-----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, L8dWS/OcK4fGFQ2NEpQ0Jq7nad5bNlUo625z4fayHuxKnPu7LO6sZpsZP2wJttfr LJhZvwvHhBFEmakJokA69g== 0000912057-97-028410.txt : 19970819 0000912057-97-028410.hdr.sgml : 19970819 ACCESSION NUMBER: 0000912057-97-028410 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970818 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970818 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INSIGHT HEALTH SERVICES CORP CENTRAL INDEX KEY: 0001012697 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEDICAL LABORATORIES [8071] IRS NUMBER: 330702770 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 333-02935 FILM NUMBER: 97666011 BUSINESS ADDRESS: STREET 1: 4440 VON KARMAN AVENUE STE 320 CITY: NEWPORT BEACH STATE: CA ZIP: 92660 BUSINESS PHONE: 7144760733 MAIL ADDRESS: STREET 1: 4440 VON KARMAN AVE., STE 320 CITY: NEWPORT BEACH STATE: CA ZIP: 92660 8-K/A 1 8-K/A UNITED STATES 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) August 18, 1997 ------------------------------- Insight Health Services Corp. - -------------------------------------------------------------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER ) Delaware 0-28622 33-0702770 - -------------------------------------------------------------------------------- (STATE OR OTHER JURISDICTION (COMMISSION (I.R.S EMPLOYER OF INCORPORATION) FILE NUMBER) DENTIFICATION NO.) 4400 MacArthur Boulevard, Suite 800, Newport Beach, CA 92660 -------------------------------------------------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (714) 476-0733 ------------------------------------------------------------- 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. (a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. The financial statements of Mobile Imaging Consortium required by this item are attached. (b) PRO FORMA FINANCIAL INFORMATION. The Unaudited Pro Forma Condensed Financial Statements are presented which reflect the acquisition of certain assets of Mobile Imaging Consortium, Limited Partnership, and Mobile Imaging Consortium - New Hampshire (collectively "MIC") by InSight Health Services Corp. ("Registrant") through its wholly owned subsidiary, InSight Health Corp. ("InSight"). The Unaudited Pro Forma Condensed Financial Statements are provided for informational purposes only and are not necessarily indicative of the results that actually would have occurred had the acquisition been in effect for the period presented. The Unaudited Pro Forma Condensed Consolidated Balance Sheet is based on the historical balance sheet as of March 31, 1997 and is presented as if the acquisition had been consummated at that date. The Unaudited Pro Forma Condensed Consolidated Statement of Income is based on the historical statements of operations of each of InSight and MIC for the nine months ended March 31, 1997, and reflects certain adjustments to give effect to the acquisition as if it had occurred on July 1, 1996. Pro forma adjustments are based on the purchase method of accounting and a preliminary allocation of the purchase price. However, changes to the adjustments included in the Unaudited Pro Forma Combined Financial Statements are expected as evaluations of assets and liabilities are completed and additional information becomes available. Accordingly, the final allocated values will differ from the amounts used to calculate the adjustments in the Unaudited Pro Forma Condensed Consolidated Financial Statements. (c) EXHIBITS 99.1(a) Independent Auditors' Report 99.1(b) Audited Combined Financial Statements for the years ended December 31, 1996, 1995 and 1994 2 (b) (i) INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (AMOUNTS IN THOUSANDS)
As reported Pro Forma Pro Forma March 31, 1997 Adjustments March 31, 1997 -------------- ----------- -------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 6,504 $ - $ 6,504 Trade accounts receivable 13,841 250 (A) 14,091 Other current assets 2,914 - 2,914 --------- -------- --------- Total current assets 23,259 250 23,509 PROPERTY AND EQUIPMENT 30,309 3,070 (B) 33,379 OTHER ASSETS 18,975 5,391 (C) 24,366 --------- -------- --------- $ 72,543 $ 8,711 $ 81,254 --------- -------- --------- --------- -------- --------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and other accrued expenses $ 13,154 - $ 13,154 Current portion of equipment and other notes 11,716 2,048 13,764 Current portion of deferred gain on debt restructure 821 - (D,E) 821 --------- -------- --------- Total current liabilities 25,691 2,048 27,739 --------- -------- --------- LONG-TERM LIABILITIES: Equipment and other notes, less current portion 37,103 6,663 (D,E) 43,766 Deferred gain on debt restructure, less current portion 902 - 902 Other long-term liabilities 766 - 766 --------- -------- --------- Total long-term liabilities 38,771 6,663 45,434 --------- -------- --------- MINORITY INTEREST 1,929 - 1,929 --------- -------- --------- STOCKHOLDERS' EQUITY: Convertible Series A preferred stock 6,750 - 6,750 Common stock 3 - 3 Additional paid-in capital 23,100 - 23,100 Accumulated deficit (23,701) - (23,701) --------- -------- --------- Total stockholders' equity 6,152 - 6,152 --------- -------- --------- $ 72,543 $ 8,711 $ 81,254 --------- -------- --------- --------- -------- ---------
SEE NOTES TO UNAUDITED PROFORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 3 (b)(ii) INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
InSight Health InSight Health Services Corp. Services Corp. and Subsidiaries and Subsidiaries as reported MIC Combined Pro Forma for the nine for the nine for the nine months ended months ended Pro Forma months ended March 31, 1997 March 31, 1997 Adjustments March 31, 1997 ----------------- -------------- ----------- ---------------- REVENUES: Contract services $ 35,186 $ 4,090 $ - $ 39,276 Patient services 31,153 1,342 - 32,495 Other 1,790 - - 1,790 --------- -------- -------- --------- Total revenues 68,129 5,432 - 73,561 --------- -------- -------- --------- COSTS OF OPERATIONS: Cost of services 37,386 2,730 - 40,116 Provision for doubtful accounts 1,116 109 - 1,225 Equipment leases 13,822 - - 13,822 Depreciation and amortization 7,203 924 202 (A) 8,329 --------- -------- -------- --------- Total costs of operations 59,527 3,763 202 63,492 --------- -------- -------- --------- GROSS PROFIT 8,602 1,669 (202) 10,069 CORPORATE OPERATING EXPENSES 5,343 - - 5,343 --------- -------- -------- --------- INCOME FROM COMPANY OPERATIONS 3,259 1,669 (202) 4,726 EQUITY IN EARNING OF UNCONSOLIDATED 364 - - 364 --------- -------- -------- --------- PARTNERSHIPS OPERATING INCOME (LOSS) 3,623 1,669 (202) 5,090 INTEREST EXPENSE, Net 2,741 128 518 (B) 3,387 --------- -------- -------- --------- INCOME BEFORE TAXES 882 1,541 (720) 1,703 INCOME TAX EXPENSE 134 29 158 (C) 321 --------- -------- -------- --------- NET INCOME $ 748 $ 1,512 $ (878) $ 1,382 --------- -------- -------- --------- --------- -------- -------- --------- INCOME PER COMMON SHARE: Net Income $ 0.14 $ 0.25 --------- --------- --------- --------- Weighted average number of common shares outstanding 5,444,308 5,444,308 --------- --------- --------- ---------
SEE NOTES TO UNAUDITED PROFORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4 (b)(iii) INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. NOTE 1: UNAUDITED PRO FORMA BALANCE SHEET ADJUSTMENTS The Unaudited Pro Forma Condensed Consolidated Balance Sheet of the Registrant as of March 31, 1997, gives affect to the following pro forma adjustments: (A) To record the net trade accounts receivable acquired. (B) To record the three mobile medical imaging equipment units acquired at their estimated fair value. The mobile medical imaging equipment will be depreciated over five years. (C) To record the goodwill related to the assets acquired. The goodwill will be amortized over an assumed 20 year period. (D) To record the assumption of the current and long-term portions of the capital lease obligations related to the mobile medical imaging equipment acquired. (E) To record the current and long-term portions of the $6,800,000 debt borrowed from General Electric Medical Systems (GEMS). NOTE 2: UNAUDITED PRO FORMA STATEMENT OF INCOME ADJUSTMENTS The Unaudited Pro Forma Condensed Consolidated Statement of Income of the Registrant for the nine months ended March 31, 1997, gives affect to the following pro forma adjustments: (A) To record the amortization of the goodwill associated with the acquisition over an assumed 20 year period. (B) To record interest expense on the long-term debt borrowed from GEMS associated with the acquisition at a rate of 10.5 percent per annum. (C) To record an income tax expense based upon an assumed composite (federal, state and local) income tax rate of 20 percent. 5 SIGNATURES 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 thereunto duly authorized. Date: August 18, 1997 INSIGHT HEALTH SERVICES CORP. BY: /s/ E. LARRY ATKINS ----------------------------------------- E. Larry Atkins President and Chief Executive Officer 6 EX-99.1(A) 2 EXHIBIT 99.1(A) [LETTERHEAD] INDEPENDENT AUDITORS' REPORT To the Partners Mobile Imaging Consortium - Maine Mobile Imaging Consortium - New Hampshire We have audited the accompanying combined balance sheets of Mobile Imaging Consortium, consisting of Mobile Imaging Consortium - Maine (A Maine Limited Partnership) and Mobile Imaging Consortium - New Hampshire (A Maine General Partnership), as of December 31, 1996 and 1995, and the related combined statements of income, partners' capital accounts and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Partnerships' management. Our responsibility is to express an opinion on these combined 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 audits 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 Mobile Imaging Consortium as of December 31, 1996 and 1995, and the combined results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in accordance with generally accepted accounting principles. Our audits were conducted for the purpose of forming an opinion on the basic combined financial statements taken as a whole. The combining details appearing in conjunction with the combined financial statements are presented for purposes of additional analysis and are not a required part of the basic combined financial statements. Such additional information has been subjected to the auditing procedures applied in our audits of the basic combined financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic combined financial statements taken as a whole. /s/ Baker Newman & Noyes January 20, 1997 Baker Newman & Noyes Limited Liability Company F-1 EX-99.1(B) 3 EXHIBIT 99.1(B) MOBILE IMAGING CONSORTIUM COMBINED BALANCE SHEETS ASSETS 1996 1995 ---------- ---------- Cash and cash equivalents $ 381,591 $ 972,134 Accounts receivable, net of contractual and bad debt allowances of $463,000 for 1996 and $260,000 for 1995 (note 3) 1,350,324 1,069,537 Prepaid expenses and other current assets 177,340 164,131 ---------- ---------- Total current assets 1,909,255 2,205,802 Property and equipment: Leasehold improvements 2,501 2,501 Equipment 2,775,368 2,518,317 Equipment under capital leases (note 5) 4,106,512 3,743,960 Furniture and fixtures 7,592 7,592 ---------- ---------- 6,891,973 6,272,370 Less accumulated depreciation and amortization 5,201,323 4,026,953 ---------- ---------- Net property, plant and equipment 1,690,650 2,245,417 Other assets, net 12,386 38,374 ---------- ---------- $3,612,291 $4,489,593 ---------- ---------- ---------- ---------- LIABILITIES AND PARTNERS' CAPITAL Accounts payable and accrued expenses $ 247,415 $ 338,644 Current portion of long-term debt (note 4) 131,017 208,993 Current portion of obligations under capital leases (note 5) 1,077,732 766,813 ---------- ---------- Total current liabilities 1,456,164 1,314,450 Long-term debt, less current portion (note 4) 67,555 - Obligations under capital leases, less current portion (note 5) 454,245 1,222,621 Commitments and contingencies (notes 9 and 10) Partners' capital 1,634,327 1,952,522 ---------- ---------- $3,612,291 $4,489,593 ---------- ---------- ---------- ---------- See accompanying notes. F-2 MOBILE IMAGING CONSORTIUM COMBINED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 1996 1995 1994 ---------- ---------- ---------- Revenue: Net scan revenue (note 7) $7,299,625 $6,499,166 $5,981,629 Interest 9,264 27,991 8,885 Other 139,143 58,993 74,100 ---------- ---------- ---------- Total revenue 7,448,032 6,586,150 6,064,614 Expenses: Payroll, fringe and related taxes 1,007,573 935,134 999,538 Management fees (note 8) 147,265 140,729 130,000 Hospital maintenance fees 141,175 129,247 115,554 Professional fees 267,991 159,793 128,597 Tractor expenses 83,583 64,631 65,573 Repairs and maintenance 509,285 472,797 479,196 Cryogens 116,777 110,527 109,000 Film and medical supplies 469,499 349,280 327,407 Insurance 126,259 124,646 124,099 Utilities 72,963 70,664 69,456 Rent 30,266 36,841 36,471 Property taxes 53,316 88,006 86,969 Bad debts 198,370 - 125,387 Depreciation 1,174,370 1,282,300 1,289,777 Amortization 24,009 34,079 34,078 Interest 189,924 290,755 387,437 Other 203,602 159,971 174,820 ---------- ---------- ---------- Total operating expenses 4,816,227 4,489,400 4,683,359 ---------- ---------- ---------- Net income $2,631,805 $2,096,750 $1,381,255 ---------- ---------- ---------- ---------- ---------- ---------- See accompanying notes. F-3 MOBILE IMAGING CONSORTIUM COMBINED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
GENERAL LIMITED GENERAL PARTNERS PARTNERS PARTNERS (MIC-ME) (MIC-ME) (MIC-ME) TOTAL ------------ ----------- ---------- ----------- Balance, December 31, 1993 $ 603,184 $ 487,992 $ 264,141 $ 1,355,317 Net income 756,610 521,074 103,571 1,381,255 Partner distributions (note 6) (638,480) (442,320) (325,000) (1,405,800) ----------- ----------- --------- ----------- Balance, December 31, 1994 721,314 566,746 42,712 1,330,772 Net income 1,040,369 710,246 346,135 2,096,750 Partner distributions (note 6) (710,000) (490,000) (275,000) (1,475,000) ----------- ----------- --------- ----------- Balance, December 31, 1995 1,051,683 786,992 113,847 1,952,522 Net income 1,334,745 906,496 390,564 2,631,805 Partner distributions (note 6) (1,505,000) (1,020,000) (425,000) (2,950,000) ----------- ----------- --------- ----------- Balance, December 31, 1996 $ 881,428 $ 673,488 $ 79,411 $ 1,634,327 ----------- ----------- --------- ----------- ----------- ----------- --------- -----------
See accompanying notes. F-4 MOBILE IMAGING CONSORTIUM COMBINED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994 ----------- ----------- ----------- Cash flows from operating activities: Net income $ 2,631,805 $ 2,096,750 $ 1,381,255 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,174,370 1,282,300 1,289,777 Amortization 24,009 34,079 34,078 Loss on disposal of asset - 1,653 - Changes in current assets and liabilities: Increase in accounts receivable (280,787) (209,038) (269,491) Increase in prepaid expenses and other current assets (13,209) (19,975) (67,583) Decrease in other assets 1,979 - - Increase (decrease) in accounts payable and accrued expenses (91,229) (15,580) 103,229 ----------- ---------- ----------- Net cash provided by operating activities 3,446,938 3,170,189 2,471,265 Cash flows from investing activities: Purchases of property and equipment (257,051) (103,173) (48,611) Purchases of investments - - (255,068) Proceeds from sale of investments - 255,068 - ----------- ---------- ----------- Net cash provided (used) by investing activities (257,051) 151,895 (303,679 Cash flows from financing activities: Proceeds from issuance of long-term debt 256,324 93,164 - Principal payments of long-term debt (266,745) (529,300) (393,694) Principal payments on capital lease obligations (820,009) (689,084) (619,329) Distributions to partners (2,950,000) (1,475,000) (1,405,800) ----------- ---------- ----------- Net cash used by financing activities (3,780,430) (2,600,220) (2,418,823) ----------- ---------- ----------- Net increase (decrease0 in cash (590,543) 721,864 (251,237) Cash at beginning of year 972,134 250,270 501,506 ----------- ---------- ----------- Cash at end of year $ 381,591 $ 972,134 $ 250,269 ----------- ---------- ----------- ----------- ---------- ----------- Supplemental disclosures of cash flow information: Interest paid $ 189,924 $ 294,107 $ 384,085 ----------- ---------- ----------- ----------- ---------- ----------- Supplemental schedule of noncash investing and financing activities: Acquisition of property and equipment through obligations under capital leases $ 362,552 $ - $ - ----------- ---------- ----------- ----------- ---------- -----------
See accompanying notes. F-5 MOBILE IMAGING CONSORTIUM NOTES TO FINANCIAL STATEMENTS December 31, 1996 and 1995 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES METHOD OF ACCOUNTING The combined financial statements are prepared on the accrual basis of accounting. The combined financial statements include the accounts of Mobile Imaging Consortium - Maine (A Maine Limited Partnership) and Mobile Imaging Consortium - New Hampshire (A Maine General Partnership). All transactions and balances between the two partnerships have been eliminated in combination. PROPERTY AND EQUIPMENT Property and equipment is recorded at cost. Depreciation is calculated using straight-line and accelerated methods over the estimated useful lives of the assets. Assets capitalized under capital lease obligations are amortized over the term of the related leases. ORGANIZATION COSTS Organization costs incurred in relation to the commencement of the respective Partnership's activities have been capitalized and are amortized over five years using the straight-line method. SYNDICATION COSTS Syndication costs incurred in forming the respective partnerships are deducted from partners' capital in the combined financial statements. INCOME TAXES No provision or benefit for income taxes has been included in the combined financial statements since any taxable income or loss passes through to, and is reportable by, the respective partners individually. 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. Estimates related to contractual and bad debt allowances are especially significant. Actual results could differ from those estimates. F-6 MOBILE IMAGING CONSORTIUM NOTES TO FINANCIAL STATEMENTS December 31, 1996 and 1995 2. ORGANIZATION Mobile Imaging Consortium - Maine ("MIC-ME") is a limited partnership formed under the laws of the State of Maine in October, 1991. The Partnership operates two mobile magnetic resonance imaging systems which primarily serve hospitals throughout Maine. The general partners have exclusive responsibility for the control of all aspects of the Partnership's business. Mobile Imaging Consortium - New Hampshire ("MIC-NH") is a general partnership formed under the laws of the State of Maine in January, 1993. The Partnership operates a mobile magnetic resonance imaging system which primarily serves three hospitals in New Hampshire. The two partnerships have similar general and limited partners. In addition, both partnerships are managed by the same management agent, Joseph J. Bean Associates. The management agent performs all recordkeeping functions on behalf of the partners. In addition, the management agent is responsible for allocating certain shared expenses incurred on behalf of both partnerships. 3. BUSINESS AND CREDIT CONCENTRATIONS Nearly all of the patients served by the Partnerships are from Maine or New Hampshire. No single patient accounted for more than five percent of the combined revenues for 1996, 1995, or 1994, and no account receivable from any patient exceeded five percent of total combined accounts receivable at December 31, 1996 and 1995. MIC-NH maintains contracts with three hospitals located in New Hampshire and generates all of its revenues under these contracts. The hospitals, in turn, charge the individual patients. Therefore, MIC-NH had receivable balances from only three parties as of December 31, 1996 and 1995. MIC-ME submits the charges for substantially all of its patients to third parties for full or partial payment. No single third-party payor accounted for more than ten percent of total combined accounts receivable at December 31, 1996 and 1995. F-7 MOBILE IMAGING CONSORTIUM NOTES TO FINANCIAL STATEMENTS December 31, 1996 and 1995 4. LONG-TERM DEBT
1996 1995 ---- ---- Long-term debt consists of the following: Variable rate note payable to a bank, due in monthly installments of principal and interest of $38,795 through May 1996; secured by equipment $ - $ 157,235 7.16% note payable to a financial institution, due in monthly installments of $10,663 including principal and interest through May 1996 - 51,758 8.55% note payable to a financial institution, due in monthly installments of $7,776 including principal and interest through September 1998; secured by equipment 151,170 - 7.81% note payable to a financial institution, due in monthly installments of $9,792 including principal and interest through May 1996 47,402 - --------- --------- 198,572 208,993 Less current installments of long-term debt (131,017) (208,993) --------- --------- $ 67,555 $ - --------- --------- --------- ---------
Principal installments of long-term debt are as follows as of December 31, 1996: 1997 $ 131,017 1998 67,555 --------- $ 198,572 --------- --------- 5. LEASES The Partnership is obligated under several capital leases for equipment as follows: At December 31, 1996 and 1995, the gross amount of equipment and related accumulated amortization recorded under the capital leases is as follows: 1996 1995 ---- ---- Equipment $ 4,106,512 $ 3,743,960 Less accumulated amortization (2,711,410) (1,884,091) ----------- ----------- $ 1,395,102 $ 1,859,869 ----------- ----------- ----------- ----------- F-8 MOBILE IMAGING CONSORTIUM NOTES TO FINANCIAL STATEMENTS December 31, 1996 and 1995 5. LEASES (CONTINUED) The future minimum capital lease payments as of December 31, 1996 are as follows: Future minimum lease payments 1997 $ 1,182,024 1998 482,467 ----------- 1,664,491 Less imputed interest (weighted average rate of 10.1%) 132,514 ----------- Present value of future minimum lease payments 1,531,997 Current portion of obligations under capital leases 1,077,732 ----------- Long-term portion of obligations under capital leases $ 454,245 ----------- ----------- The lease agreements generally provide for fair market value purchase options at the end of the lease terms. 6. PARTNERS' CAPITAL AND INCOME DISTRIBUTIONS The allocation of net income or losses and distributions of cash flow are in accordance with the terms of each respective partnership agreement. For MIC-NH, the five general partners are distributed their pro-rata share of net income or losses and distributions of cash flow. For MIC-ME, the four general partners, as a group, and the limited partners, share equally in the first $100,000 of net income or loss, allocated to the individual partners in each group based on their pro-rata ownership interest. Likewise, the first $100,000 of distributions of cash flow are allocated in this manner. Any income or losses or distributions of cash flow exceeding $100,000 are allocated 60% to the general partners and 40% to the limited partners. Allocations within each group of partners are based on each partners pro-rata ownership interest of the group. 7. NET SCAN REVENUE Net scan revenue consists of the following at December 31: 1996 1995 1994 ---- ---- ---- Gross scan revenue $ 8,888,277 $ 7,967,895 $ 6,984,102 Less contractual adjustments (1,588,652) (1,468,729) (1,002,473) ----------- ----------- ----------- Net scan revenue $ 7,299,625 $ 6,499,166 $ 5,981,629 ----------- ----------- ----------- ----------- ----------- ----------- F-9 MOBILE IMAGING CONSORTIUM NOTES TO FINANCIAL STATEMENTS December 31, 1996 and 1995 8. RELATED PARTY TRANSACTIONS As noted in note 1, the financial statements include the accounts of MIC-ME and MIC-NH. Certain shared expenses, such as insurance and supplies, are incurred by MIC-ME and are charged to MIC-NH. These charges have been eliminated in the combination of the two entities in the accompanying financial statements. Charges from MIC-ME to MIC-NH for shared expenses were $48,000, $48,000, and $93,365 for the years ended December 31, 1996, 1995 and 1994, respectively. Joseph J. Bean Associates ("JBA") provides operational and financial management services to both Partnerships. JBA is a party related to the Partnerships through Joseph J. Bean, who either individually or through an interest in another entity, acts as a general or limited partner in both Partnerships. MIC-ME paid management fees of $90,159, $86,038, and $78,000 to JBA for the years ended December 31, 1996, 1995 and 1994, respectively. MIC-NH paid management fees of $57,106, $54,691, and $52,000 to JBA for the years ended December 31, 1996, 1995 and 1994, respectively. In addition, the Partnerships lease office space from JBA under an operating lease agreement. The initial term of the lease is three years from May 1, 1996 to April 30, 1999. At that time the lease terms will automatically renew, unless notice of termination is executed, for a term of 22 months through February 28, 2001. The Partnerships have an option to renew the lease for an additional term of 10 years. Future lease payments for the remaining term of the lease, including the automatic renewal period, are as follows: 1997 $24,839 1998 25,164 1999 19,691 2000 17,117 2001 2,871 9. COMMITMENTS AND CONTINGENCIES The Partnerships maintains several service contracts with hospitals located in Maine and New Hampshire as well as contracts with third-party agencies. The hospital service contracts have various lengths and payment terms. MIC-ME's contracts are primarily based on the hospital's referral of patients to the Partnership in return for compensation for the use of the hospital's physical facilities. MIC-NH's contracts generally stipulate charges directly to the hospital based on the volume of procedures performed. The Partnerships also maintain contracts with various third-party payors under which rates have been negotiated for service to patients who are insured by these parties. It is anticipated that the hospital service contracts will be assumed by a successor entity pursuant to an agreement described in note 10. The contracts with third-party payors are expressly excluded from the agreement. F-10 MOBILE IMAGING CONSORTIUM NOTES TO FINANCIAL STATEMENTS December 31, 1996 and 1995 9. COMMITMENTS AND CONTINGENCIES (CONTINUED) MIC-ME is involved in a dispute with the City of Portland regarding jurisdiction for property tax assessment on the Partnership's mobile assets. The City of Portland contends that it has jurisdiction to assess property taxes based on the location of the Partnership's general offices. MIC-ME contends that the mobile assets are subject to taxes from the jurisdictions in which the assets are located on the assessment date, April 1. The outcome of this matter is uncertain as of December 31, 1996. The Partnership has estimated its potential liability in the event of an unfavorable outcome and has included such amounts in the accompanying financial statements. 10. SALE OF PARTNERSHIPS' ASSETS AND ASSUMPTION OF LIABILITIES In January, 1997 the Partnerships executed an Asset Purchase and Liabilities Assumption Agreement (the "Agreement") with InSight Health Corp. ("InSight"), a Delaware corporation. The Agreement stipulates that InSight will purchase all operational assets and goodwill with the exception of cash on hand, accounts receivable, and other items as specified in the Agreement. The Agreement also stipulates that InSight will have no rights or liabilities with regard to the property tax matter as described in note 9. Pursuant to the Agreement, the Partnerships are required to deposit collections of pre-sale accounts receivable into an escrow account up to $1,000,000 as indemnification for InSight. The escrow will be released to the Partnerships in equal amounts each quarter subsequent to the Agreement date, barring any claims made by InSight as described in the Agreement. The Agreement stipulates that InSight will assume substantially all liabilities, contracts, leases and operating agreements upon execution of the Agreement, except those as specifically documented in the Agreement or schedules thereto. Finally, the Agreement includes clauses which prohibit the corporate general partners and the individual limited partners of the Partnerships from competing with InSight in Maine and New Hampshire. The specific provisions dictate that the parties will not compete in the area of nuclear magnetic resonance imaging for a term of five years and in the area of CT scanning for a period of three years. The Agreement also includes consulting and non-compete provisions for Joseph J. Bean, individually, and Joseph J. Bean Associates, the management agent of the Partnerships. F-11 ADDITIONAL INFORMATION MOBILE IMAGING CONSORTIUM COMBINING BALANCE SHEET December 31, 1996
Combined MIC- MIC-New December 31, ASSETS Maine Hampshire Eliminations 1996 - ------ ----- --------- ------------ ------------ Cash and cash equivalents $ 271,260 $ 110,331 $ - $ 381,591 Accounts receivable, net 1,220,066 130,258 - 1,350,324 Prepaid expenses and other current assets 155,298 22,042 - 177,340 Due from affiliates - 1,315 (1,315) - ---------- --------- --------- ---------- Total current assets 1,646,624 263,946 (1,315) 1,909,255 Property and equipment: Leasehold improvements 2,501 - - 2,501 Equipment 2,664,599 110,769 - 2,775,368 Equipment under capital leases 1,944,195 2,162,317 - 4,106,512 Furniture and fixtures 7,592 - - 7,592 ---------- --------- --------- ---------- 4,618,887 2,273,086 - 6,891,973 Less accumulated depreciation and amortization 3,714,639 1,486,684 - 5,201,323 ---------- --------- --------- ---------- Net property and equipment 904,248 786,402 - 1,690,650 Other assets, net - 12,386 - 12,386 ---------- --------- --------- ---------- $2,550,872 $1,062,734 $ (1,315) $3,612,291 ---------- ---------- --------- ---------- ---------- ---------- --------- ---------- LIABILITIES AND PARTNERS' CAPITAL Accounts payable and accrued expenses $ 232,912 $ 14,503 $ - $ 247,415 Due to affiliates 1,315 - (1,315) - Current portion of long-term debt 114,900 16,117 - 131,017 Current portion of capital lease obligations 532,156 545,576 - 1,077,732 ---------- --------- --------- ---------- Total current liabilities 881,283 576,196 (1,315) 1,456,164 Long-term debt, less current portion 67,555 - - 67,555 Obligations under capital leases, less current portion 47,118 407,127 - 454,245 Partners' capital 1,554,916 79,411 - 1,634,327 ---------- --------- --------- --------- $2,550,872 $1,062,734 $ (1,315) $3,612,291 ---------- ---------- --------- ---------- ---------- --------- --------- ----------
F-12 MOBILE IMAGING CONSORTIUM COMBINING BALANCE SHEET December 31, 1995
Combined MIC- MIC-New December 31, ASSETS Maine Hampshire Eliminations 1995 - ------ ----- --------- ------------ ------------ Cash and cash equivalents $ 780,033 $ 192,101 $ - $ 972,134 Accounts receivable, net 962,906 106,631 - 1,069,537 Prepaid expenses and other current assets 139,881 24,250 - 164,131 Due from affiliates 34,106 - (34,106) - - ---------- --------- --------- ---------- Total current assets 1,916,926 322,982 (34,106) 2,205,802 Property and equipment: Leasehold improvements 2,501 - - 2,501 Equipment 2,432,798 85,519 - 2,518,317 Equipment under capital leases 1,808,893 1,935,067 - 3,743,960 Furniture and fixtures 7,592 - - 7,592 ---------- --------- --------- ---------- 4,251,784 2,020,586 - 6,272,370 Less accumulated depreciation and amortization 3,001,415 1,025,538 - 4,026,953 ---------- --------- --------- ---------- Net property and equipment 1,250,369 995,048 - 2,245,417 Other assets, net 16,080 22,294 - 38,374 ---------- --------- --------- ---------- $3,183,375 $1,340,324 $ (34,106) $4,489,593 ---------- ---------- --------- ---------- ---------- ---------- --------- ---------- LIABILITIES AND PARTNERS' CAPITAL Accounts payable and accrued expenses $ 303,520 $ 35,124 $ - $ 338,644 Due to affiliates - 34,106 (34,106) - Current portion of long-term debt 191,395 17,598 - 208,993 Current portion of capital lease obligations 381,593 385,220 - 766,813 ---------- --------- --------- ---------- Total current liabilities 876,508 472,048 (34,106) 1,314,450 Obligations under capital leases, less current portion 468,192 754,429 - 1,222,621 Partners' capital 1,838,675 113,847 - 1,952,522 ---------- --------- --------- --------- $3,183,375 $1,340,324 $ (34,106) $4,489,593 ---------- ---------- --------- ----------- ---------- ---------- --------- -----------
F-13 MOBILE IMAGING CONSORTIUM COMBINING STATEMENT OF INCOME Year Ended December 31, 1996
MIC- Combined MIC- New December 31, Maine Hampshire Eliminations 1996 ---------- --------- ------------ ------------ Revenue: Scan revenue $5,592,590 $1,707,035 $ - $7,299,625 Interest 8,119 1,145 - 9,264 Other 154,873 32,270 (48,000) 139,143 ---------- --------- ------------ ------------ Total revenue 5,755,582 1,740,450 (48,000) 7,448,032 Expenses: Payroll, fringe and related taxes 746,493 261,080 - 1,007,573 Management fees 90,159 57,106 - 147,265 Hospital maintenance fees 141,175 - - 141,175 Professional fees 215,099 52,892 - 267,991 Tractor expenses 68,702 14,881 - 83,583 Repairs and maintenance 334,216 175,069 - 509,285 Cryogens 60,250 56,527 - 116,777 Film and medical supplies 458,991 10,508 - 469,499 Insurance 84,785 41,474 - 126,259 Utilities 71,719 49,244 (48,000) 72,963 Rent 30,266 - - 30,266 Property taxes 53,316 - - 53,316 Bad debts 198,370 - - 198,370 Depreciation 713,224 461,146 - 1,174,370 Amortization 14,100 9,909 - 24,009 Interest 92,603 97,321 - 189,924 Other 140,873 62,729 - 203,602 ---------- --------- ------------ ------------ Total operating expenses 3,514,341 1,349,886 (48,000) 4,816,227 ---------- ---------- ------------ ------------ Net income $2,241,241 $ 390,564 $ - $2,631,805 ---------- ---------- ------------ ------------ ---------- ---------- ------------ ------------
F-14 MOBILE IMAGING CONSORTIUM COMBINING STATEMENT OF INCOME Year Ended December 31, 1995
MIC- Combined MIC- New December 31, Maine Hampshire Eliminations 1995 ---------- --------- ------------ ------------ Revenue: Scan revenue $4,863,716 $1,635,450 $ - $6,499,166 Interest 24,999 2,992 - 27,991 Other 105,192 1,801 (48,000) 58,9933 ---------- --------- ------------ ------------ Total revenue 4,993,907 1,640,243 (48,000) 6,586,150 Expenses: Payroll, fringe and related taxes 709,021 266,113 - 975,134 Management fees 86,038 54,691 - 140,729 Hospital maintenance fees 129,247 - - 129,247 Professional fees 124,097 35,696 - 159,793 Tractor expenses 64,631 - - 64,631 Repairs and maintenance 311,408 161,389 - 472,797 Cryogens 54,000 56,527 - 110,527 Film and medical supplies 333,859 15,421 - 349,280 Insurance 82,143 42,503 - 124,646 Utilities 69,575 49,089 (48,000) 70,664 Rent 36,841 - - 36,841 Property taxes 88,006 - - 88,006 Bad debts - - - 198,370 Depreciation 863,542 418,758 - 1,282,300 Amortization 24,170 9,909 - 34,079 Interest 166,611 124,144 - 290,755 Other 100,103 59,868 - 159,971 ---------- --------- ------------ ------------ Total operating expenses 3,243,292 1,294,108 (48,000) 4,489,400 ---------- ---------- ------------ ------------ Net income $1,750,615 $ 346,135 $ - $2,096,750 ---------- ---------- ------------ ------------ ---------- ---------- ------------ ------------
F-15 MOBILE IMAGING CONSORTIUM COMBINING STATEMENT OF INCOME Year Ended December 31, 1994
MIC- Combined MIC- New December 31, Maine Hampshire Eliminations 1994 ----- --------- ------------ ------------ Revenue: Scan revenue $ 4,563,281 $ 1,418,348 $ - $ 5,981,629 Interest 7,898 987 - 8,885 Other 167,465 - (93,365) 74,100 ----------- ----------- -------- ----------- Total revenue 4,738,644 1,419,335 (93,365) 6,064,614 Expenses: Payroll, fringe and related taxes 728,913 270,625 - 999,538 Management fees 78,000 52,000 - 130,000 Hospital maintenance fees 115,554 - - 115,554 Professional fees 105,410 23,187 - 128,597 Tractor expenses 65,573 - - 65,573 Repairs and maintenance 342,652 136,544 - 479,196 Cryogens 54,000 55,000 - 109,000 Film and medical supplies 313,867 13,540 - 327,407 Insurance 81,863 42,236 - 124,099 Rent 36,471 - - 36,471 Utilities 68,253 49,203 (48,000) 69,456 Property Taxes 86,969 - - 86,969 Bad debts 125,387 - - 125,387 Depreciation 892,060 397,717 - 1,289,777 Amortization 24,170 9,908 - 34,078 Interest 227,885 159,552 - 387,437 Other 113,933 106,252 (45,365) 174,820 ----------- ----------- -------- ----------- Total operating expenses 3,460,960 1,315,764 (93,365) 4,683,359 ----------- ----------- -------- ----------- Net income $ 1,277,684 $ 103,571 $ - $ 1,381,255 ----------- ----------- -------- ----------- ----------- ----------- -------- -----------
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