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EXHIBIT 99.1
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The unaudited pro forma condensed combined financial information as of December
31, 1995 and for the year ended December 31, 1995 are set forth on the
following pages. The pro forma information has been prepared utilizing the
historical financial statements of ENVOY, NEIC, and Teleclaims, Inc. The pro
forma financial information gives pro forma effect to the NEIC and the
Teleclaims acquisitions as if they had occurred on December 31, 1995 for
balance sheet purposes and as of January 1, 1995 for purposes of the pro forma
statement of operations. In addition, the pro forma condensed combined
statement of operations for the year ended December 31, 1995 reflects the
effects of (1) ENVOY's equity investment (made in January 1995) in EMC, as if
the investment was made as of January 1, 1995; and (2) NEIC's acquisition of
Medical Electronic Data Exchange, Inc. and Medical Electronic Data Index, Inc.
(referred to herein collectively as "Synaptek"), a medical claims clearinghouse
and electronic data transfer business completed in July 1995, as if such
acquisition was made by ENVOY as of January 1, 1995.
The NEIC and Teleclaims acquisitions will be 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. The unaudited pro forma
condensed combined statements of operations, which include results of
operations as if the acquisitions had been consummated, do not reflect the
effects of potential cost savings and operating synergies anticipated to result
from the acquisitions. Certain amounts in the historical financial statements
of NEIC, Synaptek, and Teleclaims have been classified to conform to the
financial presentation of ENVOY.
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PRO FORMA CONDENSED COMBINED BALANCE SHEET (UNAUDITED)
DECEMBER 31, 1995
SUBTOTAL
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
ENVOY TELECLAIMS ADJUSTMENTS TELE/ENV
---------------------------------------------------------------
(Unaudited) (Dollars in Thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 222 $ _ $ _ $ 222
Short-term investments 5,103 _ _ 5,103
Accounts receivable--net 7,610 192 _ 7,802
Inventories 2,092 _ _ 2,092
Deferred income taxes 300 _ _ 300
Other current assets 465 18 _ 483
-------------------------------------------------------------
Total current assets 15,792 210 _ 16,002
Purchased research and development _ _ (m) 700 _
(m) (700)
Property and equipment:
Equipment 16,474 721 _ 17,195
Furniture and fixtures 704 45 _ 749
Leasehold improvements 904 6 _ 910
-------------------------------------------------------------
18,082 772 _ 18,854
Less accumulated depreciation (5,314) (516) _ (5,830)
-------------------------------------------------------------
12,768 256 _ 13,024
Other assets 1,590 279 _ 1,869
Deferred loan costs _ _ _ _
Intangibles _ 329 (f) (329) 300
(j) 300
Goodwill _ (k) (198) 182
(l) 380
-------------------------------------------------------------
Total assets $ 30,150 $ 1,074 $ 153 $ 31,377
=============================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 388 $ 18 $ _ $ 406
Accrued salaries and other current
liabilities 4,127 29 _ 4,156
Due to affiliates--loan--current _ _ _ _
Current portion of capital lease _ _ _ _
obligation
Preferred redeemable stock _ _ _ _
-------------------------------------------------------------
Total current liabilities 4,515 47 _ 4,562
Senior bank debt _ _ _ _
Long-term debt 10,000 _ _ 10,000
Other liabilities _ _ _ _
Deferred income taxes 300 _ (l) 380 414
(m) (266)
-------------------------------------------------------------
Total liabilities 14,815 47 114 14,976
Shareholders' equity:
Series B convertible preferred stock _ _ _ _
Common stock _ _ _ _
11,289 _ (a) 1,500 12,789
Additional paid-in capital 7,155 2,655 (a) (2,655) 7,155
Retained (deficit) earnings (3,109) (1,628) (a) 1,628 (3,543)
(m) 266
(m) (700)
-------------------------------------------------------------
Total shareholders' equity 15,335 1,027 39 16,401
-------------------------------------------------------------
Total liabilities and shareholders' equity $ 30,150 $ 1,074 $ 153 $ 31,377
=============================================================
SUBTOTAL
HISTORICAL PRO FORMA PRO FORMA PRO FORMA
NEIC COMBINED ADJUSTMENTS COMBINED
-----------------------------------------------------------
(Unaudited) (Dollars in Thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 4,681 $ 4,903 (b) $ 86,150 $ 4,253
(d) (86,150)
(e) (650)
Short-term investments 4,409 9,512 9,512
Accounts receivable--net 6,188 13,990 _ 13,990
Inventories _ 2,092 _ 2,092
Deferred income taxes 4,620 4,920 _ 4,920
Other current assets 144 627 _ 627
---------------------------------------------------------
Total current assets 20,042 36,044 (650) 35,394
Purchased research and development _ _ (m) 30,000 _
(m) (30,000)
Property and equipment:
Equipment 4,822 22,017 (e) (806) 21,211
Furniture and fixtures 2,312 3,061 _ 3,061
Leasehold improvements 809 1,719 _ 1,719
---------------------------------------------------------
7,943 26,797 (806) 25,991
Less accumulated depreciation (4,137) (9,967) _ (9,967)
---------------------------------------------------------
3,806 16,830 (806) 16,024
Other assets _ 1,869 _ 1,869
Deferred loan costs _ _ (i) 1,200 1,200
Intangibles _ 300 (j) 19,600 19,900
Goodwill 3,892 4,074 (f) (3,892) 46,377
(k) 27,653
(l) 18,542
---------------------------------------------------------
Total assets $ 27,740 $ 59,117 $ 61,647 $ 120,764
=========================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,635 $ 6,041 (h) $ 5,950 $ 11,991
Accrued salaries and other current
liabilities 31 4,187 _ 4,187
Due to affiliates--loan--current 2,385 2,385 _ 2,385
Current portion of capital lease 174 174 _ 174
obligation
Preferred redeemable stock _ _ (c) 2,200 2,200
-------------------------------------------------------------
Total current liabilities 8,225 12,787 8,150 20,937
Senior bank debt _ _ (b) 41,050 41,050
Long-term debt _ 10,000 _ 10,000
Other liabilities 383 383 _ 383
Deferred income taxes (2,063) (1,649) (l) 18,542 5,493
(m) (11,400)
-------------------------------------------------------------
Total liabilities 6,545 21,521 56,342 77,863
Shareholders' equity:
Series B convertible preferred stock _ _ (b) 40,100 40,100
Common stock _ _ (b) 5,000 _
339 13,128 (g) (339) 17,789
Additional paid-in capital 36,982 44,137 (g) (36,982) 7,155
Retained (deficit) earnings (16,126) (19,669) (g) 16,126 (22,143)
(m) 11,400
(m) (30,000)
-------------------------------------------------------------
Total shareholders' equity 21,195 37,596 5,305 42,901
---------------------------------------------------------
Total liabilities and shareholders' equity $ 27,740 $ 59,117 $ 61,647 $ 120,764
=========================================================
See accompanying notes to unaudited pro forma condensed combined financial
information.
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PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1995
SUBTOTAL
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
ENVOY TELECLAIMS ADJUSTMENTS TELE/ENV
-----------------------------------------------------------
(Unaudited) (Dollars in Thousands)
Revenues $ 25,205 $ 903 $ _ $ 26,108
Operating costs and expenses:
Cost of revenues 15,435 818 _ 16,253
Selling, general and administrative 8,243 671 _ 8,914
Depreciation and amortization 2,468 172 (n) 61 2,734
(s) 33
---------------------------------------------------------
Operating income (loss) (941) (758) (94) (1,793)
Other income (expense):
Interest income 380 31 _ 411
Interest expense (513) _ _ (513)
FDC Management Services fee 850 _ _ 850
---------------------------------------------------------
717 31 _ 748
---------------------------------------------------------
Income (loss) from continuing operations
before income taxes and loss in investee (224) (727) (94) (1,045)
Income taxes _ _ _ _
Loss in investee (1,776) _ _ (1,776)
---------------------------------------------------------
Income (loss) from continuing operations $ (2,000) $ (727) $ (94) $ (2,821)
=========================================================
Loss per common share from continuing
operations $ (0.18)
========
Weighted average common shares outstanding 11,241 (o) 73
========
HISTORICAL
FINANCIAL DATA HISTORICAL
HISTORICAL SUBTOTAL SYNAPTEK FINANCIAL DATA
NEIC PRO FORMA JAN-JULY '95(p) EMC-JAN.- '95
----------------------------------------------------------------
(Unaudited) (Dollars in Thousands)
Revenues $ 37,444 $ 63,552 $ 1,187 $ _
Operating costs and expenses:
Cost of revenues 14,757 31,010 519 _
Selling, general and administrative 14,129 23,043 624 _
Depreciation and amortization 1,221 3,955 70 _
-------------------------------------------------------------
Operating income (loss) 7,337 5,544 (26) _
Other income (expense):
Interest income 325 736 _ _
Interest expense (179) (692) (22) _
FDC Management Services fee _ 850 _ _
-------------------------------------------------------------
146 894 (22) _
-------------------------------------------------------------
Income (loss) from continuing operations
before income taxes and loss in investee 7,483 6,438 (48) _
Income taxes (2,881) (2,881) _ _
Loss in investee _ (1,776) _ (q) (24)
-------------------------------------------------------------
Income (loss) from continuing operations $ 4,602 $ 1,781 $ (48) $ (24)
=============================================================
Loss per common share from continuing
operations
Weighted average common shares outstanding
SUBTOTAL
PRO FORMA PRO FORMA PRO FORMA
COMBINED ADJUSTMENTS COMBINED
---------------------------------------------
(Unaudited) (Dollars in Thousands)
Revenues $ 64,739 $ _ $ 64,739
Operating costs and expenses:
Cost of revenues 31,529 _ 31,529
Selling, general and administrative 23,667 _ 23,667
Depreciation and amortization 4,025 (r) 4,600 23,996
(n) 15,398
(t) (27)
---------------------------------------------
Operating income (loss) 5,518 (19,971) (14,453)
Other income (expense):
Interest income 736 _ 736
Interest expense (714) (u) (240) (4,649)
(v) (3,695)
FDC Management Services fee 850 _ 850
---------------------------------------------
872 (3,935) (3,063)
---------------------------------------------
Income (loss) from continuing operations
before income taxes and loss in investee 6,390 (23,906) (17,516)
Income taxes (2,881) (w) 2,881 _
Loss in investee (1,800) _ (1,800)
---------------------------------------------
Income (loss) from continuing operations $ 1,709 $ (21,025) $ (19,316)
=============================================
Loss per common share from continuing
operations $ (1.66)
==========
Weighted average common shares outstanding (x) 333 11,647
==========
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 November 30, 1995, ENVOY Corporation ("ENVOY") entered into an agreement and
plan of merger (the "merger agreement") with NEIC. The merger was approved by
the shareholders on March 6, 1996 and closed immediately thereafter. In the
merger, each share of outstanding NEIC common stock was converted into the
right to receive $2,606.94 cash, for an aggregate consideration of $86,150,000.
An additional 840 shares of NEIC cumulative redeemable preferred stock will
remain outstanding and may be redeemed by or put at any time on and after
August 1, 1996 at a redemption price of $2,606.94 per share, or an aggregate of
$2,200,000.
The cash purchase price was funded by cash proceeds from equity investments in
ENVOY and conventional debt financing. An aggregate of 3,730,233 shares of
Series B convertible preferred stock were sold for a total consideration of
$40,100,000, or $10.75 per Series B preferred stock. Each share of the Series
B preferred stock is convertible into one share of ENVOY common stock. ENVOY
has bank financing of $50,000,000, consisting of a $25,000,000 term loan and a
$25,000,000 revolving credit facility. Additionally, ENVOY sold 333,333 shares
of ENVOY common stock for an aggregate purchase price of $5,000,000.
The financing for the NEIC acquisition is assumed to be as follows (in
thousands):
Proceeds of Series B convertible preferred stock $ 40,100
Proceeds of common stock 5,000
Bank financing 41,050
--------------
Total $ 86,150
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The merger is accounted for under the purchase method of accounting applying
the provisions of Accounting Principles Board Opinion No. 16 ("APB 16").
Pursuant to the requirements of APB 16, the aggregate purchase price, based on
appraised fair values, will be allocated to the tangible and intangible assets
and liabilities assumed based on their estimated fair value at the date of the
acquisition. The estimated aggregate purchase price to be allocated to the
assets acquired and liabilities assumed consists of (in thousands):
Cash paid for NEIC stock $ 86,150
Preferred stock fair value 2,200
Estimated transaction and acquisition costs 5,950
--------------
Total $ 94,300
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Notes to Unaudited Pro Forma Condensed
Combined Financial Information (continued)
The allocation of the purchase price for purposes of the pro forma financial
information has been estimated as follows (in thousands):
Current assets $ 14,772
Property and equipment 3,000
Deferred tax asset 6,683
Deferred loan costs 1,200
Liabilities assumed (8,608)
Identifiable intangibles 19,600
In-process technology 30,000
Unallocated excess purchase price over net
assets acquired (goodwill) 46,195
Estimated tax effect of temporary differences
related to all assets and liabilities, excluding
goodwill ($27,653) (18,542)
------------
$ 94,300
============
The allocation is based on management's preliminary estimates. The actual
allocations will be based on further studies and valuations and may change
during the allocation period.
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Notes to Unaudited Pro Forma Condensed
Combined Financial Information (continued)
PRO FORMA BALANCE SHEET ADJUSTMENTS
(a) Also, on March 1, 1996, ENVOY acquired Teleclaims, Inc., an Alabama
corporation, in exchange for 73,242 shares of common stock for a
purchase price of approximately $1,500,000. The acquisition is
accounted for under the purchase method of accounting applying the
provisions of APB No. 16. The allocation is based on preliminary
estimates. The actual allocations will be based on further studies and
valuations and may change during the allocation period. The allocation
of the purchase price for purposes of the pro forma financial
information is as follows (in thousands):
Current assets $ 210
Property and equipment 256
Other assets 279
Liabilities assumed (47)
Identifiable intangibles 300
In-process technology 700
Estimated tax effect of temporary differences
related to all assets and liabilities, excluding
goodwill ($198) (380)
Unallocated excess purchase price over net
assets acquired (goodwill) 182
------------
$ 1,500
============
Also records elimination of Teleclaims' stockholders' equity of
$1,027,000.
(b) Records cash proceeds and debt and equity anticipated to be issued in
the NEIC merger as follows (in thousands):
Bank financing $ 41,050
Issuance of Series B convertible preferred stock 40,100
Issuance of common stock 5,000
-----------
Cash proceeds $ 86,150
===========
(c) Records fair value of NEIC preferred stock that may be redeemed or put
at a redemption price of an aggregate of $2,200,000. No dividend is
attributable to preferred stock.
(d) Records cash paid to NEIC shareholders as part of the purchase price.
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Notes to Unaudited Pro Forma Condensed
Combined Financial Information (continued)
PRO FORMA BALANCE SHEET ADJUSTMENTS (CONTINUED)
(e) Records estimated assumed write-down of $806,000 of NEIC property and
equipment to fair value and records settlement of cash awards of
$650,000 to be paid by NEIC prior to the merger.
(f) Records elimination of goodwill of NEIC and elimination of intangible
assets of Teleclaims.
(g) Records elimination of NEIC stockholders' equity.
(h) Records the estimated transaction and acquisition costs associated with
the NEIC acquisition.
(i) Records estimated deferred loan costs of $1,200,000 related to the NEIC
bank financing.
(j) Records the preliminary estimate of $19,600,000 of identifiable
intangible assets acquired of NEIC and $300,000 of Teleclaims.
(k) Records the preliminary unallocated excess purchase price over net
assets acquired of $27,653,000 for NEIC and $198,000 for Teleclaims.
(l) Records estimated deferred income taxes and additional goodwill of NEIC
and Teleclaims of $18,542,000 and $380,000, respectively, related to
temporary differences related to all assets acquired and liabilities
assumed, excluding goodwill ($27,653,000 for NEIC).
(m) Records the one time write-off for the NEIC merger and the Teleclaims
acquisition of acquired in-process technology of $30,000,000 and
$700,000, respectively, and related deferred income taxes of
$11,400,000 and $266,000, respectively, identified in the purchase
price allocation. The amount allocated to technology in process and
related deferred income taxes will be charged to expense in the first
statement of operations for the combined companies inasmuch as these
amounts relate to research and development that has not reached
technological feasibility and for which there is no alternative future
use.
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Notes to Unaudited Pro Forma Condensed
Combined Financial Information (continued)
PRO FORMA STATEMENT OF OPERATIONS ADJUSTMENTS
(n) Records the amortization over a three-year life on the straight-line
basis for the unallocated excess purchase price over the net assets
acquired (goodwill) for the NEIC and Teleclaims acquisitions. In
connection with the preliminary allocation of the purchase price,
$30,000,000 for NEIC and $700,000 for Teleclaims represents a charge for
in-process technology and $11,400,000 for NEIC and $266,000 for
Teleclaims represents the related deferred income tax benefit to be
recorded in the initial period subsequent to the consummation of the
acquisitions. The $30,700,000 charge and related income tax benefit of
$11,666,000 is excluded from the accompanying pro forma statement of
operations as it is a nonrecurring item consistent with Rule 11-02 of
Regulation S-X.
(o) Adjustment to reflect the issuance of 73,242 shares of ENVOY Common
Stock at a value of $20.48 per common share or an aggregate value of
$1,500,000.
(p) Records historical financial data of Synaptek prior to its acquisition
by NEIC for the period January through July 1995.
(q) Records historical financial data of EMC for the one-month period
January 1995.
(r) Records the amortization of acquired identifiable intangible assets
related to the NEIC merger on a straight-line basis over periods of two
to nine years.
(s) Records the amortization of acquired identifiable intangible assets
related to the Teleclaims acquisition on a straight-line basis over a
period of nine years.
(t) Records the elimination of amortization of intangibles for Synaptek.
(u) Records amortization of estimated deferred loan costs incurred in
connection with the acquisition over the life of the related debt.
(v) Records interest expense on long-term debt incurred in connection with
the acquisition at an annual interest rate of 9%.
(w) Records the elimination of income tax provision for NEIC.
(x) Adjustment to reflect the issuance of 333,333 shares of ENVOY Common
Stock in connection with the NEIC merger at a value of $15.00 per common
share or an aggregate value of $5,000,000.
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Notes to Unaudited Pro Forma Condensed
Combined Financial Information (continued)
CERTAIN OTHER MATTERS
Anticipated Synergies: The accompanying pro forma condensed combined
statements of operations do not reflect any "synergies" anticipated to result
from the acquisitions. ENVOY's management believes that operating cost savings
of approximately $10,000,000 annually will result once the companies have
combined their corporate offices and operations.
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