-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Mjr5Rr4TBixrQuR4wpE6DCLSBmefxr8AIb9f3EsJs/DVfrvttguxCFU6kHi3PAaN 1Cw1fr1paiKtv+eA5gN7dQ== 0001005477-97-002175.txt : 19970912 0001005477-97-002175.hdr.sgml : 19970911 ACCESSION NUMBER: 0001005477-97-002175 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970617 ITEM INFORMATION: FILED AS OF DATE: 19970828 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMPLETE MANAGEMENT INC CENTRAL INDEX KEY: 0001002063 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT CONSULTING SERVICES [8742] IRS NUMBER: 113149119 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-14356 FILM NUMBER: 97671893 BUSINESS ADDRESS: STREET 1: 254 W 31ST ST CITY: NEW YORK STATE: NY ZIP: 10004 BUSINESS PHONE: 2128681188 MAIL ADDRESS: STREET 1: 254 WEST 31ST STREET CITY: NEW YORK STATE: NY ZIP: 10001-2813 8-K/A 1 FORM 8-K/A 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 Date of Report (Date of earliest event reported): June 17, 1997 COMPLETE MANAGEMENT, INC. ------------------------- (Exact name of Registrant as specified in its charter) NEW YORK 0-27260 11-3149119 - ------------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 254 West 31st Street, New York, New York 10001 -------------------------------------------------- (Address of principal executive office) (Zip Code) (212) 868-1188 -------------- Registrant's telephone number, including area code: N/A - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) Item 7: Financial Statements, Pro Forma Financial Information and Exhibits Financial Statement of Business Acquired: The financial statements of Consumer Health Network, Inc. commencing on page F-2 hereof. Pro Forma Financial Information The unaudited pro forma consolidated statements of income for Complete Management, Inc. and its subsidiaries commencing on page F-10 hereof. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. COMPLETE MANAGEMENT, INC. Date: August 27, 1997 By: /s/ Dennis Simmons, ------------------------------------- Dennis Simmons, Executive Vice President 2 I N D E X PAGE ---- CONSUMER HEALTH NETWORK, INC. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-2 BALANCE SHEETS DECEMBER 31, 1996 AND 1995 F-3 STATEMENTS OF INCOME AND RETAINED EARNINGS YEARS ENDED DECEMBER 31, 1996 AND 1995 F-4 STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1996 AND 1995 F-5 NOTES TO FINANCIAL STATEMENTS F-6-9 COMPLETE MANAGEMENT, INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1997 AND FOR THE YEAR ENDED DECEMBER 31, 1996. F-10-11 F-1 CONSUMER HEALTH NETWORK, INC. (formerly C.H.N. ACQUISITION CORP., INC. D/B/A CONSUMER HEALTH NETWORK) REPORT ON FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996 AND 1995 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors Consumer Health Network, Inc. We have audited the accompanying balance sheets of CONSUMER HEALTH NETWORK, INC. (formerly C.H.N. Acquisition Corp., Inc. d/b/a Consumer Health Network) as of December 31, 1996 and 1995, and the related statements of income and retained earnings and cash flows for the years 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 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 financial position of Consumer Health Network, Inc. as of December 31, 1996 and 1995, and its results of operations and cash flows for the years then ended, in conformity with generally accepted accounting principles. /s/ J. H. Cohn LLP Roseland, New Jersey March 12, 1997 F-2 CONSUMER HEALTH NETWORK, INC. BALANCE SHEETS DECEMBER 31, 1996 AND 1995 ASSETS 1996 1995 ------ ---------- ---------- Current assets: Cash and cash equivalents $2,457,472 $1,495,477 Accounts receivable, net of allowance for doubtful accounts of $87,000 and $69,000 1,164,789 891,150 Prepaid expenses and sundry receivable 26,013 52,470 ---------- ---------- Total current assets 3,648,274 2,439,097 Furniture and equipment, at cost, net of accumulated depreciation 273,380 240,117 Intangible assets, net of accumulated amortization of $20,833 in 1996 104,167 125,000 Deposits 18,551 30,027 ---------- ---------- Totals $4,044,372 $2,834,241 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Current portion of notes payable - bank $ 30,672 $ 79,560 Current portion of obligations under capital leases 17,879 15,731 Accounts payable and accrued expenses 373,300 591,597 ---------- ---------- Total current liabilities 421,851 686,888 Notes payable - bank, net of current portion 15,299 50,415 Obligations under capital leases, net of current portion 60,868 78,744 ---------- ---------- Total liabilities 498,018 816,047 ---------- ---------- Commitments and contingency Stockholders' equity: Common stock, no par value; authorized 1,000,000 shares; issued and outstanding 1,564 shares, at stated value of $1 per share 1,564 1,564 Additional paid-in capital 816,771 816,771 Retained earnings 2,728,019 1,199,859 ---------- ---------- Total stockholders' equity 3,546,354 2,018,194 ---------- ---------- Totals $4,044,372 $2,834,241 ========== ========== See Notes to Financial Statements. F-3 CONSUMER HEALTH NETWORK, INC. STATEMENTS OF INCOME AND RETAINED EARNINGS YEARS ENDED DECEMBER 31, 1996 AND 1995 INCOME 1996 1995 ------ ---------- ---------- Net revenue $7,853,265 $6,211,415 ---------- ---------- Expenses: Salaries and fringe benefits 2,593,284 2,106,338 Selling 594,140 587,711 General and administrative 1,493,909 1,022,264 Depreciation and amortization 155,950 84,022 ---------- ---------- Totals 4,837,283 3,800,335 ---------- ---------- Operating income 3,015,982 2,411,080 ---------- ---------- Other income (expense): Special professional fees (155,825) (187,643) Interest income, net 53,144 1,667 ---------- ---------- Totals (102,681) (185,976) ---------- ---------- Income before income taxes 2,913,301 2,225,104 Provision for income taxes 88,500 48,000 ---------- ---------- Net income 2,824,801 2,177,104 RETAINED EARNINGS ----------------- Balance, (deficit), beginning of year 1,199,859 (42,012) Distributions to stockholders (1,296,641) (935,233) ---------- ---------- Balance, end of year $2,728,019 $1,199,859 ========== ========== See Notes to Financial Statements. F-4 CONSUMER HEALTH NETWORK, INC. STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1996 AND 1995 1996 1995 ---------- ---------- Operating activities: Net income $2,824,801 $2,177,104 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 155,950 84,022 Provision for bad debts 47,746 38,000 Changes in operating assets and liabilities: Accounts receivable (321,385) (59,182) Prepaid expenses and sundry receivables 26,457 (31,180) Deposits 11,476 (4,173) Accounts payable and accrued expenses (93,297) 114,484 ---------- ---------- Net cash provided by operating activities 2,651,748 2,319,075 ---------- ---------- Investing activities: Acquisition of company (125,000) Purchase of furniture and equipment (168,380) (85,715) ---------- ---------- Net cash used in investing activities (293,380) (85,715) ---------- ---------- Financing activities: Payment of notes payable (84,004) (79,560) Payment of obligations under capital leases (15,728) (11,646) Distributions to stockholders (1,296,641) (935,233) ---------- ---------- Net cash used in financing activities (1,396,373) (1,026,439) ---------- ---------- Net increase in cash and cash equivalents 961,995 1,206,921 Cash and cash equivalents, beginning of year 1,495,477 288,556 ---------- ---------- Cash and cash equivalents, end of year $2,457,472 $1,495,477 ========== ========== Supplemental disclosure of cash flow data: Interest paid $ 14,776 $ 23,383 ========== ========== Income taxes paid $ 78,063 $ 69,833 ========== ========== Supplemental disclosure of noncash investing and financing activities: During 1995, the Company acquired equipment in the amount of $72,440 under capital lease obligations. See Notes to Financial Statements. F-5 CONSUMER HEALTH NETWORK, INC. NOTES TO FINANCIAL STATEMENTS Note 1 - Business and summary of accounting policies: Business: Consumer Health Network, Inc., formerly C.H.N. Acquisition Corp. Inc. d/b/a/ Consumer Health Network, (the "Company") is a preferred provider organization establishing economic partnerships between the payers of health care benefits and the providers of health care services. The Company has contracts with hospitals, physicians and other health care providers to provide discounted fees to payers of such services who use the Company's network. Because of these separate relationships with the provider of services and the payer of such services, the Company is not a risk entity. In December 1995, another preferred provider organization was merged into the Company. The assets of the acquired entity consisted exclusively of contracts with physicians and other healthcare providers to provide discounts to network members. The purchase price was $125,000 which was paid in 1996. In conjunction with the merger, stockholders of the acquired organization executed noncompete agreements. Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Cash equivalents: The Company considers all highly liquid investments with a maturity of three months or less when purchased as cash equivalents. Concentrations of credit risk: Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company maintains its cash and cash equivalents in bank deposit accounts which, at times, may exceed Federally insured limits. A substantial portion of the Company's revenue is derived from, and its accounts receivable are concentrated in, entities in the health care industry. At December 31, 1996, accounts receivable from five of these entities accounted for approximately 74% of total accounts receivable. The Company routinely assesses the financial strength of its customers and establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information. F-6 CONSUMER HEALTH NETWORK, INC. NOTES TO FINANCIAL STATEMENTS Note 1 - Business and summary of accounting policies (concluded): Depreciation and amortization: Depreciation of furniture and equipment is calculated on accelerated methods by annual charges to operations over the estimated useful lives of the assets. Acquisition costs are amortized over the six year period of the noncompete agreement. Advertising: The Company expenses the cost of advertising and promotions as incurred. Advertising costs charged to operations were $99,652 and $201,624 in 1996 and 1995, respectively. Income taxes: The Company has elected to be treated as an "S" Corporation under the applicable sections of the Internal Revenue Code. Under these sections, corporate income or loss, in general, is allocated to the stockholders for inclusion in their personal income tax returns. Accordingly, there is no provision for Federal income tax in the accompanying financial statements. The Company has also elected to be treated as an "S" Corporation for New Jersey state income tax purposes. However, the State of New Jersey does impose a tax on "S" Corporation income at a reduced rate and, accordingly, a provision for such tax has been made in the accompanying financial statements. Note 2 - Furniture and equipment: Furniture and equipment consists of the following: Estimated Useful Lives 1996 1995 ---------- -------- -------- Equipment 5 years $279,618 $239,992 Office furniture and fixtures 7 years 151,349 123,826 Software 3-5 years 143,468 42,237 -------- -------- 574,435 406,055 Less accumulated depreciation and amortization 301,055 165,938 -------- -------- Totals $273,380 $240,117 ======== ======== F-7 CONSUMER HEALTH NETWORK, INC. NOTES TO FINANCIAL STATEMENTS Note 2 - Furniture and equipment (concluded): Included in equipment and office furniture is $138,262 of equipment under capital lease obligations at December 31, 1996 and 1995. Related accumulated depreciation amounted to $84,749 and $49,620 at December 31, 1996 and 1995, respectively. Note 3 - Notes payable - bank: Notes payable - bank are payable in monthly installments with interest at prime plus 1% (9.25% at December 31, 1996) through July 1998, are secured by all assets of the Company and are guaranteed by the stockholders. Principal payment requirements subsequent to December 31, 1996 are $30,672 in 1997 and $15,299 in 1998. Note 4 - Related party transactions: Selling, general and administrative expenses and other special professional fees amounting to $435,948 and $249,030 in 1996 and 1995, respectively, were incurred for services rendered by companies in which certain stockholders have an interest. At December 31, 1996 and 1995, these companies were due $14,145 and $95,848, respectively, which amounts are included in accounts payable and accrued expenses in the accompanying balance sheets. Note 5 - Commitments and contingency: Capital lease obligations: The Company leases equipment under lease agreements expiring through 2000. The following is a schedule by year of future minimum lease payments under capital lease obligations, together with the present value of net minimum lease payments, as of December 31, 1996: Year Ending December 31, Amount ------------ ------- 1997 $27,072 1998 26,847 1999 26,175 2000 19,631 ------- Total minimum lease payments 99,725 Less amount representing interest 20,978 ------- Present value of net minimum lease payments 78,747 Less current portion 17,879 ------- Long-term portion $60,868 ======= F-8 CONSUMER HEALTH NETWORK, INC. NOTES TO FINANCIAL STATEMENTS Note 5 - Commitments and contingency (concluded): Operating lease: The Company leases its office facilities under a lease which expires in November 1999. In addition to minimum annual rentals, the lease requires the payment of certain operating expenses. Minimum rental commitments under the noncancelable operating lease as of December 31, 1996 are as follows: Year Ending December 31, Amount ------------ ------ 1997 $108,300 1998 108,300 1999 99,275 -------- Total $315,875 ======== Rent expense amounted to $107,554 and $131,007 in 1996 and 1995, respectively. Stock purchase agreement: The Company had an employment agreement with a key officer/stockholder which expired on December 31, 1995 and was not renewed. According to the terms of the agreement, the Company was required to purchase all shares of common stock owned by the related key officer/stockholder within two years of the termination of employment at the then current appraisal price, as defined. Noncompete agreement: In connection with the acquisition of another preferred provider organization (see Note 1), the Company is obligated under a noncompete agreement with the stockholders of the acquired organization to pay 10% of eligible revenue (as defined) through December 31, 2001, not to exceed $475,000. During the year ended December 31, 1996, the Company derived revenue, subject to this agreement, amounting to approximately $3,000 and recorded a liability to the stockholders of the acquired organization of approximately $300. It is not certain that the Company will earn revenue sufficient to require the payment of $475,000 during the period and, accordingly, no liability has been provided. Note 6 - Major customers: Five customers accounted for 71% and 81% of the Company's total revenue for the years ended December 31, 1996 and 1995, respectively. * * * F-9 COMPLETE MANAGEMENT, INC. Unaudited Pro forma Consolidated Statements of Income (in thousands, except per share data)
For the Six Months Ended June 30, 1997 --------------------------------------------------- CMI CHN Adjustments Pro forma -------- -------- -------------- ------------ (4) (1) Revenue $ 12,496 $ -- $ -- $ 12,496 Other revenue 20,647 3,227 23,874 Interest discount (1,549) -- (1,549) -------- -------- -------- -------- Net revenue 31,594 3,227 0 34,821 Cost of revenue 15,116 -- 15,116 General and administrative expenses 10,430 3,042 (402)(2) 13,070 -------- -------- -------- -------- Operating income 6,048 185 402 6,635 Interest discount included in income 1,129 -- 1,129 Interest expense (3,193) (7) (3,200) Interest, dividends and other income, net 1,790 54 1,844 Other income/(expense) 445 -- 445 -------- -------- -------- -------- Income before provision for income taxes 6,219 232 402 6,853 Provision for taxes 2,416 32 310(3) 2,758 -------- -------- -------- -------- Net income $ 3,803 $ 200 $ 92 $ 4,095 ======== ======== ======== ======== Primary net income per share $ 0.37 $ 0.38 ======== ======== Weighted average number of shares outstanding 10,405 10,720(5) ======== ========
For the Year Ended December 31, 1996 ------------------------------------------------------------------ CMI CHN AAMC OTHER Adjustments Pro forma -------- ------ -------- -------- ------------ ------------ (4) (1) Revenue $ 21,463 $ -- $ 5,581 $ 1,787 $ -- $ 28,831 Other revenue 11,695 7,853 -- -- -- 19,548 Interest discount (2,166) -- -- -- -- (2,166) -------- ------ ------- ------- ----- -------- Net revenue 30,992 7,853 5,581 1,787 -- 46,213 Cost of revenue 12,308 0 5,835 1,526 -- 19,669 General and administrative expenses 9,143 4,993 864 308 828(2) 16,136 -------- ------ ------- ------- ----- -------- Operating income 9,541 2,860 (1,118) (47) (828) 10,408 Interest discount included in income 2,452 -- -- -- -- 2,452 Interest expense (2,740) -- -- -- -- (2,740) Interest, dividends and other income, net 1,040 53 (8) (10) -- 1,075 -------- ------ ------- ------- ----- -------- Income before provision for income taxes 10,293 2,913 (1,126) (57) (828) 11,195 Provision for taxes 4,879 88 -- 1 (450)(3) 4,518 -------- ------ ------- ------- ----- -------- Net income $ 5,414 $2,825 $(1,126) $ (58) $(378) $ 6,677 ======== ====== ======= ======= ===== ======== Primary net income per share $ 0.68 $ 0.80 ======== ======== Weighted average number of shares outstanding 8,008 8,323(5) ======== ========
F-10 COMPLETE MANAGEMENT, INC. Unaudited Pro forma Consolidated Statements of Income - ------------------------------------------- (1) Reflects the acquisitions as if they had occurred at the beginning of each year. (2) Reflects the following adjustments: 1997 1996 ---- ---- amortization of purchase price in excess of net assets $ 172 $828 acquired non-recurring general and administrative expenses $(574) $ -- (3) Pro forma net income reflects a provision for income taxes since certain acquisitions had been S Corporations through such date. Such provision assumes an effective tax rate of 47%. (4) The adjustments are based on available information and upon certain assumptions that the Company believes are reasonable under circumstances; however, the actual recording of the acquisitions (which management does not expect to vary materially) will be based on ultimate appraisals, evaluations and estimates of fair values. (5) Reflects the issuance of 314,651 shares in connection with the acquisition of CHN. F-11 -----END PRIVACY-ENHANCED MESSAGE-----