________________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM 8-K
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 21, 1996
------------------------
PHYSICIAN SUPPORT SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
DELAWARE 33-80731 13-3624081
(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
ROUTE 230 AND EBY-CHIQUES ROAD,
MT. JOY, PA 17552
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (717) 653-5340
NOT APPLICABLE
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
________________________________________________________________________________
Physician Support Systems, Inc., a Delaware Corporation ('PSS'), hereby
amends its Current Report on Form 8-K dated June 4, 1996 as set forth below.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(A) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Set forth below are the audited financial statements of ALM, Inc., a Kansas
corporation ('ALM'), as of December 31, 1995 and for the one year then ended.
These financial statements have been audited by Deloitte & Touche LLP,
independent auditors. Also set forth below are the unaudited financial
statements of ALM as of March 31, 1996 and for the three months ended March 31,
1995 and 1996. These unaudited statements have been prepared on the same basis
as the audited financial statements and, in the opinion of management, contain
all adjustments necessary for a fair presentation of the financial position and
results of operations for the periods presented. Operating results for the three
months ended March 31, 1996 are not necessarily indicative of the results that
may be expected for the entire year.
1
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
PHYSICIAN SUPPORT SYSTEMS, INC.
We have audited the accompanying balance sheet of ALM, Inc. as of December
31, 1995, and the related statements of earnings, stockholders' equity and cash
flows for the year 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of ALM, Inc. as of December 31, 1995 and the
results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
July 8, 1996
2
ALM, INC.
BALANCE SHEETS
DECEMBER 31, 1995 AND MARCH 31, 1996 (UNAUDITED)
DECEMBER 31, MARCH 31,
1995 1996
------------ -----------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents........................................................ $112,285 $ 153,245
Accounts receivable.............................................................. 157,812 200,435
Accounts receivable--unbilled.................................................... 356,129 343,579
Prepaid expenses and other current assets........................................ 1,668 4,379
------------ -----------
Total current assets........................................................ 627,894 701,638
------------ -----------
Property and Equipment--Net........................................................... 65,215 82,578
------------ -----------
Total................................................................................. $693,109 $ 784,216
------------ -----------
------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses............................................ $140,160 $ 150,268
Accrued profit sharing contribution.............................................. 31,699 --
------------ -----------
Total current liabilities................................................... 171,859 150,268
------------ -----------
Commitments
Stockholders' equity:
Common stock --$1 par value, 30,000 shares authorized, 138 shares issued and
outstanding..................................................................... 138 138
Additional paid-in capital....................................................... 178,462 178,462
Retained earnings................................................................ 342,650 455,348
------------ -----------
Total stockholders' equity.................................................. 521,250 633,948
------------ -----------
Total liabilities and stockholders' equity............................................ $693,109 $ 784,216
------------ -----------
------------ -----------
See notes to financial statements.
3
ALM, INC.
STATEMENTS OF EARNINGS
YEAR ENDED DECEMBER 31, 1995 AND THREE MONTHS ENDED MARCH 31, 1995 AND 1996 (UNAUDITED)
MARCH 31,
DECEMBER 31, --------------------
1995 1995 1996
------------ -------- --------
(UNAUDITED)
Revenue................................................................... $1,978,316 $490,010 $473,493
Operating expenses:
Salaries and wages................................................... 752,442 179,419 195,802
General and administrative........................................... 760,628 147,656 164,848
Depreciation and amortization........................................ 56,619 10,102 5,421
------------ -------- --------
Total operating expenses........................................ 1,569,689 337,177 366,071
------------ -------- --------
Income from operations.................................................... 408,627 152,833 107,422
------------ -------- --------
Other income:
Interest income...................................................... 4,323 889 698
Other, net........................................................... 18,128 4,433 4,578
------------ -------- --------
Total other income.............................................. 22,451 5,322 5,276
------------ -------- --------
Net income................................................................ 431,078 $158,155 112,698
--------
--------
Unaudited pro forma income tax adjustments................................ 164,000 42,800
------------ --------
Unaudited pro forma net income............................................ $ 267,078 $ 69,898
------------ --------
------------ --------
See notes to financial statements.
4
ALM, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1995 AND THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
COMMON STOCK
---------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS
------ ------ ----------- --------
(UNAUDITED)
Balance, January 1, 1995.............................................. 138 $138 $ 178,462 $341,572
Net income....................................................... 431,078
Dividends........................................................ (430,000)
------ ------ ----------- --------
Balance, December 31, 1995............................................ 138 138 178,462 342,650
Net income (unaudited)........................................... 112,698
------ ------ ----------- --------
Balance, March 31, 1996 (unaudited)................................... 138 $138 $ 178,462 $455,348
------ ------ ----------- --------
------ ------ ----------- --------
See notes to financial statements.
5
ALM, INC.
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995 AND THREE MONTHS ENDED MARCH 31, 1995 AND 1996 (UNAUDITED)
MARCH 31,
DECEMBER 31, --------------------
1995 1995 1996
------------ -------- --------
(UNAUDITED)
Cash flows from operating activities:
Net income........................................................... $431,078 $158,155 $112,698
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization................................... 56,619 10,102 5,421
Changes in operating assets and liabilities:
Accounts receivable........................................ (21,906) (42,078) (42,623)
Accounts receivable --unbilled............................. (14,928) (17,289) 12,550
Prepaid expenses and other current assets.................. 4,655 5,225 (2,711)
Accounts payable and accrued expenses...................... 5,519 21,806 10,108
Accrued profit sharing contribution........................ 31,699 (31,699)
------------ -------- --------
Net cash provided by operating activities............. 492,736 135,921 63,744
Cash flows from investing activities--Purchase of property and equipment.. (17,727) (15,834) (22,784)
------------ -------- --------
Net cash used in investing activities................. (17,727) (15,834) (22,784)
------------ -------- --------
Cash flows from financing activities--Cash dividends paid................. (530,000) (100,000)
------------ -------- --------
Net cash used in financing activities................. (530,000) (100,000)
------------ -------- --------
Net decrease in cash and cash equivalents................................. (54,991) 20,087 40,960
Cash and cash equivalents, Beginning of period............................ 167,276 167,276 112,285
------------ -------- --------
Cash and cash equivalents, End of period.................................. $112,285 $187,363 $153,245
------------ -------- --------
------------ -------- --------
See notes to financial statements.
6
ALM, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995 AND THREE MONTHS ENDED MARCH 31, 1995
AND 1996 (UNAUDITED)
1. ORGANIZATION
DESCRIPTION OF THE BUSINESS
ALM, Inc. (a Kansas corporation) is engaged in the business of providing
accounts receivable management, billing, collection and related services to
healthcare providers primarily in the greater Kansas City metropolitan area.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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. Significant estimates include the Company's estimation of
unbilled revenue and related accounts receivable. Actual results could differ
from those estimates.
REVENUE RECOGNITION
The Company estimates fees that will be invoiced upon collection of
physician accounts receivable and recognizes such revenues when substantially
all services to be performed by the Company have been completed. Accounts
receivable -- unbilled represents amounts recognized for services rendered but
not yet invoiced and is based on the Company's estimate of the fees that will be
collected from clients when patient accounts are collected. This estimate is
calculated by applying the Company's management fee percentage to an estimate of
the clients' collections that will be achieved on amounts billed to patients and
their insurers. The Company revises its estimate of its unbilled accounts
receivable each month based on its clients' billing and collection information
for that month. The Company provides for additional costs necessary to complete
the collection process. Accounts receivable primarily represents amounts
invoiced to clients.
CASH AND CASH EQUIVALENTS
The Company considers its highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Cash
equivalents as of December 31, 1995 primarily consist of bank money market and
savings accounts.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided
primarily on the straight-line and accelerated methods over the estimated useful
lives of the assets. Leasehold improvements are amortized over the shorter of
the lease term or the estimated useful life of the related asset.
INCOME TAXES
The Company has elected to be treated as an S Corporation for income tax
purposes. As a result, the Company's earnings or loss for income tax purposes is
included in the tax returns of the individual shareholders. Accordingly, no
recognition has been given to income taxes in the accompanying financial
statements. Net earnings for financial statement purposes may differ from
taxable income reportable to shareholders as a result of differences between the
tax basis and financial reporting basis of assets and liabilities. As of
December 31, 1995, the primary differences between the tax basis and financial
reporting basis of assets and liabilities related to the cash to accrual
conversion which would include accounts receivable (billed and unbilled),
prepaid expenses, accounts payable and accrued expenses.
7
ALM, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1995 AND THREE MONTHS ENDED MARCH 31, 1995
AND 1996 (UNAUDITED)
The unaudited pro forma income tax adjustments reflect income taxes as if
the Company had operated as a C Corporation for income tax purposes.
ADVERTISING COSTS
Costs incurred related to nondirect advertising are expensed as incurred.
Advertising expense aggregated $49,734 for the year ended December 31, 1995 and
$4,945 (unaudited) and $8,151 (unaudited) for the three months ended March 31,
1995 and 1996, respectively.
STATEMENT OF CASH FLOWS
The Company made no cash payments with respect to interest or income taxes
for the year ended December 31, 1995 and for the three months ended March 31,
1995 and 1996 (unaudited).
UNAUDITED INTERIM FINANCIAL INFORMATION
The interim financial information as of and for the three month periods
ended March 31, 1995 and 1996, was prepared by the Company in a manner
consistent with the audited financial statements. The unaudited information, in
management's opinion, reflects all adjustments that are of a normal recurring
nature and that are necessary to present fairly the results for the periods
presented. The results of operations for the three month period ended March 31,
1996 are not necessarily indicative of the results to be expected for the entire
year.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
AMOUNT
----------------------------
ESTIMATED DECEMBER 31, MARCH 31,
USEFUL LIFE 1995 1996
------------- ------------ ------------
(UNAUDITED)
Furniture and fixtures.......................... 5-10 years $137,717 $138,217
Equipment....................................... 5 years 34,661 37,208
Computer software............................... 5-7 years 385,786 405,523
Leasehold improvements.......................... Life of lease 16,959 16,959
------------ ------------
575,123 597,907
Less accumulated depreciation and
amortization.................................. 509,908 515,329
------------ ------------
$ 65,215 $ 82,578
------------ ------------
------------ ------------
4. CONCENTRATION OF REVENUES
For the year ended December 31, 1995, three customers accounted for
$937,222 or 47.4% of total revenues as follows:
AMOUNT %
-------- ----
Customer 1................................................................. $480,944 24.3%
Customer 2................................................................. 231,448 11.7
Customer 3................................................................. 224,830 11.4
8
ALM, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1995 AND THREE MONTHS ENDED MARCH 31, 1995
AND 1996 (UNAUDITED)
5. EMPLOYEE BENEFIT PLANS
The Company sponsors a defined contribution profit sharing plan for
substantially all of its employees who have met the one year continuous service
requirement. The contribution is based upon a percentage of wages earned as
approved by the Board of Directors. The contribution to the Plan for the year
ended December 31, 1995 aggregated $31,699.
In addition, the Company sponsors a defined contribution 401(k) plan for
the benefit of its employees who meet the one year continuous service
requirement. The Company provides no matching contributions to this plan.
6. LEASE COMMITMENT AND RELATED PARTY TRANSACTIONS
The Company leases its office space from an affiliated entity (through
certain common ownership). The lease is on a month-to-month basis and rental
expense aggregated $79,476 for the year ended December 31, 1995 and $14,811
(unaudited) and $19,869 (unaudited) for the three months ended March 31, 1995
and 1996, respectively.
The Company entered into an agreement during 1995 with an affiliated entity
(through certain common ownership) to provide consultative services. The
agreement provides for annual payments of $65,000 for such services and expires
on December 31, 2000. However, the contract may be terminated without cause at
either party's discretion with thirty days advance written notice. The Company
recorded expense totaling $64,500 related to this agreement for the year ended
December 31, 1995 and $16,250 (unaudited) for the three months ended March 31,
1995 and 1996.
There were no payables to or receivables from the affiliated entities as of
December 31, 1995 or March 31, 1996 (unaudited) relative to these agreements.
7. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
In accordance with SFAS No. 107, Disclosures About Fair Value of Financial
Instruments, the following methods were used in estimating fair value
disclosures for significant financial instruments of the Company. The carrying
amount of cash and cash equivalents, accounts receivable and accounts payable
approximates fair value because of the short maturity of those instruments.
8. SUBSEQUENT EVENT
On May 21, 1996, the stockholders of ALM, Inc. sold substantially all
assets and liabilities of the Company to Physician Support Systems, Inc. The
accompanying financial statements do not reflect any of the effects of this
subsequent transaction.
9
(B) PRO FORMA FINANCIAL INFORMATION.
The following unaudited pro forma financial information gives effect to the
acquisition by Physician Support Systems, Inc. ('PSS') of ALM, Inc. ('ALM').
Such acquisition, which was completed on May 21, 1996, was accounted for as a
purchase. The unaudited pro forma financial statements are derived from the
historical financial statements of PSS and ALM and estimates and assumptions set
forth below and in the notes to the unaudited pro forma financial statements.
The unaudited pro forma balance sheet gives effect to the acquisition by
PSS of ALM as if such acquisition had occurred on March 31, 1996. The unaudited
pro forma balance sheet also gives effect to the acquisition by PSS of PBS
Northwest, Inc. ('PBS'), which was completed on May 8, 1996, as if such
acquisition had occurred on March 31, 1996. Such unaudited pro forma balance
sheet is derived from the unaudited consolidated balance sheet of PSS as of
March 31, 1996 included in its Quarterly Report on Form 10-Q for the three
months ended March 31, 1996 which is incorporated herein by reference, the
unaudited balance sheet of PBS as of March 31, 1996 included in its Current
Report on Form 8-K dated May 14, 1996, as amended by Amendment No. 1 thereto,
which is incorporated herein by reference as well as the unaudited balance sheet
of ALM as of March 31, 1996 included elsewhere in this Form 8-K.
The unaudited pro forma statements of operations present unaudited pro
forma results of operations for the year ended December 31, 1995 and the three
months ended March 31, 1996. For purposes of the unaudited pro forma statements
of operations, the acquisition by PSS of ALM is included as if such acquisition
had occurred on January 1, 1995. In addition, the unaudited pro forma statements
of operations show separately the results of operations of PBS, of the Acquired
Businesses (North Coast Health Care Management Group ('NCHCM'), Medical
Management Support, Inc. ('MMS') and Data Processing Systems, Inc. ('DPS'))
which were acquired by PSS effective upon the completion of its initial public
offering of common stock on February 12, 1996 and also include pro forma
adjustments related to such offering. The unaudited pro forma statement of
operations for the year ended December 31, 1995 is derived from the audited
consolidated statement of operations of PSS for the year ended December 31, 1995
included in the Company's Annual Report on Form 10-K, the audited and unaudited
statements of operations of PBS and of the Acquired Businesses for the year
ended December 31, 1995, and the audited statement of operations of ALM for the
year ended December 31, 1995 included elsewhere in this Form 8-K. The unaudited
pro forma statement of operations for the three months ended March 31, 1996 is
derived from the unaudited consolidated statement of operations of PSS for the
three months ended March 31, 1996 included in its Quarterly Report on Form 10-Q
for the three months ended March 31, 1996 (which includes the results of
operations of the Acquired Businesses from the effective dates of their
acquisitions by PSS to March 31, 1996), the unaudited statements of operations
of PBS, of the Acquired Businesses from January 1, 1996 to the effective dates
of their acquisitions, and the unaudited statement of operations of ALM for the
three months ended March 31, 1996 included elsewhere in this Form 8-K.
Pro forma adjustments are based upon preliminary estimates, available
information and certain assumptions that management deems appropriate. The
unaudited pro forma financial information presented herein are not necessarily
indicative of the results PSS would have obtained had such events occurred at
the beginning of the period, as assumed, or of the future results of PSS. The
unaudited pro forma financial information should be read in conjunction with the
financial statements and notes thereto included elsewhere in this prospectus.
10
PHYSICIAN SUPPORT SYSTEMS, INC.
PRO FORMA BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)
HISTORICAL
-------------------------------
PHYSICIAN PRO FORMA
SUPPORT ADJUSTMENTS
SYSTEMS AND PBS --------------------
SUBSIDIARIES NORTHWEST ALM PBS ALM PRO FORMA
------------ --------- ---- ------- ------- ---------
ASSETS
Cash........................................ $ 20,157 $ 271 $153 $(3,300)(a) ($1,500)(b) $15,781
Accounts receivable--billed................. 2,730 220 200 3,150
Accounts receivable--unbilled............... 5,520 257 344 6,121
Prepaid expenses and other current assets... 772 16 4 792
------------ --------- ---- ---------
Total current assets................... 29,179 764 701 25,844
------------ --------- ---- ---------
Fixed assets, net........................... 2,518 13 83 2,614
Intangible assets, net...................... 22,617 2,745(a) 1,353(b) 26,715
Other assets................................ 74 3 77
------------ --------- ---- ------- ------- ---------
$ 54,388 $ 780 $784 $ (555) $ (147) $55,250
------------ --------- ---- ------- ------- ---------
------------ --------- ---- ------- ------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable............................ 590 8 598
Accrued expenses............................ 5,922 105 150 6,177
Current portion of other long-term
liabilities............................... 520 520
Deferred income taxes....................... 39 112(a) 37(b) 188
------------ --------- ---- ---------
Total current liabilities................... 7,071 113 150 7,483
------------ --------- ---- ---------
Long-term debt.............................. 5,500 5,500
Other long-term liabilities................. 1,287 200(b) 1,487
Deferred income taxes....................... 912 912
Common stock................................ 6 1 1 (1)(a) (1)(b) 6
Additional paid-in capital.................. 43,678 10 178 (10)(a) (178)(b) 43,928
656(a) 455(b)
(656)(a) (455)(b)
-- 250(b)
Retained earnings........................... (4,066) 656 455 (656)(a) (455)(b) (4,066)
------------ --------- ---- ------- ------- ---------
39,618 667 634 (667) (384) 39,868
------------ --------- ---- ------- ------- ---------
$ 54,388 $ 780 $784 $ (555) $ (147) $55,250
------------ --------- ---- ------- ------- ---------
------------ --------- ---- ------- ------- ---------
See notes to pro forma financial statements.
11
PHYSICIAN SUPPORT SYSTEMS, INC.
PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
HISTORICAL
----------------------- PRO FORMA
PHYSICIAN ACQUISITION PBS NORTHWEST
SUPPORT ADJUSTMENTS ------------------------
SYSTEMS ----------- PRO FORMA PRO FORMA
AND ACQUIRED ACQUIRED OFFERING ACQUISITION
SUBSIDIARY BUSINESSES BUSINESSES ADJUSTMENTS SUBTOTAL HISTORICAL ADJUSTMENTS
---------- ---------- ----------- ----------- -------- ---------- -----------
Revenues.......................... $ 19,584 $8,704 $ 28,288 $2,113
Operating Expenses:
Wages and salaries............ 9,661 4,016 $ (100)(c) 13,577 1,087
General and administrative 6,846 2,499 9,345 431
Depreciation and
amortization................ 3,378 181 614(d) 4,173 9 $ 144(d)
---------- ---------- -------- ----------
19,885 6,696 27,095 1,527
---------- ---------- -------- ----------
Income (loss) from operations (301) 2,008 1,193 586
Other income (expense)
Interest...................... (1,476) (20) $ 2,406(e) 910 14 (165)(f)
Other......................... 4 (55) (51)
---------- ---------- -------- ----------
(1,472) (75) 859 14
---------- ---------- -------- ----------
Income (loss) before income taxes
(benefit)....................... (1,773) 1,933 2,052 600
Income taxes (benefit)............ (500) 149 418(g) 962(g) 1,030 116(g)
---------- ---------- -------- ----------
Net income (loss)................. $ (1,273) $1,784 $ 1,022 $ 600
---------- ---------- -------- ----------
---------- ---------- -------- ----------
Weighted average shares
outstanding.....................
Net income (loss) per share.......
ALM
------------------------
PRO FORMA
ACQUISITION
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
Revenues.......................... $1,978 $32,379
Operating Expenses:
Wages and salaries............ 752 15,416
General and administrative 760 10,536
Depreciation and
amortization................ 57 96(d) 4,479
---------- ---------
1,569 30,431
---------- ---------
Income (loss) from operations 409 1,948
Other income (expense)
Interest...................... 4 (75)(f) 688
Other......................... 18 (33)
---------- ---------
22 655
---------- ---------
Income (loss) before income taxes
(benefit)....................... 431 2,603
Income taxes (benefit)............ 104(g) 1,250
---------- ---------
Net income (loss)................. $ 431 $ 1,353
---------- ---------
---------- ---------
Weighted average shares
outstanding..................... 6,276,628(h)
---------
---------
Net income (loss) per share....... 0.22
----
----
See notes to pro forma financial statements.
12
PHYSICIAN SUPPORT SYSTEMS, INC.
PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
HISTORICAL
------------------------------------------
PHYSICIAN PRO FORMA
SUPPORT ACQUISITION ADJUSTMENTS
SYSTEMS ---------------------------
AND ACQUIRED PBS ACQUIRED PBS SUB
SUBSIDIARY BUSINESSES NORTHWEST ALM BUSINESS NORTHWEST ALM TOTAL
---------- ---------- --------- ---- -------- --------- --- ------
Revenues..................................... $6,399 $729 $ 565 $473 $8,166
Operating Expenses:
Wages and salaries....................... 3,325 390 281 196 4,192
General and administrative............... 2,218 210 105 165 2,698
Depreciation and amortization............ 961 64 1 5 $ 50(d) $36(d) $24(d) 1,141
---------- ----- --------- ---- ------
6,504 664 387 366 8,031
---------- ----- --------- ---- ------
Income (loss) from operations................ (105) 65 178 107 135
Other income (expense)
Interest................................. (146) (1) (147)
Other.................................... 136 1 5 142
---------- ----- --------- ---- ------
(10) (1) 1 5 (5)
---------- ----- --------- ---- ------
Income (loss) before income taxes
(benefit).................................. (115) 64 179 112 130
Income taxes (benefit)....................... (56) 5(g) 57(g) 35 (f) 42
---------- ----- --------- ---- ------
Net income (loss)............................ $ (59) $ 64 $ 179 $112 $ 88
---------- ----- --------- ---- ------
---------- ----- --------- ---- ------
Weighted average shares outstanding..........
Net income (loss) per share..................
PRO FORMA
OFFERING
ADJUSTMENTS PRO FORMA
----------- ----------
<
Revenues..................................... $ 8,166
Operating Expenses:
Wages and salaries....................... 4,192
General and administrative............... 2,698
Depreciation and amortization............ 1,141
----------
8,031
----------
Income (loss) from operations................ 135
Other income (expense)
Interest................................. $ 205(e) 58
Other.................................... 142
----------
200
----------
Income (loss) before income taxes
(benefit).................................. 335
Income taxes (benefit)....................... 82(g) 124
----------
Net income (loss)............................ $ 211
----------
----------
Weighted average shares outstanding.......... 6,276,628(h)
----------
----------
Net income (loss) per share.................. $0.03
-----
-----
See notes to pro forma financial statements.
13
1. UNAUDITED PRO FORMA BALANCE SHEET ADJUSTMENTS
(a) Adjustment to reclassify undistributed S Corporation earnings to
additional paid-in capital and to reflect the acquisition of PBS by PSS. The
purchase price of $3,300,000 (including transaction fees of approximately
$300,000) is allocated as follows:
($000S)
-------
Current assets....................................................................... $ 764
Fixed assets......................................................................... 13
Other assets......................................................................... 3
Intangible assets.................................................................... 2,745
Current liabilities.................................................................. (225)
-------
Total purchase price............................................................ $ 3,300
-------
-------
Intangible assets include the following:
($000S)
-------
Non-compete agreement................................................................ $ 100
Goodwill............................................................................. 2,645
-------
Total intangible assets......................................................... $ 2,745
-------
-------
Useful lives assigned to intangible assets are as follows:
ESTIMATED
USEFUL LIFE
-----------------
Non-compete agreement.................................................. Life of agreement
Goodwill............................................................... 20 years
(b) Adjustment to reclassify undistributed S Corporation earnings to
additional paid-in capital and to reflect the acquisition of ALM by PSS. The
purchase price of $1,950,000 (including $1,400,000 of cash and 11,628 shares of
common stock valued at $250,000 paid at closing and deferred purchase price of
$200,000 payable under certain circumstances two years after closing, and also
including transaction fees of approximately $100,000) is allocated as follows:
($000S)
-------
Current assets....................................................................... $ 701
Fixed assets......................................................................... 83
Intangible assets.................................................................... 1,353
Current liabilities.................................................................. (187)
-------
Total purchase price............................................................ $ 1,950
-------
-------
Intangible assets include the following:
($000S)
-------
Non-compete agreement................................................................ $ 100
Goodwill............................................................................. 1,253
-------
Total intangible assets......................................................... $ 1,353
-------
-------
Useful lives assigned to intangible assets are as follows:
ESTIMATED
USEFUL LIFE
-----------------
Non-compete agreement.................................................. Life of agreement
Goodwill............................................................... 20 years
14
2. UNAUDITED PRO FORMA STATEMENT OF OPERATIONS ADJUSTMENTS
(c) Adjustment to reflect the decrease in compensation expense as a result
of employment agreements with NCHCM executive officers entered into as a result
of the acquisition by PSS.
(d) Adjustment to reflect the increase in amortization expense associated
with the intangible assets recorded by PSS in purchase accounting related to the
acquisitions. The goodwill associated with the acquisitions is being amortized
on a straight line basis over an estimated life of 20 years.
(e) Adjustment to reflect the decrease in interest expense and increase in
interest income associated with the repayment of long-term debt as a result of
the offering.
(f) Adjustment to reduce interest income earned in adjustment(e) as a
result of the purchases of PBS and ALM.
(g) Adjustment to reflect the income tax effects of the acquisitions.
(h) The weighted average shares outstanding used to calculate pro forma
earnings per share is 6,276,628 shares, representing the number of shares issued
and outstanding as a result of the offering and the ALM acquisition.
(C) EXHIBITS.
99.1 -- Physician Support Systems, Inc., Form 10-Q (File 33-80731) for the quarter ended March 31, 1996 previously
filed and incorporated herein by reference.
99.2 -- Physician Support Systems, Inc. Form 8-K (File 33-80731) dated May 14, 1996 as amended by Amendment No. 1
thereto dated July 15, 1996, previously filed and incorporated herein by reference.
15
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this Amendment No. 1 to its report to be signed
on its behalf by the undersigned hereunder duly authorized.
PHYSICIAN SUPPORT SYSTEMS, INC.
Dated: August 2, 1996.
/S/ DAVID S. GELLER
By ..................................
DAVID S. GELLER
SENIOR VICE PRESIDENT