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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
(AMENDMENT NO. 1)
Date of Report (Date of earliest event reported):
October 20, 1997 (August 7, 1997)
ENVOY CORPORATION
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(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Tennessee 0-25062 62-1575729
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(State or other jurisdiction of incorporation) (Commission File Number) (I.R.S. Employer
Identification No.)
15 Century Boulevard, Suite 600, Nashville, TN 37214
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (615) 885-3700
Not Applicable
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(Former name or former address, if changed since last report)
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This Current Report on Form 8-K/A amends and supersedes, to the extent
set forth herein, the Current Report on Form 8-K filed by the Registrant with
the Securities and Exchange Commission on August 22, 1997.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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(b) Pro Forma Financial Information (unaudited):
The following unaudited pro forma financial information is contained on
pages 4 to 9 of this report:
Introduction to Unaudited Pro Forma Condensed Combined Financial
Information;
Pro Forma Condensed Combined Balance Sheet as of June 30, 1997;
Pro Forma Condensed Combined Statement of Operations for the six months
ended June 30, 1997;
Pro Forma Condensed Combined Statement of Operations for the year ended
December 31, 1996; and
Notes to Unaudited Pro Forma Condensed Combined Financial Information.
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INTRODUCTION TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION
The unaudited pro forma condensed combined financial information as of
and for the six months ended June 30, 1997 and for the year ended December 31,
1996 are set forth on the following pages. The unaudited pro forma financial
information has been prepared utilizing the historical financial statements of
ENVOY Corporation ("ENVOY") and Healthcare Data Interchange Corporation
("HDIC"). The pro forma financial information also has been prepared to reflect
the historical financial data for certain acquisitions made by ENVOY since the
beginning of 1996. These acquisitions include National Electronic Information
Corporation ("NEIC"), Teleclaims, Inc. ("Teleclaims"), National Verification
Systems, L.P. ("NVS"), EMC* Express, Inc. ("EMC"), Professional Office Systems,
Inc. ("POSI"), and Diverse Software Solutions, Inc. ("DSS") (collectively, the
"Acquired Businesses"). Accordingly, the pro forma financial information gives
pro forma effect to the acquisitions of HDIC and the Acquired Businesses as if
they had occurred as of June 30, 1997 for purposes of the balance sheet and as
of January 1, 1996 for purposes of the statements of operations.
All of the foregoing acquisitions have been accounted for under the
purchase method of accounting and the pro forma financial information has been
prepared on such basis of accounting utilizing estimates and assumptions as set
forth below and in the notes thereto. The pro forma financial information is
presented for informational purposes and is not necessarily indicative of the
future financial position or results of operations of the combined companies, or
of the financial position or the results of operations of the combined
companies, that would have actually occurred had the acquisitions been
consummated on such date or as of the periods described above. The purchase
price allocations reflected in the pro forma financial information have been
based on preliminary estimates of the respective fair value of assets and
liabilities which may differ from the actual allocations, and are subject to
revision based on further studies and valuations. Certain amounts in the
historical financial statements of HDIC and the Acquired Businesses have been
reclassified to conform to the financial presentation of ENVOY.
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ENVOY CORPORATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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<CAPTION>
SUBTOTAL
HISTORICAL HISTORICAL PRO FORMA PRO FORMA PRO FORMA
ASSETS: ENVOY HDIC COMBINED ADJUSTMENTS COMBINED
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<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 36,410 $ 11 $ 36,421 $ (36,412)(a) $ 9
ACCOUNTS RECEIVABLE-NET 21,896 - 21,896 21,896
INVENTORIES 2,257 - 2,257 2,257
DEFERRED INCOME TAXES 1,478 - 1,478 1,478
OTHER CURRENT ASSETS 1,830 75 1,905 (75)(b) 1,830
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TOTAL CURRENT ASSETS 63,871 86 63,957 (36,487) 27,470
PURCHASED RESEARCH AND DEVELOPMENT - 35,000 (c) -
(35,000)(c)
PROPERTY AND EQUIPMENT, NET 16,342 82 16,424 16,424
OTHER ASSETS 52,810 - 52,810 2,050 (d) 68,922
14,062 (e)
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TOTAL ASSETS $133,023 $ 168 $133,191 $ (20,375) $112,816
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LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 320 $ 320 $ 320
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES 16,639 $ 31,549 48,188 $ 993 (f) 20,831
(31,549)(h)
3,199 (g)
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16,959 31,549 48,508 (27,357) 21,151
LONG TERM DEBT, LESS CURRENT PORTION 122 - 122 122
OTHER LONG TERM LIABILITIES - - - 10,601 (g) 10,601
DEFERRED INCOME TAXES 736 - 736 736
SHAREHOLDERS' EQUITY:
PREFERRED STOCK-NO PAR VALUE;
AUTHORIZED, 12,000,000 SHARES;
ISSUED, 3,730,233 40,100 - 40,100 40,100
COMMON STOCK-NO PAR VALUE; AUTHORIZED,
48,000,000 SHARES; ISSUED, 16,493,161 112,359 - 112,359 112,359
ADDITIONAL PAID-IN CAPITAL 7,155 222 7,377 (222)(i) 7,155
ACCUMULATED DEFICIT (44,408) (31,603) (76,011) 31,603 (i) (79,408)
(35,000)(c)
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TOTAL SHAREHOLDERS' EQUITY 115,206 (31,381) 83,825 (3,619) 80,206
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 133,023 $ 168 $ 133,191 $ (20,375) $ 112,816
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</TABLE>
See accompanying notes to unaudited pro forma
condensed combined financial information.
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PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED) (IN THOUSANDS)
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<CAPTION>
Historical
Historical Historical Subtotal Financial Results of
ENVOY HDIC (j) Pro Forma Acquired Businesses (k)
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<S> <C> <C> <C> <C>
Revenues $ 52,508 $ - $ 52,508 $601
Operating costs and expenses:
Cost of revenues 25,798 12,563 38,361 335
Selling, general and administrative 11,814 946 12,760 223
Depreciation and amortization 12,183 27 12,210 -
Merger and facility integration costs 3,000 - 3,000 -
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Operating loss (287) (13,536) (13,823) 43
Interest income/expense (449) 605 156 -
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Loss from operations before tax 162 (14,141) (13,979) 43
Income tax provision (benefit) 2,560 (4,949) (2,389) -
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Net income (loss) $ (2,398) $ (9,192) $ (11,590) $ 43
======== ======== ========= ====
Loss per common share from operations $ (0.12)
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Weighted average shares outstanding 20,697
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<CAPTION>
Subtotal
Pro Forma Pro Forma Pro Forma
Combined Adjustments Combined
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<S> <C> <C> <C>
Revenues $ 53,109 $ 5,051 (l) $ 58,160
Operating costs and expenses:
Cost of revenues 38,696 (5,599) (m) 33,097
Selling, general and administrative 12,983 - 12,983
Depreciation and amortization 12,210 44 (n) 13,366
469 (p)
168 (q)
475 (r)
Merger and facility integration costs 3,000 - 3,000
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Operating loss (13,780) 9,494 (4,286)
Interest income/expense 156 654 (v) 810
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Loss from operations before tax (13,936) 8,840 (5,096)
Income tax provision (benefit) (2,389) 4,949 (x) 469
(2,091) (y)
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Net income (loss) $ (11,547) $ 5,982 $ (5,565)
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Loss per common share from operations $ (0.27)
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Weighted average shares outstanding 20,697
=========
</TABLE>
See accompanying notes to unaudited pro forma
condensed combined financial information.
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PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED) (IN THOUSANDS)
<TABLE>
<CAPTION>
Historical
Historical Historical Subtotal Financial Results of
ENVOY HDIC(j) Pro Forma Acquired Businesses(k)
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<S> <C> <C> <C> <C>
Revenues $76,584 $ - $ 76,584 $ 15,698
Operating costs and expenses:
Cost of revenues 38,252 16,733 54,985 5,677
Selling, general and administrative 18,950 1,252 20,202 7,406
Depreciation and amortization 19,177 44 19,221 588
Merger and facility integration costs 35,904 - 35,904 2,307
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Operating loss (35,699) (18,029) (53,728) (280)
Interest income/expense 1,624 613 2,237 (91)
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Loss from operations before tax (37,323) (18,642) (55,965) (189)
Income tax provision (benefit) 1,577 (6,525) (4,948) 947
------- ------- -------- --------
Net income (loss) $(38,900) $(12,117) $ (51,017) $ (1,136)
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Loss per common share from operations $ (2.99)
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Weighted average shares outstanding 13,019
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Subtotal
Pro Forma Pro Forma Pro Forma
Combined Adjustments Combined
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<S> <C> <C> <C>
Revenues $ 92,282 $ 9,708 (l) $ 101,990
Operating costs and expenses:
Cost of revenues 60,662 (7,606) (m) 53,056
Selling, general and administrative 27,608 27,608
Depreciation and amortization 19,809 2,762 (n) 26,552
(36) (o)
937 (p)
2,130 (q)
950 (r)
Merger and facility integration costs 38,211 (2,307) (s) 35,904
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Operating loss (54,008) 12,878 (41,130)
Interest income/expense 2,146 44 (t) 4,162
665 (u)
1,307 (v)
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Loss from operations before tax (56,154) 10,862 (45,292)
Income tax provision (benefit) (4,001) (947) (w) 1,243
6,525 (x)
(334) (y)
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Net income (loss) $ (52,153) $ 5,618 $ (46,535)
========= ======= =========
Loss per common share from operations $ (3.50)
=========
Weighted average shares outstanding 286 (z) 13,305
=========
</TABLE>
See accompanying notes to unaudited pro forma condensed
combined financial information.
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Notes to Unaudited Pro Forma Condensed Combined
Financial Information
On August 7, 1997, ENVOY Corporation ("ENVOY") completed the
acquisition of all of the outstanding capital stock of Healthcare Data
Interchange Corporation ("HDIC"). HDIC was the electronic data interchange
("EDI") health care provider subsidiary of Aetna U.S. Healthcare Inc. ("AUSHC")
and currently manages all healthcare EDI processing between AUSHC and its
participating network physicians, dentists and hospitals. The purchase price for
the shares of HDIC, which was approximately $36.4 million, was funded through
the Company's available cash. In addition, ENVOY and AUSHC simultaneously
entered into a long-term services agreement under which AUSHC agreed to use
ENVOY as its single source clearinghouse and EDI network for all AUSHC health
care EDI transactions.
The acquisition of HDIC was accounted for under the purchase method of
accounting, applying the provisions of APB Opinion No. 16 ("APB 16") and, as a
result, ENVOY recorded the assets and liabilities of HDIC at its estimated fair
value with the excess of the purchase price over this amount being recorded as
goodwill. The allocation of the purchase price for purposes of the pro forma
financial information has been estimated as follows (in thousands):
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<S> <C>
Cash $ 11
Property and equipment 82
Liabilities assumed (14,793)
Identifiable intangibles 2,050
Goodwill 14,062
Purchased research and development 35,000
--------
$ 36,412
========
</TABLE>
The allocation is based on management's preliminary estimates. The actual
allocations will be based upon further studies and valuations and may change
during the allocation period, generally one year following the completion of the
acquisition.
Pro Forma Balance Sheet Adjustments
(a) Records cash paid to AUSHC.
(b) Elimination of assets not acquired in the purchase.
(c) Records the one time write-off of acquired in process technology of
$35,000,000 identified in the purchase price allocation. The actual amount
of this charge will be based on further studies and valuations. The amount
allocated to purchased research and development was charged to expense in
the first statement of operations for the combined companies inasmuch as
these amounts related to research and development that has not yet reached
technological feasibility and for which there is no alternative future use.
(d) Records the preliminary estimate of identifiable intangible assets acquired.
(e) Records the preliminary estimate of goodwill.
(f) Records the estimated costs and expenses associated with the acquisition.
(g) Records the estimated present value of unfavorable contracts in the
acquisition of HDIC totaling $13,800,000.
(h) Records elimination of HDIC intercompany payable not assumed in the
acquisition.
(i) Records elimination of HDIC stockholders' equity.
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Pro Forma Statement of Operations Adjustments
(j) Records the historical financial data of HDIC for the six month period ended
June 30, 1997 and for the year ended December 31, 1996.
(k) Records historical financial data of the Acquired Businesses for the
following periods: NEIC - January 1, 1996 through March 6, 1996; Teleclaims
- January 1, 1996 through February 28, 1996; NVS - January 1, 1996 through
September 30,1996; EMC - January 1, 1996 through October 31,1996; POSI -
January 1, 1996 through September 30, 1996; and DSS - January 1, 1997
through February 28, 1997 and for the year ended December 31, 1996. Each of
the Acquired Businesses has been accounted for under the purchase method of
accounting applying the provisions of APB 16.
(l) Records estimated incremental revenues of ENVOY for the period January 1,
1997 through June 30, 1997 and for the year ended December 31, 1996 based on
contractual obligations related to the acquisition of HDIC.
(m) Elimination of rebates paid to ENVOY by HDIC for the period January 1, 1997
through June 30, 1997 and for the year ended December 31, 1996.
(n) Records the amortization of goodwill for the Acquired Businesses over
periods of three to fifteen years, as applicable, on a straight line basis.
(o) Elimination of amortization of intangibles for the Acquired Businesses.
(p) Records the amortization of goodwill for HDIC over a fifteen year period on
straight line basis.
(q) Records the amortization of acquired identifiable intangible assets over
periods of two to nine years, as applicable, for the Acquired Businesses.
(r) Records the amortization of acquired identifiable intangible assets for
HDIC over periods of two to three years.
(s) Eliminates nonrecurring charges resulting directly from the acquisition of
the Acquired Businesses of $2,307,000 which are included in the Historical
Financial Results of the Acquired Businesses. The charges are excluded from
the accompanying Pro Forma Statements of Operations as it is a nonrecurring
item consistent with Rule 11-02 of Regulation S-X.
(t) Records the amortization of deferred loan costs incurred in connection with
the acquisition of the Acquired Businesses over the life of the related
debt (5 years).
(u) Records interest expense of debt incurred in connection with the Acquired
Businesses at an average interest rate of approximately 9% for the period
January 1 through March 6, 1996.
(v) Records the estimated interest expense on unfavorable contracts assumed as
part of the HDIC acquisition for the six months ended June 30, 1997 and for
the year ended December 31, 1996.
(w) Elimination of the historical income tax provision for the Acquired
Businesses.
(x) Elimination of the historical income tax provision for HDIC.
(y) Records the tax provision for the pro forma adjustments, the Acquired
Businesses and HDIC.
(z) Adjustment to reflect the issuance of 73,242 common shares in the
Teleclaims acquisition and 333,333 common shares in the NEIC merger, of
ENVOY Common Stock had the acquisition and merger taken place January 1,
1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this amendment to the report to be signed on its
behalf by the undersigned hereunto duly authorized.
ENVOY CORPORATION
Date: October 20, 1997 By: /s/ Kevin M. McNamara
--------------------------------------
Kevin M. McNamara
Senior Vice President and Chief Financial
Officer
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