Exhibit 99.4
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
give effect to the Merger of the Company and Continental using the purchase
method of accounting. The unaudited pro forma combined condensed financial
statements are based on the respective historical financial statements of the
Company and Continental and the notes thereto. The unaudited pro forma combined
condensed balance sheet assumes that the Merger took place on June 30, 1998. The
unaudited pro forma combined condensed statements of operations assume that the
Merger took place as of January 1, 1997.
The unaudited pro forma combined condensed financial statements are based
on the estimates and assumptions set forth in the notes to such statements. The
pro forma adjustments made in connection with the development of the pro forma
information are preliminary and have been made solely for purposes of developing
such pro forma information for illustrative purposes. The amount of the purchase
price in excess of Continental's net assets acquired has been allocated to
goodwill and other intangible assets based on management estimates and the
allocation will be finalized based on an appraisal. Although the Company does
not expect that the final allocation will be materially different from these
estimates, there can be no assurance that such differences, if any, will not be
material. The unaudited pro forma combined condensed financial statements do not
purport to be indicative of the results of operations for future periods or the
combined financial position or results of operations that actually would have
resulted had the entities been a single entity during these periods.
The Company incurred direct transaction costs of approximately $0.9 million
associated with the Merger and Continental incurred related costs of
approximately $1.0 million which were expensed prior to the Merger. These
amounts are preliminary estimates only and therefore are subject to change. In
addition, the Company may incur cash and non-cash restructuring charges to
operations in the third quarter of 1998. However, the amounts of such charges
cannot be estimated at this time. There can be no assurance that the Company
will not incur additional charges in subsequent periods to reflect costs
associated with the Merger.
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Unaudited Pro Forma Combined Condensed Statement of Operations
(in thousands, except per share data)
(unaudited)
Six months ended June 30, 1998
--------------------------------------------------------------------
MIM Continental Pro Forma MIM
(Historical) (Historical) Adjustments Pro Forma
------------ ------------ ----------- ---------
Revenues $ 207,841 $ 30,764 $ 238,605
Cost of revenues 196,044 24,477 220,521
--------- --------- ---------
Gross profit 11,797 6,287 18,084
Selling, general and
administrative expenses 9,261 4,824 564 (1) 14,487
--------- --------- ---------
(104)(1)
(58)(1)
Operating profit 2,536 1,463 (402) 3,597
Interest income (expense) 990 (163) 827
Minority interest (1) -- (1)
--------- --------- --------- ---------
Profit before taxes 3,525 1,300 (402) 4,423
Taxes -- 646 (646)(2) --
--------- --------- --------- ---------
Net income $ 3,525 $ 654 $ 244 $ 4,423
========= ========= ========= =========
Basic income per share (7) $ 0.26 $ 56.14 $ 0.25
Diluted income per share (7) $ 0.23 $ 56.14 $ 0.23
Weighted average common
shares used in computing
basic income per share (7) 13,471 12 3,900 17,383
Weighted average common
shares used in computing
diluted income per share (3)(7) 15,467 12 3,900 19,379
Year ended December 31, 1997
--------------------------------------------------------------------
MIM Continental Pro Forma MIM
(Historical) (Historical) Adjustments Pro Forma
------------ ------------ ----------- ---------
Revenues $ 242,291 $ 47,280 $ 289,571
Cost of revenues 239,002 36,320 275,322
--------- --------- --------- ---------
Gross profit 3,289 10,960 14,249
Selling, general and
administrative expenses 19,098 9,503 1,128 (1) 29,439
--------- --------- --------- ---------
(208)(1)
(82)(1)
Operating profit (15,809) 1,457 (838) (15,190)
Interest income (expense) 2,295 (291) 2,004
Minority interest 17 -- 17
--------- --------- --------- ---------
Profit (loss) before taxes (13,497) 1,166 (838) (13,169)
Taxes -- 632 (632)(2) --
--------- --------- --------- ---------
Net income (loss) $ (13,497) $ 534 $ (206) $ (13,169)
========= ========= ========= =========
Basic and diluted income
(loss) per share (7) $ (1.07) $ 46.03 $ (0.80)
Weighted average common
shares used in computing
basic and diluted income
(loss) per share (4)(7) 12,620 12 3,900 16,532
See accompanying notes to the unaudited pro forma combined condensed financial
statements.
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Unaudited Pro Forma Combined Condensed Balance Sheet
(in thousands)
(unaudited)
Six Months Ended June 30, 1998
----------------------------------------------------------------------
MIM Continental Pro Forma MIM
(Historical) (Historical) Adjustments Pro Forma
------------ ------------ ----------- ---------
Assets
Cash & cash equivalents $ 2,583 $ 628 $ (1,900)(5) $ 1,311
Investment securities 20,715 -- 20,715
Receivables 41,005 9,402 50,407
Inventory -- 902 902
Prepaid expense 1,222 336 1,558
Deferred income taxes -- 235 235
-------- -------- -------- --------
Total current assets 65,525 11,503 (1,900) 75,128
Investment securities 351 -- 351
Investments 2,300 -- 2,300
Property & equipment, net 3,832 552 4,384
Goodwill and other intangible assets, net -- 5,450 17,333(6)
1,900(5)
(5,450)(6) 19,233
Deferred income taxes -- 35 35
Other assets 353 30 383
-------- -------- -------- --------
Total assets $ 72,361 $ 17,570 $ 11,883 $101,814
======== ======== ======== ========
Liabilities & stockholders equity
Current portion of capital lease obligations $ 231 $ 15 $ 246
Current portion of long term debt -- 288 288
Accounts payable 1,042 5,054 6,096
Claims payable 31,829 1,029 32,858
Payables to plan sponsors and others 13,073 -- 13,073
Accrued expenses 4,105 1,065 5,170
Income taxes payable -- 782 782
--------- -------- --------
Total current liabilities 50,280 8,233 58,513
Other non-current liabilities -- 54 54
Capital lease obligations, less current portion 639 17 656
Minority interest 1,112 -- 1,112
Long-term debt, less current portion -- 3,152 3,152
Liabilities & stockholders' equity
Common stock 1 12 (12)(6)(7)
1(6)(7) 2
Additional paid-in capital 73,603 4,584 (4,584)(6)(7)
(1)(6)(7)
17,997(5)(6)(7) 91,599
Retained earnings (51,536) 1,518 (1,518)(6) (51,536)
Stockholder notes receivable (1,738) -- (1,738)
--------- -------- -------- --------
Total stockholders' equity 20,330 6,114 10,883 38,327
Total liabilities & stockholders' equity $ 72,361 $ 17,570 $ 11,883 $101,814
======== ======== ======== ========
See accompanying notes to the unaudited pro forma combined condensed financial
statements.
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NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
(1) To record amortization of goodwill (over 25 years) and other intangibles
(over an estimated 7.5 years) and elimination of prior amortization of
goodwill and other intangibles.
(2) Elimination of income taxes as a result of consolidated losses or
utilization of operating loss carryforwards.
(3) The unaudited pro forma diluted income per common share is based on the
weighted average number of common shares and common share equivalents of
the Company and Continental outstanding for each period, at an exchange
ratio of 327.59 shares of Common Stock for each Continental share.
(4) The unaudited pro forma basic and diluted income per common share is based
on the weighted average number of common shares of the Company and
Continental outstanding for each period, at an exchange ratio of 327.59
shares of Common Stock for each Continental share. Diluted loss per common
share is the same as basic loss per common share which excludes common
share equivalents since they would be antidilutive.
(5) To record direct transaction costs of approximately $0.9 million associated
with the Merger, consisting primarily of fees for investment banking,
legal, accounting and other related costs to be paid by the Company.
Continental incurred approximately $1.0 million of costs related to the
Merger, including transaction fees payable to former officers of
Continental. As these costs are non-recurring, they are not reflected in
the pro forma combined condensed statement of operations.
(6) To record the issuance of 3,912,448 shares of Common Stock in exchange for
the 11,943.125 Continental Shares (see Note 7) in connection with the
Merger. The Common Stock has been valued at $4.60 per share (the average
price per share of the Common Stock several days before and after the date
of the Merger Agreement). The amount of the purchase price (including $1.9
million of transaction costs) in excess of Continental's net assets
acquired has been allocated to goodwill ($14.6 million) and other
intangible assets ($3.6 million) based on management estimates and the
allocation will be finalized based on an appraisal. Other intangible assets
primarily consist of customer lists and non-compete agreements.
(7) In June 1998, all holders of Continental stock options exercised all
outstanding options to purchase 343.125 Continental shares. These
Continental shares have been reflected in the unaudited pro forma combined
condensed financial statements as if they were exercised as of the
beginning of the respective period presented. These Continental shares have
been included in the determination of the purchase price.
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