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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A No. 2
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 20, 1998 (August 7, 1997)
ENVOY CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Tennessee 0-25062 62-1575729
(State or other jurisdiction of incorporation) (Commission File Number) (I.R.S. Employer
Identification No.)
</TABLE>
Two Lakeview Place
15 Century Boulevard, Suite 600, Nashville, TN 37214
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (615) 885-3700
Not Applicable
(Former name or former address, if changed since last report)
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This Current Report on Form 8-K/A No. 2 is being filed solely to include
historical interim financial statements of HDIC as of June 30, 1997 and 1996
and, therefore, amends and supersedes, to the extent set forth herein, "Item 7.
Financial Statements, Pro Forma Financial Information and Exhibits" of the
Registrant's Current Report on Form 8-K, as filed on August 7, 1997 and amended
on October 20, 1997.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired
The following financial statements of HDIC are contained on pages 3 to 9
of this report:
Report of Independent Auditors
Combined Balance Sheets as of December 31, 1996 and 1995 and June 30, 1997
(Unaudited)
Combined Statements of Operations for the years ended December 31, 1996,
1995 and 1994 and for the six months ended June 30, 1997 and 1996
(Unaudited)
Combined Statements of Shareholders' Deficit for the years ended December
31, 1996, 1995, and 1994 and for the six months ended June 30, 1997
(Unaudited)
Combined Statements of Cash Flows for the years ended December 31, 1996,
1995 and 1994 and for the six months ended June 30, 1997 and 1996
(Unaudited)
Notes to Combined Financial Statements
(b) Pro Forma Financial Information (unaudited):
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*
Notes to Unaudited Pro Forma Condensed Combined Financial Information*
- --------
* Previously filed
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REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholder
of Healthcare Data Interchange Corporation
We have audited the accompanying combined balance sheets of Healthcare Data
Interchange Corporation and Aetna Data Interchange (the electronic interchange
business of Aetna Inc.) as of December 31, 1996 and 1995, as described in Note
1, and the related combined statements of operations, shareholder's deficit, and
cash flows for the three years in the period ended December 31, 1996. These
financial statements are the responsibility of 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 combined financial position of Healthcare Data
Interchange Corporation and Aetna Data Interchange at December 31, 1996 and 1995
and the combined results of their operations and their cash flows for the three
years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
July 31, 1997
Philadelphia, Pennsylvania
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HEALTHCARE DATA INTERCHANGE CORPORATION
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
--------------------------- ------------
1996 1995 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash............................................. $ 11,492 $ 12,125 $ 11,930
Short-term investments........................... -- 535,250 --
Other............................................ 75,000 7,412 75,000
------------ ------------ ------------
Total current assets..................... 86,492 554,787 86,930
Equipment.......................................... 169,000 94,000 176,000
Less accumulated depreciation...................... 66,498 22,666 94,387
------------ ------------ ------------
102,502 71,334 81,613
Other.............................................. -- 201,457 --
------------ ------------ ------------
Total assets............................. $ 188,994 $ 827,578 $ 168,543
============ ============ ============
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
Intercompany payable............................. $ 22,377,182 $ 10,898,840 $ 31,549,050
------------ ------------ ------------
Total current liabilities................ 22,377,182 10,898,840 31,549,050
Shareholder's deficit:
Common stock..................................... 3 3 3
Class B common stock............................. 1 1 1
Additional paid-in capital....................... 222,496 222,496 222,496
Retained deficit................................. (22,410,688) (10,293,762) (31,603,007)
------------ ------------ ------------
Total shareholder's deficit.............. (22,188,188) (10,071,262) (31,380,507)
------------ ------------ ------------
Total liabilities and shareholder's
deficit................................ $ 188,994 $ 827,578 $ 168,543
============ ============ ============
</TABLE>
See accompanying notes.
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HEALTHCARE DATA INTERCHANGE CORPORATION
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
---------------------------------------- -------------------------
1996 1995 1994 1997 1996
------------ ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues (Note 1).............. $ -- $ -- $ -- $ -- $ --
Operating costs and expenses:
Personnel costs.............. 4,835,681 5,837,557 2,753,751 1,614,401 2,494,627
Vendor fees.................. 11,818,465 1,768,866 381,719 11,459,961 5,250,600
Depreciation................. 43,832 18,832 3,834 27,889 15,666
General and administrative... 1,228,991 1,542,541 40,549 434,809 698,168
------------ ----------- ----------- ----------- -----------
Operating loss................. (17,926,969) (9,167,796) (3,179,853) (13,537,060) (8,459,061)
Other income (expense):
Interest income.............. 14,546 23,299 43,261 438 12,752
Intercompany interest
expense................... (630,000) (345,000) (135,000) (605,000) (310,000)
Other........................ (99,503) 776 1,299 303 (3,103)
------------ ----------- ----------- ----------- -----------
(714,957) (320,925) (90,440) (604,259) (300,351)
Loss before income taxes....... (18,641,926) (9,488,721) (3,270,293) (14,141,319) (8,759,412)
Benefit for income taxes....... 6,525,000 3,321,000 1,145,000 4,949,000 3,066,000
------------ ----------- ----------- ----------- -----------
Net loss....................... $(12,116,926) $(6,167,721) $(2,125,293) $(9,192,319) $(5,693,412)
============ =========== =========== =========== ===========
</TABLE>
See accompanying notes.
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HEALTHCARE DATA INTERCHANGE CORPORATION
COMBINED STATEMENTS OF SHAREHOLDER'S DEFICIT
<TABLE>
<CAPTION>
CLASS B
COMMON STOCK COMMON STOCK ADDITIONAL TOTAL
--------------- --------------- PAID-IN RETAINED SHAREHOLDER'S
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT DEFICIT
------ ------ ------ ------ ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993........... 300 $3 100 $1 $222,496 $ (2,000,748) $ (1,778,248)
Net loss............................. -- -- -- -- -- (2,125,293) (2,125,293)
--- -- --- -- -------- ------------ ------------
Balance at December 31, 1994........... 300 3 100 1 222,496 (4,126,041) (3,903,541)
Net loss............................. -- -- -- -- -- (6,167,721) (6,167,721)
--- -- --- -- -------- ------------ ------------
Balance at December 31, 1995........... 300 3 100 1 222,496 (10,293,762) (10,071,262)
Net loss............................. -- -- -- -- -- (12,116,926) (12,116,926)
--- -- --- -- -------- ------------ ------------
Balance at December 31, 1996........... 300 3 100 1 222,496 (22,410,688) (22,188,188)
Net loss (unaudited)................. -- -- -- -- -- (9,192,319) (9,192,319)
--- -- --- -- -------- ------------ ------------
Balance at June 30, 1997 (unaudited)... 300 $3 100 $1 $222,496 $(31,603,007) $(31,380,507)
=== == === == ======== ============ ============
</TABLE>
See accompanying notes.
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HEALTHCARE DATA INTERCHANGE CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
---------------------------------------- -------------------------
1996 1995 1994 1997 1996
------------ ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss....................... $(12,116,926) $(6,167,721) $(2,125,293) $(9,192,319) $(5,693,412)
Adjustments to reconcile net
loss to net cash (used in)
provided by operating
activities:
Depreciation.............. 43,832 18,832 3,834 27,889 15,666
Change in assets and
liabilities:
Increase in intercompany
payable.............. 11,478,342 6,227,973 2,457,729 9,171,868 5,674,587
Other................... 133,869 (338) (2,705) -- 2,903
------------ ----------- ----------- ----------- -----------
Net cash (used in) provided by
operating activities......... (460,883) 78,746 333,565 7,438 (256)
INVESTMENT ACTIVITIES
Net decrease (increase) in
short-term investments....... 535,250 (4,554) (314,132) -- (193)
Purchase of equipment.......... (75,000) (75,000) (19,000) (7,000) --
------------ ----------- ----------- ----------- -----------
Net cash provided by (used in)
investing activities......... 460,250 (79,554) (333,132) (7,000) (193)
------------ ----------- ----------- ----------- -----------
Net (decrease) increase in
cash......................... (633) (808) 433 438 (449)
Cash at beginning of period.... 12,125 12,933 12,500 11,492 12,125
============ =========== =========== =========== ===========
Cash at end of period.......... $ 11,492 $ 12,125 $ 12,933 $ 11,930 $ 11,676
============ =========== =========== =========== ===========
</TABLE>
See accompanying notes.
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HEALTHCARE DATA INTERCHANGE CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
These combined financial statements include the accounts of Healthcare Data
Interchange Corporation ("HDIC") and Aetna Data Interchange ("ADI") as defined
below. U.S. Healthcare, Inc. and Aetna Life and Casualty Company, Inc. merged as
of July 19, 1996, forming Aetna Inc., a new parent company. HDIC was
incorporated in 1992 as a wholly-owned subsidiary of U.S. Healthcare, Inc.
During 1995 Aetna Life and Casualty Company, Inc. began an electronic data
interchange division, Aetna Data Interchange (ADI). The principal activity of
HDIC and ADI is to provide electronic data interchange services to their parent
companies.
The accompanying financial statements include the direct expenses of HDIC
and ADI required to provide electronic data interchange services to U.S.
Healthcare, Inc. and Aetna Life and Casualty Company, Inc., respectively. The
operations of the combined business have been accounted for as a cost center;
accordingly, the accompanying financials do not include any revenue for the
electronic services provided.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
UNAUDITED INTERIM FINANCIAL STATEMENTS
The combined balance sheet as of June 30, 1997 and the related combined
statements of operations, stockholders' deficit, and cash flows for the six
months then ended (interim financial statements) have been prepared by the
Company's management and are unaudited. In the opinion of management, the
interim financial statements include all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of the interim results.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted from the interim financial statements. The
interim financial statements should be read in conjunction with the December
31, 1996 audited financial statements appearing herein. The results of the six
months ended June 30, 1997 and 1996 may not be indicative of operating results
for the full year.
SHORT-TERM INVESTMENTS
Short-term investments include investments in United States Treasury
Securities and certificates of deposit. Carrying value of the investments
approximated fair value.
EQUIPMENT
Equipment is recorded at cost. Depreciation is provided over the estimated
lives of the respective assets on the straight-line basis principally over five
years.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. INTERCOMPANY PAYABLE
Intercompany payable amounts are owed to parent entities for amounts paid
on behalf of the subsidiaries and expenses allocated to the subsidiaries for
services rendered, principally salaries and overhead. Intercompany interest is
computed based upon U.S. Healthcare, Inc.'s average overnight repo return.
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HEALTHCARE DATA INTERCHANGE CORPORATION
COMBINED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. INCOME TAXES
HDIC and ADI are included in the consolidated federal income tax return of
their respective parents. Individual current federal income tax provisions are
generally computed as if the subsidiaries were filing separate federal tax
returns; current income tax benefits, including those resulting from carrybacks,
are recognized to the extent realized in the consolidated return. Amounts so
computed are included in intercompany payable.
5. SUBSEQUENT EVENT
As of January 1, 1997, ADI was combined with U.S. Healthcare's HDIC
subsidiary. On June 14, 1997, U.S. Healthcare entered into an agreement to sell
HDIC to ENVOY Corporation for approximately $36.4 million. The agreement
includes an exclusive contract for ENVOY Corporation to provide electronic data
interchange services to Aetna Inc.'s health maintenance organizations for up to
10 years.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to this report to be signed on its
behalf by the undersigned hereunto duly authorized.
ENVOY CORPORATION
Date: November 20, 1998 By: /s/ Kevin M. McNamara
-----------------------
Kevin M. McNamara
Senior Vice President and Chief
Financial Officer
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