<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 28, 1998
MEDIRISK, INC.
(Exact name of registrant
as specified in its charter)
Delaware 000-27056 58-2256400
- --------------------------------------------------------------------------------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
Two Piedmont Center, Suite 400, 3565 Piedmont Rd., Atlanta, Georgia 30305
- --------------------------------------------------------------------------------
(Address of principal executive officers) (Zip Code)
Registrant's telephone number, including area code: (404) 364-6700
N/A
---------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
On May 28, 1998, Medirisk, Inc. (the "Company") completed the
acquisition of Successful Solutions, Inc. ("Successful Solutions"). The Company
hereby amends its Current Report on Form 8-K dated May 29, 1998 with respect to
the acquisition of Successful Solutions to include the below-referenced
financial statements and pro forma financial information.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Successful Solutions, Inc.
<TABLE>
<S> <C>
Audited:
--------
Independent Auditor's Report...............................................................F-1
Balance Sheets as of December 31, 1997 and 1996............................................F-2
Statements of Income and Retained Earnings for the years ended
December 31, 1997 and 1996........................................................F-3
Statements of Cash Flows for the years ended December 31, 1997 and 1996....................F-4
Notes to Financial Statements..............................................................F-6
Unaudited:
---------
Balance Sheet as of March 31, 1998.........................................................F-12
Statements of Operations for the three months ended March 31, 1998 and 1997................F-13
Statements of Cash Flows for the three months ended March 31, 1998 and 1997................F-14
Notes to Unaudited Financial Statements....................................................F-15
</TABLE>
(b) PRO FORMA FINANCIAL INFORMATION.
The following pro forma financial information relating to the Company
and Successful Solutions, as well as certain previously-acquired companies, is
included herein:
<TABLE>
<S> <C>
Pro Forma Consolidated Condensed Balance Sheet as of
March 31, 1998..............................................................F-17
Pro Forma Consolidated Condensed Statements of Operations
for the three-month period ended March 31, 1998..............................F-18
Pro Forma Consolidated Condensed Statements of Operations
for the year ended December 31, 1997.........................................F-19
Notes to Unaudited Pro Forma Consolidated Condensed
Financial Statements.........................................................F-20
</TABLE>
(c) EXHIBITS.
None.
2
<PAGE> 3
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Successful Solutions, Inc.
Vidalia, Georgia 30475
We have audited the accompanying balance sheets of Successful Solutions, Inc.
(an S Corporation) as of December 31, 1997 and 1996, and the related statements
of income and retained earnings and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Successful Solutions, Inc. as
of December 31, 1997 and 1996, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
/s/ Lovins, Clark & Company, P.C.
LOVINS, CLARK & COMPANY, P.C.
Vidalia, Georgia
June 3, 1998
F-1
<PAGE> 4
SUCCESSFUL SOLUTIONS, INC.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
ASSETS
------
1997 1996
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 101,174 $ 350
Trade accounts receivable 349,481 185,869
Prepaid expenses 14,569 3,843
Loan receivable-employee 1,000 1,820
--------- ---------
TOTAL CURRENT ASSETS 466,224 191,882
--------- ---------
PROPERTY AND EQUIPMENT
Machinery and equipment 324,417 278,485
Furniture and fixtures 47,464 47,464
Accumulated depreciation (195,391) (139,828)
--------- ---------
NET PROPERTY AND EQUIPMENT 176,490 186,121
--------- ---------
TOTAL ASSETS $ 642,714 $ 378,003
========= =========
LIABILITIES AND EQUITY
----------------------
CURRENT LIABILITIES
Cash overdraft $ 45,236 $ 25,362
Accounts payable -- 6,834
Accrued salaries and benefits 9,924 --
Accrued insurance 2,447 --
Accrued medical claims 9,500 1,894
Accrued payroll tax 1,294 29,919
Current obligation under capital leases 30,716 49,263
--------- ---------
TOTAL CURRENT LIABILITIES 99,117 113,272
--------- ---------
LONG TERM LIABILITIES
Long term obligation under capital leases 11,613 12,738
--------- ---------
EQUITY
Common stock-$1 par value:
500 shares authorized, issued,
and outstanding 500 500
Retained earnings 531,484 251,493
--------- ---------
TOTAL EQUITY 531,984 251,993
--------- ---------
TOTAL LIABILITIES AND EQUITY $ 642,714 $ 378,003
========= =========
</TABLE>
See accompanying notes and accountants' report.
F-2
<PAGE> 5
SUCCESSFUL SOLUTIONS, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
REVENUES $ 3,438,578 $ 3,342,419
----------- -----------
Salaries, wages and benefits 859,784 495,974
Depreciation 56,187 49,144
Research and development costs 1,037,819 956,562
Other operating expenses 753,810 1,106,194
----------- -----------
OPERATING INCOME 730,978 734,545
----------- -----------
OTHER INCOME AND EXPENSES
Interest expense (13,041) (15,431)
Interest income 824 1,099
Loss on disposal of asset (1,875) --
----------- -----------
TOTAL OTHER INCOME AND EXPENSES (14,092) (14,332)
----------- -----------
NET INCOME 716,886 720,213
BEGINNING RETAINED EARNINGS 251,493 209,058
DISTRIBUTIONS (436,895) (677,778)
----------- -----------
ENDING RETAINED EARNINGS $ 531,484 $ 251,493
=========== ===========
</TABLE>
See accompanying notes and accountants' report.
F-3
<PAGE> 6
SUCCESSFUL SOLUTIONS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 716,886 $ 720,213
Adjustments to reconcile net income
to cash provided by
operating activities:
Depreciation 56,187 49,144
Loss on disposal of asset 1,875 --
(Increase) Decrease in:
Accounts receivable (163,612) (38,055)
Prepaid expenses (10,725) 12,073
Loan receivable-employee 820 (1,820)
Increase (Decrease) in:
Accounts payable (6,834) 6,608
Accrued expenses (8,648) 31,813
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 585,949 779,976
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITY
Acquisition of equipment (965) (3,069)
--------- ---------
NET CASH USED BY INVESTING ACTIVITY (965) (3,069)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash overdraft 19,874 (27,008)
Payments on capital leases (67,139) (67,304)
Payments on note payable -- (12,980)
Stockholders distributions (436,895) (669,465)
--------- ---------
NET CASH USED BY FINANCING ACTIVITIES (484,160) (776,757)
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 100,824 150
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 350 200
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 101,174 $ 350
========= =========
</TABLE>
See accompanying notes and accountants' report.
F-4
<PAGE> 7
SUCCESSFUL SOLUTIONS, INC.
STATEMENTS OF CASH FLOWS
(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $13,041 $15,431
======= =======
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING TRANSACTIONS
Distribution of capital lease equipment $ -- $ 8,313
======= =======
Acquisition of equipment acquired by capital leases $47,467 $39,879
======= =======
</TABLE>
See accompanying notes and accountants' report.
F-5
<PAGE> 8
SUCCESSFUL SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS ACTIVITIES
Successful Solutions, Inc. was incorporated under the laws of
the State of Georgia on March 28, 1991. The Company is engaged
in the business of providing consulting services to health
care providers related to case management, cost containment,
quality improvement, utilization management, analyses of
clients and other related services. Successful Solutions, Inc.
primarily conducts business in the State of Georgia. The
Company began limited activity in the states of Alabama and
Kentucky in 1997.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company considers accounts receivable to be fully
collectible; accordingly, no allowance for doubtful accounts
is presented.
PROPERTY
Property and equipment are carried at cost. Depreciation is
computed using the straight-line method over the estimated
useful lives of the assets as follows:
<TABLE>
<S> <C>
Furniture and fixtures 7-10 years
Equipment 5-10 years
</TABLE>
Expenditures for maintenance and repairs are charged to
operations as incurred. Expenditures for betterments and major
renewals are capitalized. The cost of assets sold or retired
and the related amounts of accumulated depreciation are
eliminated from the accounts in the year of disposal and any
resulting gain or loss is reported in the statement of income
and retained earnings.
See accountants' report.
F-6
<PAGE> 9
SUCCESSFUL SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
REVENUE RECOGNITION
Revenue is recognized upon performance of services for the
customer or upon shipment of data to the customer.
INCOME TAXES
Effective March 28, 1991, the Company, with the consent of its
shareholder, elected under the Internal Revenue Code to be an
S Corporation. In lieu of corporation income taxes, the
shareholders of an S Corporation are taxed on their
proportionate share of the Company's taxable income.
Therefore, no provisions or liability for income taxes have
been included in these financial statements.
CASH AND CASH EQUIVALENTS
For the purpose of reporting cash flows, the Company considers
all cash accounts which are not subject to withdrawal
restrictions or penalties, and certificates of deposit with
original maturities of 90 days or less to be cash or cash
equivalents.
ELIMINATIONS
The Company's sole shareholder has conducted several unrelated
activities through the Company for the past several years.
These activities have been eliminated in these financial
statements in order to reflect financial position and actual
results of operations for the Company only. The elimination of
these activities has resulted in a total reduction of assets
at book value of $594,081, a total reduction of liabilities of
$236,834 and a reduction of expenses of $221,538 and $291,009
for the years 1997 and 1996, respectively.
2. PROPERTY AND EQUIPMENT
Major classifications of property and equipment and
accumulated depreciation balances are summarized as follows:
See accountants' report.
F-7
<PAGE> 10
SUCCESSFUL SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Machinery & equipment $324,417 $278,485
Furniture & fixtures 47,464 47,464
-------- --------
371,881 325,949
Less accumulated depreciation 195,391 139,828
-------- --------
Net book value $176,490 $186,121
======== ========
</TABLE>
Depreciation expense was $56,187 and $49,144 for the years
ended December 31, 1997 and 1996.
3. RELATED PARTY TRANSACTIONS
The Company has an outstanding loan receivable in the amount
of $1,000 at December 31, 1997 and $1,820 at December 31, 1996
to an employee. Payroll deductions are used for repayment.
The Company leases an aircraft from S.S. Air, Inc. on a month
to month basis. S.S. Air, Inc. is solely owned by Ronnie R.
Smith, sole shareholder of Successful Solutions, Inc. The
total lease payments were $312,000 for the 1997 year and
$312,000 for the 1996 year. This amount represents fair market
value for the exclusive use of the aircraft.
The Company has a contractual relationship with Creative
Healthcare Solutions, Inc. to perform marketing services for
the Company. The sole shareholder of both Companies at
December 31, 1997 is Ronnie R. Smith. The sole shareholder of
Successful Solutions, Inc. owned 47% of Creative Healthcare
Solutions, Inc. at December 31, 1996. The total marketing fees
were $84,525 and $111,895 for 1997 and 1996, respectively.
4. OPERATING LEASES
The Company leases various equipment under several
noncancelable operating leases expiring at various times until
September, 2001. Total operating lease expense was
approximately $100,000 and $90,000 in 1997 and 1996.
See accountants' report.
F-8
<PAGE> 11
SUCCESSFUL SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The following is a schedule by year of future minimum
operating lease payments:
<TABLE>
<CAPTION>
Years Ending December 31
------------------------
<S> <C>
1998 $101,141
1999 103,153
2000 96,850
2001 46,184
--------
Total $347,328
========
</TABLE>
The Company also rents office and some storage space without a
lease agreement on a month to month basis. The monthly rent
payment is $1,257.
5. CAPITAL LEASES
The Company is obligated under various capital equipment
leases that expire at various dates during the next two years.
A summary of assets under capital leases as of December 31,
1997 is as follows:
<TABLE>
<S> <C>
Computer equipment $ 88,482
Less: accumulated depreciation (23,655)
--------
Assets under capital lease (net) $ 64,827
========
</TABLE>
Assets under capital leases are depreciated over a five to ten
year life. Depreciation expense totaled $13,849 and $12,226
for the years ended December 31, 1997 and 1996.
See accountants' report.
F-9
<PAGE> 12
SUCCESSFUL SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The future minimum lease payments under capital leases are
computed as follows:
<TABLE>
<CAPTION>
Years Ending December 31
------------------------
<S> <C>
1998 $ 34,607
1999 11,940
--------
Total 46,547
Less: Interest-computed on the present value
of the lease payments at the inception of the
lease based on individual lease terms. 4,218
--------
Present value of net minimum obligations 42,329
Less: Current obligation under capital lease 30,716
--------
Long term obligations under capital leases $ 11,613
========
</TABLE>
6. MAJOR CUSTOMERS
Sales to a customer which exceed 10% of the Company's revenues
are considered major customers. The Company had two major
customers for the year ended December 31, 1997 and four major
customers for the year ended December 31, 1996, with the
following balances and transactions:
<TABLE>
<CAPTION>
Accounts Receivable Revenues
------------------- --------
December 31, 1997 December 31, 1996 1997 % Age 1996 % Age
- ----------------- ----------------- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C>
$67,240 $117,814 $706,354 21 $685,134 21
-- -- 349,771 10 -- --
-- 6,351 -- -- 622,052 19
-- 22,956 -- -- 476,064 14
-- 5,774 -- -- 357,621 11
</TABLE>
See accountants' report.
F-10
<PAGE> 13
SUCCESSFUL SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
7. SELF-INSURANCE PROGRAM
The Company has a self-insurance program for hospitalization
and medical coverage for its employees. The Company limits its
costs through the use of stop-loss policies from reinsurers.
Specific individual costs for claims are limited to $5,000 a
year. The Company's aggregate annual cost limitation is based
on a formula that considers, among other things, the total
number of employees. The Company's annual cost, excluding
reinsurance premiums, is limited to approximately $51,500 and
$50,000 for 1997 and 1996.
Management believes they have adequately provided for all
claims incurred in the accompanying financial statements.
Amounts reserved for these items total approximately $9,500
and $1,894 at December 31, 1997 and 1996.
8. RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred.
Research and development costs were $1,037,819 and $956,562
for the years 1997 and 1996.
9. SUBSEQUENT EVENT
On May 28, 1998, the Company was acquired by Medirisk, Inc.
("Medirisk") of Atlanta, Georgia for a purchase price of
approximately $2.9 million in cash and 189,811 unregistered
shares of Medirisk common stock, plus contingent consideration
based upon a multiple of the Company's operating income over a
predetermined amount through June 30, 1999.
See accountants' report.
F-11
<PAGE> 14
SUCCESSFUL SOLUTIONS, INC.
UNAUDITED BALANCE SHEET
(Amounts in thousands)
<TABLE>
<CAPTION>
MARCH 31, 1998
--------------
<S> <C>
Current assets
Cash and cash equivalents $ 274
Accounts receivable, net 146
Prepaid expenses 13
Other current assets 1
------------
Total current assets 434
Property and equipment, net 171
------------
Total assets $ 605
============
Current liabilities
Accrued expenses $ 43
Current obligations under capital leases 22
------------
Total current liabilities 65
Long-term obligations under capital leases 16
------------
Total liabilities 81
Equity
Common stock --
Retained earnings 524
------------
Total equity 524
------------
Total liabilities and equity $ 605
============
</TABLE>
See accompanying notes to unaudited financial statements.
F-12
<PAGE> 15
SUCCESSFUL SOLUTIONS, INC.
UNAUDITED STATEMENTS OF OPERATIONS
(Amounts in thousands)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
---------------
1998 1997
---- ----
<S> <C> <C>
Revenue $ 771 $ 697
Salaries, wages and benefits 200 235
Other operating expenses 517 407
Depreciation 14 13
----- -----
Operating income 40 42
Interest income (expense), net (1) (4)
Loss on disposal of asset -- (2)
----- -----
Net income $ 39 $ 36
===== =====
</TABLE>
See accompanying notes to unaudited financial statements.
F-13
<PAGE> 16
SUCCESSFUL SOLUTIONS, INC.
UNAUDITED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
---------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 39 $ 36
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 14 13
Loss disposal of asset -- 2
Decrease (increase) in:
Accounts receivable 204 68
Other assets 2 (5)
Increase (decrease) in:
Accrued expenses 20 (4)
----- ----
Net cash provided by operating activities 279 110
----- ----
Cash flows from investing activities:
Purchases of property and equipment (2) --
----- ----
Net cash used in investing activities (2) --
----- ----
Cash flows from financing activities:
Payments on capital leases (12) (14)
Stockholder distributions (47) (45)
Cash overdraft (45) (25)
----- ----
Net cash used in financing activities (104) (84)
----- ----
Net increase in cash and cash equivalents 173 26
Cash and cash equivalents at beginning of period 101 --
----- ----
Cash and cash equivalents at end of period $ 274 $ 26
===== ====
</TABLE>
See accompanying notes to unaudited financial statements.
F-14
<PAGE> 17
SUCCESSFUL SOLUTIONS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(1) Basis of Presentation
These unaudited financial statements include the financial position and
results of operations of Successful Solutions, Inc. as of March 31,
1998 and for the three months ended March 31, 1998 and 1997.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for the fair presentation of
the unaudited financial statements of Successful Solutions, Inc. as of
March 31, 1998 and for the three months ended March 31, 1998 and 1997
have been included. Operating results for the three-month period ended
March 31, 1998 are not necessarily indicative of the results that may
be expected for the year ended December 31, 1998.
F-15
<PAGE> 18
UNAUDITED PRO FORMA FINANCIAL DATA
The unaudited pro forma consolidated condensed balance sheet as of March
31, 1998 set forth below gives effect to the Company's acquisition of Successful
Solutions as if it had occurred on March 31, 1998. The unaudited pro forma
consolidated condensed statement of operations for the three months ended March
31, 1998 set forth below give effect to the Company's acquisitions of Successful
Solutions on May 28, 1998 and Healthdemographics on March 31, 1998 as if they
had occurred on January 1, 1998. The unaudited pro forma consolidated condensed
statement of operations set forth below for the year ended December 31, 1997
gives effect to the Company's acquisition of (i) Successful Solutions on May 28,
1998, (ii) Healthdemographics on March 31, 1998, (iii) CareData Reports, Inc.
("CareData") on August 28, 1997, and (iv) CIVS, Inc. ("CIVS") on June 24, 1997,
as if they had occurred on January 1, 1997. The Successful Solutions,
Healthdemographics, CIVS and CareData acquisitions have each been accounted for
using the purchase method of accounting. The pro forma financial data should be
read in conjunction with the historical consolidated financial statements and
notes of the Company, included in the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission (the "Commission") on March 30,
1998, and the historical financial statements and notes of: (i) Successful
Solutions, included in this report on Form 8-K/A; (ii) Healthdemographics,
included in the Company's Current Report on Form 8-K, filed with the Commission
on April 13, 1998; (iii) CIVS included in the Company's Current Report on Form
8-K/A, filed with the Commission on September 5, 1997; and (iv) CareData
included in the Company's Current Report on Form 8-K/A, filed with the
Commission on November 14, 1997. The pro forma combined results are not
necessarily indicative of the results that would have been achieved had the
acquisitions of Successful Solutions, Healthdemographics, CIVS and CareData
occurred on January 1, 1997 or of future operations.
F-16
<PAGE> 19
SUCCESSFUL SOLUTIONS, INC.
MEDIRISK, INC AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
March 31, 1998
(Amounts in thousands)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
MEDIRISK SUCCESSFUL SOLUTIONS ADJUSTMENTS CONSOLIDATED
-------- -------------------- ----------- ------------
<S> <C> <C> <C> <C>
Current assets
Cash and cash equivalents $ 1,280 $ 274 $ -- $ 1,554
Accounts receivable, net 4,749 146 -- 4,895
Prepaid expenses 977 13 -- 990
Other current assets 499 1 -- 500
-------- ------- ------- --------
Total current assets 7,505 434 -- 7,939
Property and equipment 3,604 380 -- 3,984
Less accumulated depreciation and amortization 1,642 209 -- 1,851
-------- ------- ------- --------
Property and equipment, net 1,962 171 -- 2,133
Excess of cost over net assets of businesses
acquired, less accumulated amortization 11,471 -- 1,800 (1) 13,271
Intangible assets, less accumulated amortization 2,295 -- 250 (2) 2,545
Software development costs, less accumulated
amortization 1,395 -- -- 1,395
Other assets 663 -- -- 663
-------- ------- ------- --------
Total other assets 15,824 -- 2,050 17,874
Total assets $ 25,291 $ 605 $ 2,050 $ 27,946
======== ======= ======= ========
Current liabilities
Current installments of long-term debt and obligations under
capital leases $ 2,499 $ 22 $ 2,920(4) $ 5,441
Accounts payable 398 -- -- 398
Accrued expenses 1,370 43 150 (3) 1,563
Income taxes payable 730 -- -- 730
Accrued contingent consideration relating to acquired
business 2,975 -- -- 2,975
Deferred revenue 2,615 -- -- 2,615
-------- ------- ------- --------
Total current liabilities 10,587 65 150 13,722
Long-term debt and obligations under capital leases, excluding
current installments 41 16 -- 57
-------- ------- ------- --------
Total liabilities 10,628 81 3,070 13,779
Shareholders' equity (deficit):
Common stock 5 -- -- (5) 5
Additional paid in capital 31,663 -- 3,504 (5) 35,167
Accumulated deficit (17,005) 524 (524)(6) (21,005)
(4,000)(7)
-------- ------- ------- --------
Total stockholders' equity 14,663 524 (1,020) 14,167
Total liabilities and shareholders' equity (deficit) $ 25,291 $ 605 $ 2,050 $ 27,946
======== ======= ======= ========
</TABLE>
See accompanying notes to unaudited pro forma consolidated condensed financial
statements.
F-17
<PAGE> 20
MEDIRISK, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
---------------------------------------------------------------------------
HISTORICAL
----------------------------------------
SUCCESSFUL HEALTHDEMO- PRO FORMA PRO FORMA
MEDIRISK SOLUTIONS(8) GRAPHICS(9) ADJUSTMENTS CONSOLIDATED
-------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenue................................... $ 5,176 $ 771 $ 342 -- $6,289
Salaries, wages and benefits.............. 2,574 200 613 -- 3,387
Other operating expenses.................. 1,522 517 437 -- 2,476
Depreciation and amortization............. 427 14 11 89 (10) 541
Acquired in-process research and
development costs and integration
costs................................... 5,315 -- -- (5,250)(11) 65
------- -------- ----- ------ ------
Operating income (loss)......... (4,662) 40 (719) 5,161 (180)
Interest income (expense), net............ 36 (1) (138) (106)(12) (209)
Other income (expense).................... -- -- -- -- --
Provision for income taxes................ -- -- -- -- --
------- -------- ----- ------ ------
Income (loss) before
extraordinary item............ (4,626) 39 (857) 5,055 (389)
Unaudited pro forma loss per common share
before extraordinary item -- basic and
diluted................................. $ (1.03) $(0.08)
======= ======
Unaudited pro forma weighted average
number of common shares used in
calculating unaudited net loss per
common share before extraordinary
item -- basic and diluted............... 4,495 4,854 (13)
</TABLE>
See accompanying notes to unaudited pro forma financial data.
F-18
<PAGE> 21
MEDIRISK, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
----------------------------------------------------------------------------------------------
HISTORICAL
------------------------------------------------------------------
SUCCESSFUL HEALTHDEMO- 1997 PRO FORMA PRO FORMA
MEDIRISK SOLUTIONS(14) GRAPHICS(15) ACQUISITIONS(16) ADJUSTMENTS CONSOLIDATED
-------- ------------- ------------ ----------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenue........................... $16,749 $ 3,439 $ 905 $1,730 $ -- $22,823
Salaries, wages and benefits...... 7,910 860 971 1,296 -- 11,037
Other operating expenses.......... 4,374 1,792 752 1,099 -- 8,017
Depreciation and amortization..... 1,304 56 18 47 763 (17) 2,188
Acquired in-process research and
development costs and
integration costs............... 4,575 -- -- -- (4,258)(18) 317
------- ------- ----- ------ ------- -------
Operating income
(loss)................ (1,414) 731 (836) (712) 3,495 1,264
Interest income (expense), net.... 345 (12) (26) 8 (757)(19) (442)
Loss on disposal of asset......... -- (2) -- -- -- (2)
Provision for income taxes........ (707) -- -- -- 707 (20) --
------- ------- ----- ------ ------- -------
Income (loss) before
extraordinary item.... $(1,776) 717 $(862) $ (704) $ 3,445 $ 820
======= =======
Unaudited pro forma income (loss)
per common share before
extraordinary item -- basic and
diluted......................... $ (0.45) $ 0.19
======= =======
Unaudited pro forma weighted
average number of common shares
used in calculating unaudited
income (loss) per common share
before extraordinary
item -- basic and diluted....... 3,918 4,404 (21)
</TABLE>
See accompanying notes to unaudited pro forma financial data.
F-19
<PAGE> 22
MEDIRISK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA FINANCIAL DATA
Effective May 28, 1998, the Company acquired all of the outstanding shares
of Successful Solutions of Vidalia, Georgia, which provides decision support
tools, consulting services and training materials to hospitals and physician
groups to assist them in improving patient outcomes, achieving the efficient
delivery of care and establishing billing and coding practices that comply with
industry requirements. The Company purchased Successful Solutions for
approximately $2.9 million in cash and 189,811 shares of common stock. The
acquisition was accounted for using the purchase method of accounting with the
results of operations of the business acquired included from the effective date
of the acquisition. The acquisition resulted in in-process research and
development costs estimated to be approximately $4.0 million, acquired products
of approximately $250,000, and excess of cost over assets acquired estimated to
be approximately $1.8 million.
Effective March 23, 1998, the Company acquired all of the outstanding
shares of Healthdemographics of San Diego, California, which provides databases
and decision-support tools that allow customers to forecast the supply of and
demand for health care services. The Company purchased Healthdemographics for
approximately $2.7 million in cash and 171,315 shares of common stock. The
acquisition was accounted for using the purchase method of accounting with the
results of operations of the business acquired included from the effective date
of the acquisition. The acquisition resulted in in-process research and
development costs estimated to be approximately $5.3 million, acquired products
estimated to be approximately $500,000, and excess of cost over net assets
acquired estimated to be approximately $1.0 million.
Effective June 1, 1997, the Company acquired all of the outstanding shares
of CIVS of Rockville, Maryland, a leading national provider of credentialing
services to hospitals and managed care organizations for approximately $3.5
million in cash and 129,166 shares of the Company's common stock and the
assumption of net assets of $76,000. The acquisition was accounted for using the
purchase method of accounting with the results of operations of the business
acquired included from the effective date of the acquisition. The acquisition
resulted in purchased in-process research and development costs of approximately
$3.1 million, acquired products of approximately $415,000, and excess of cost
over net assets acquired of approximately $1.1 million.
Effective August 1, 1997, the Company acquired all of the outstanding
shares of CareData of New York, New York, which creates reports analyzing
consumer satisfaction with more than 150 aspects of managed health care plans
and ranks specific health plans accordingly. The Company purchased CareData for
approximately $4.1 million in cash and 14,516 shares of Medirisk common stock.
The acquisition was accounted for using the purchase method of accounting with
the results of operations of the business acquired included from the effective
date of the acquisition. The acquisition resulted in in-process research and
development costs of approximately $975,000, acquired products of approximately
$200,000, and excess of cost over net assets acquired of approximately $2.9
million. Approximately $3.0 million of contingent consideration resulting from
the CareData acquisition was paid at the end of April 1998. This payment was
treated as an increase in excess of cost over net assets acquired.
The unaudited pro forma consolidated statement of operations as of
March 31, 1998 illustrates the estimated effects of the Successful Solutions and
Healthdemographics acquisitions as if the acquisitions had occurred on January
1, 1998. The unaudited pro forma consolidated condensed statement of operations
for the year ended December 31, 1997 illustrates the estimated effects of all
these acquisitions had they occurred on January 1, 1997.
The unaudited pro forma financial data have been prepared using the
purchase method of accounting, whereby the total cost of the acquisition is
allocated to the tangible and intangible assets acquired and liabilities assumed
based upon their respective fair values at the effective date of such
acquisition. For purposes of the unaudited pro forma financial data, such
allocations have been made based upon currently available information and
management's estimates.
F-20
<PAGE> 23
The historical financial statements are derived from the unaudited
financial statements of the Company, Successful Solutions, and
Healthdemographics as of and for the three months ended March 31, 1998, the
audited financial statements of the Company, Successful Solutions, and
Healthdemographics as of and for the year ended December 31, 1997, and the
unaudited financial statements of CIVS and CareData for the periods beginning
January 1, 1997 and ending on the effective dates of the respective
acquisitions.
The unaudited pro forma financial data do not purport to represent what the
results of operations of the Company would actually have been if the
acquisitions had occurred on such dates or to project the results of operations
of the Company for any future date or period. The unaudited pro forma financial
data should be read together with the Financial Statements and Notes thereto of
the Company, Successful Solutions, Healthdemographics, CIVS and CareData
referred to above. The unaudited pro forma financial data reflect the following
adjustments:
(1) Reflects $1.8 million of goodwill recorded as a result of the
allocation of the Successful Solutions purchase price.
(2) Reflects the technological know-how recorded as a result of the
allocation of the Successful Solutions purchase price.
(3) Reflects the accrual of direct acquisition costs recorded as a
result of the allocation of the Successful Solutions purchase price.
(4) Reflects the cash payment and borrowings against the Company's
line of credit to fund the cash portion of the Successful Solutions
acquisition.
(5) Reflects the value of the Company common stock issued in
connection with the acquisition of Successful Solutions.
(6) Reflects the elimination of the historical equity accounts of
Successful Solutions.
(7) Reflects the non-recurring write-off of acquired in-process
research and development costs recorded as a result of the allocation of
the Successful Solutions purchase price.
(8) Reflects the historical operating results of Successful Solutions
for the period from January 1, 1998 to March 31, 1998.
(9) Reflects the historical operating results of Healthdemographics
for the period from January 1, 1998 to March 22, 1998.
F-21
<PAGE> 24
(10) Reflects the additional amortization of intangible assets
recorded as a result of the allocation of the Successful Solutions and
Healthdemographics purchase prices.
<TABLE>
<CAPTION>
Period ended
March 31, 1998
--------------
(Amounts in
thousands)
<S> <C>
Successful Solutions.................... $ 50
Healthdemographics...................... 39
----
$ 89
====
</TABLE>
(11) Removes the impact of the non-recurring acquired in-process
research and development costs recorded as a result of the allocation of
the Healthdemographics purchase price. This charge was included in the
March 31, 1998 historical statements of operations and is being excluded
from the quarter ended March 31, 1998 unaudited pro forma consolidated
condensed statements of operations.
(12) Reflects the additional interest expense on the cash used to fund
the acquisitions of Successful Solutions and Healthdemographics.
<TABLE>
<CAPTION>
Period ended
March 31, 1998
--------------
(Amounts in
thousands)
<S> <C>
Successful Solutions.................... $ 58
Healthdemographics...................... 48
----
$106
====
</TABLE>
(13) Reflects the increased shares of common stock outstanding
resulting from the acquisitions of Successful Solutions and
Healthdemographics.
<TABLE>
<CAPTION>
Period ended
March 31, 1998
--------------
(Amounts in
thousands)
<S> <C>
Successful Solutions.................... 190
Healthdemographics...................... 169
---
359
===
</TABLE>
F-22
<PAGE> 25
(14) Reflects the historical operating results of Successful Solutions
for the year ended December 31, 1997. An estimated $4.0 million charge for
in-process research and development costs was recorded by the Company on
May 28, 1998. This charge is being excluded from the year ended December
31, 1997 unaudited pro forma consolidated condensed statement of
operations.
(15) Reflects the historical operating results of Healthdemographics
for the year ended December 31, 1997. An estimated $5.3 million charge for
in-process research and development costs was recorded by the Company on
March 23, 1998. This charge is being excluded from the year ended December
31, 1997 unaudited pro forma consolidated condensed statement of
operations.
(16) Reflects the historical operating results of CIVS for the five
months ended May 31, 1997 and CareData for seven months ended July 31,
1997. The operating results of these entities subsequent to their
acquisition effective dates through December 31, 1997 are included in the
Company's operating results.
(17) Reflects the additional amortization of intangible assets
recorded as a result of the allocation of the respective purchase prices.
These amounts were as follows:
<TABLE>
<CAPTION>
1997
------------
(AMOUNTS IN
THOUSANDS)
<S> <C>
Successful Solutions.................... $200
Healthdemographics...................... 164
CIVS.................................... 64
CareData................................ 335
----
Total $763
====
</TABLE>
(18) Reflects the reversal of the non-recurring acquired in-process
research and development costs and integration costs associated with the
acquisitions of CIVS and CareData. These charges were included in the
Company's December 31, 1997 historical statements of operations and are
being excluded from the year ended December 31, 1997 unaudited pro forma
consolidated condensed statement of operations. These amounts were as
follows:
<TABLE>
<CAPTION>
1997
-------------
(AMOUNTS
IN THOUSANDS)
<S> <C>
CIVS.................................... $3,280
CareData................................ 978
------
Total $4,258
======
</TABLE>
F-23
<PAGE> 26
(19) Reflects the additional interest expense on the cash borrowings
used to fund the acquisitions. These amounts were as follows:
<TABLE>
<CAPTION>
1997
-------------
(AMOUNTS IN
THOUSANDS)
<S> <C>
Successful Solutions.................... $234
Healthdemographics...................... 216
CIVS.................................... 115
CareData................................ 192
----
Total........................... $757
====
</TABLE>
(20) Reflects decrease in income tax expense due to pro forma losses
incurred.
(21) Reflects the increased shares of common stock outstanding
resulting from the acquisitions. These shares were as follows:
<TABLE>
<CAPTION>
1997
--------------
(IN THOUSANDS)
<S> <C>
Successful Solutions.................... 190
Healthdemographics...................... 171
CIVS.................................... 115
CareData................................ 10
---
Total........................... 486
===
</TABLE>
F-24
<PAGE> 27
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 hereunto duly authorized.
MEDIRISK, INC.
By: /s/ Kenneth M. Goins, Jr.
----------------------------------------
Kenneth M. Goins, Jr.
Executive Vice President
Chief Financial Officer
Dated: June 5, 1998
