Due to the current net operating loss, there is no current or deferred
federal tax provision. The Company has a current state tax provision of
$71,000, resulting from state tax liabilities of certain of the Company's
subsidiaries.
- 8 -
<PAGE>
<TABLE>
<CAPTION>
MHM Services, Inc.
and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Six months ended March 31, 1996
(Scenario 2 Assumes Partial Repayment of the MEDIQ Note with existing cash resources and proceeds from the Sale)
(In thousands except per share data)
Pro-Forma Adjustments
---------------------------------------------
Sale of Six
Freestanding Debt
Historical Facilities (1) Acquisitions (2) Repayments Pro-Forma
---------- -------------- ---------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Net revenues $22,502 (16,670) 778 $6,610
Costs and expenses:
Operating 15,919 (11,908) 590 4,601
General and administrative 5,631 (3,793) 108 1,946
Provision for bad debt 2,846 (1,084) 96 1,858
Depreciation and amortization 714 (555) 15 174
Other (credits) charges:
Loss on sale of facilities 4,352 (4,352) 0
Interest expense - MEDIQ 572 (360) (3) 212
Interest expense - other 194 (31) (153) (3) 10
Other (54) (54)
------- ------- --- ---- -------
Income (loss) before income taxes (7,672) 5,053 (31) 513 (2,137)
Income tax expense (benefit) (175) 175 (4) 3
------- -------
Loss before non-recurring item directly
attributable to the transaction $(7,497) $(2,140)
------- -------
------- -------
Earnings per share $ (2.27) $ (0.65)
------- -------
------- -------
Weighted average shares outstanding 3,310 3,310
------- -------
------- -------
</TABLE>
- ---------------
Notes to Pro Forma Adjustments
(1) Reflects the elimination of the operating results of six freestanding
facilities. One freestanding facility remains (Mountain Crest).
(2) Reflects the operating results of the acquired clinics for the six months
ended March 31, 1996 derived from the unaudited financial statements of the
previous owner for the nine months ended September 30, 1995.
(3) Reflects the elimination of interest expense as a result of debt
repayments. MEDIQ interest was calculated using a balance of $4,236,000
at an annual interest rate of 10%.
(4) Due to the current net operating loss, there is no current federal or
deferred tax provision. The Company has a curent state tax provision of
$3,000, resulting from state tax liabilities of certain of the Company's
subsidiaires.
- 9 -
<PAGE>
<TABLE>
<CAPTION>
MHM Services, Inc.
and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Balance Sheet
March 31, 1996
(Scenario 2 Assumes Partial Repayment of the MEDIQ Note with existing cash resources and proceeds from the Sale)
(In thousands except per share data)
Pro Forma Adjustments
-------------------------------
Sale of (6)
Freestanding Debt
Historical Facilities Repayments Pro-Forma
---------- ------------ ---------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,116 8,865 (1) (9,182) (2) $ 0
(284) (1)
(515) (1)
Accounts receivable, net 7,616 7,616
Prepaid expenses 245 (121) (1) 124
Other current assets 611 (59) (1) 375
Income Taxes Refundable 675
------- ------ ------ -------
Total current assets 9,588 7,886 (9,182) 8,790
Assets held for sale 10,147 (10,147) (1) 0
Property, plant and equipment, net 621 621
Goodwill, net 1,596 1,596
Notes receivable 1,480 1,480
Other assets 1,802 (43) (1) (168) (2) 1,591
------- ------ ------ -------
Total Assets $25,234 (2,304) (9,350) $14,078
------- ------ ------ -------
------- ------ ------ -------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 2,407 (596) (1) $ 1,811
Accrued expenses 3,128 (483) (1) 3,143
Accrued expenses-sale of facilities 1,520 (799) (1) (72) (2) 649
Accrued payroll 551 (279) (1) 272
Accrued expenses - MEDIQ 386 386
Current maturities of long-term debt 1,269 3,442 (2) 4,711
------- ------ ------ -------
Total current liabilities 9,261 (2,157) 3,370 10,972
Long-term debt, less current maturities:
MEDIQ 10,350 (10,350) (2) 0
Other 2,298 (1,961) (2) 337
Other liabilities 27 27
Stockholders' equity 3,298 (147) (1) (409) (2) 2,742
------- ------ ------ -------
Total liabilities and stockholders' equity $25,234 (2,304) (9,350) $14,078
------- ------ ------ -------
------- ------ ------ -------
</TABLE>
- 10 -
<PAGE>
- ---------------
Notes to Pro-Forma Adjustments
(1) Reflects the sale of the Hospitals to BHC for approximately $10,223,000
consisting of cash of $8,865,000 and $1,358,000 in assumed liabilities of
the Hospitals and payments of approximately $515,000 for transaction costs
and payments of approximately $284,000 for repairs to two of the Company's
Hospitals (which amount was placed in escrow at Closing).
(2) For federal tax purposes, the loss from the sale of the six freestanding
facilities, when combined with the loss from operations, is anticipated
to result in a net operating loss of approximately $9,200,000 of which
approximately $2,000,000 can be carried back against historical federal
income taxes paid for the year ended September 30, 1995, resulting
in an anticipated cash refund of $675,000. The remaining net loss
of approximately $7,200,000 is anticipated to be available to carry
over to future periods to offset future income tax liabilities. Based
upon historical operating losses, the balance sheet does not reflect
any anticipated tax benefit which may be derived from such net operating
loss or any state net operating loss carryovers. In addition, based upon
the loss from the sale of the six freestanding facilities, the pro forma
adjustments reflect the elimination of net deferred tax assets.
(3) Reflects the use of a portion of the proceeds for the repayment of debt of
$2,302,000 (including early termination fees of approximately at $313,000)
at March 31, 1996 and write-off of loan amortization costs of $168,000.
Refelcts a partial repayment of the MEDIQ note in the amount of $6,880,000
with the balance of the note of $4,236,000 reclassified as current.
- 11 -
<PAGE>
SIGNATURES
Pursuant to requirements of Section 13 or 15(d) 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.
Dated: June , 1996 MHM Services, Inc.
By: /s/Vicki S. Hammond
---------------------------------
Vicki S. Hammond, Senior Vice
President - Finance and Chief
Financial Officer
12
