-----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, I1T77bm2JcKrzsLkAKX3s0q6yV9jQd9cgAgmMw69FSMClgkZKpN4dhDrqQr0foDX +GRHqh9LjX701Y5iG9Q+xQ== 0000950144-02-002850.txt : 20020415 0000950144-02-002850.hdr.sgml : 20020415 ACCESSION NUMBER: 0000950144-02-002850 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020327 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PER SE TECHNOLOGIES INC CENTRAL INDEX KEY: 0000878556 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 581651222 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-19480 FILM NUMBER: 02588539 BUSINESS ADDRESS: STREET 1: 2840 MT WILKINSON PARKWAY STREET 2: SUITE 300 CITY: ATLANTA STATE: GA ZIP: 30339 BUSINESS PHONE: 7704445300 MAIL ADDRESS: STREET 1: 2700 CUMBERLAND PKWY STREET 2: STE 300 CITY: ATLANTA STATE: GA ZIP: 30339 FORMER COMPANY: FORMER CONFORMED NAME: MEDAPHIS CORP DATE OF NAME CHANGE: 19931027 10-K405 1 g74880e10-k405.txt PER-SE TECHNOLOGIES, INC. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 --------------------- FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 000-19480 --------------------- PER-SE TECHNOLOGIES, INC. (Exact Name of Registrant as Specified in Its Charter) DELAWARE 58-1651222 (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 2840 MT. WILKINSON PARKWAY 30339 ATLANTA, GEORGIA (Zip Code) (Address of Principal Executive Offices)
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) (770) 444-5300 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED ------------------- ----------------------------------------- None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, $.01 PAR VALUE (TITLE OF CLASS) Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by non-affiliates of the Registrant as of March 18, 2002 was approximately $370,161,635 calculated using the closing price on such date of $12.34. The number of shares outstanding of the Registrant's common stock (the "Common Stock") as of March 18, 2002 was 29,996,891. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement for the Annual Meeting of Stockholders to be held on May 2, 2002 are incorporated herein by reference in Part III. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PER-SE TECHNOLOGIES, INC. FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001 TABLE OF CONTENTS
PAGE OF FORM 10-K --------- ITEM 1. BUSINESS.................................................... 1 ITEM 2. PROPERTIES.................................................. 5 ITEM 3. LEGAL PROCEEDINGS........................................... 6 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 6 ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS......................................... 8 ITEM 6. SELECTED FINANCIAL DATA..................................... 9 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................................... 10 ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........................................................ 24 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................. 24 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.................................... 24 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......... 24 ITEM 11. EXECUTIVE COMPENSATION...................................... 24 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.................................................. 25 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 25 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K......................................................... 25
PART I ITEM 1. BUSINESS OVERVIEW OF THE COMPANY Per-Se Technologies, Inc. ("Per-Se" or the "Company"), a corporation organized in 1985 under the laws of the State of Delaware, is a provider of integrated business management outsourcing services, application software, and Internet-enabled connectivity for the healthcare industry. Per-Se delivers its services and products through its three operating divisions: Physician Services, Application Software and e-Health Solutions. Physician Services provides business management outsourcing services to the hospital-affiliated physician practice market, physicians in academic settings and other large physician practices. Services focus on the management of their revenue cycle and include clinical data collection, data input, medical coding, billing, contract management, cash collections and accounts receivable management. These services are designed to assist healthcare providers with the business management functions associated with the delivery of healthcare services, allowing physicians to focus on providing quality patient care. These services also assist physicians in improving cash flows and reducing administrative costs and burdens. The Application Software division provides enterprise-wide financial, clinical and administrative software to acute care healthcare organizations, including patient financial management software, clinical information software and patient and staff scheduling systems. These applications enable healthcare organizations to simultaneously optimize the quality of care delivered and the profitability of business operations. The e-Health Solutions division provides connectivity and business intelligence solutions to healthcare providers and payers, which help reduce administrative costs and enhance revenue cycle management. Solutions include electronic claims processing, referral submissions, eligibility verification and other electronic and paper transaction processing. In addition, e-Health Solutions offers physician practice management software as an Application Service Provider ("ASP") to physician practices, and offers managed care solutions to payers in ASP, turnkey or outsourced formats. Per-Se markets its products and services to constituents of the healthcare industry, primarily to hospital-affiliated physician practices, integrated healthcare delivery networks ("IDNs") and hospitals. DESCRIPTION OF BUSINESS BY INDUSTRY SEGMENT The following description of the Company's business by industry segment should be read in conjunction with Note 18 of Notes to Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data. PHYSICIAN SERVICES The healthcare industry in the United States spends approximately $1.2 trillion on an annual basis to provide patient care. Physician Services focuses on the administrative functions of hospital-affiliated physician practices. There are approximately 225,000 hospital-affiliated physicians, which yield a market opportunity of approximately $7 billion for the provision of comprehensive business management outsourcing services. Physician Services is the largest provider of comprehensive business management outsourcing services in the United States. Services include clinical data collection, data input, medical coding, billing, contract management, cash collections and accounts receivable management to hospital-affiliated physicians, physicians in academic settings and other large physician practices. Organized around medical specialties, Physician Services supports approximately 15,000 physician clients in 42 states, offering business management outsourcing services revolving around four areas: practice support services, revenue growth consulting, cost management consulting and practice security services. All of the division's services focus on improving the revenue cycle for physicians while minimizing compliance risks. Physician Services currently supports the majority of medical specialties in the hospital-based or academic market. 1 The business of providing integrated business management outsourcing services is highly competitive. Physician Services competes with regional physician reimbursement organizations and physician groups that provide their own business management services in-house. Competition among these organizations is based upon the relationship with the client or prospective client, the efficiency and effectiveness of converting medical services to cash, the ability to provide proactive practice management services and, to the extent that service offerings are comparable, price. APPLICATION SOFTWARE Application Software provides a diverse, integrated suite of patient-centric, enterprise-wide software solutions that enable healthcare organizations to more effectively deliver quality care, manage resources, reduce costs, improve productivity and drive operational effectiveness. Application Software's products operate across the entire scope of the healthcare enterprise -- IDNs and hospitals -- and manage more than 26 million lives online. Application Software's customers, which include approximately 2,000 healthcare organizations, depend on Application Software's solutions for many critical functions, including: access to real-time, point-of-care clinical information and decision analysis capability across the continuum of care through the division's Patient1 product; comprehensive, consolidated billing through patient financial management solutions containing intrinsic contract management through the Business1 product; automation of enterprise-wide staff and patient scheduling, management of surgical inventory, and enhancement of enterprise-wide staff productivity through the Resource1 suite of products. Application Software is a market leader in several key areas of healthcare information technology, including nurse scheduling and productivity management, surgical scheduling and resource management, and enterprise-wide staff and productivity management. While the majority of the division's current customer installed base is located in the United States and Canada, the international market outside of North America is an area of focus for the division, specifically for the Patient1 clinical information system and Resource1 products. Application Software is building the infrastructure to take advantage of international demand through a series of distributors. Recent sales successes include two sales during 2001 through the newly appointed Middle Eastern distributor. The Company has distributors or customers in the United Kingdom, Japan, Australia, Brazil and the Middle East. Application Software competes against a variety of information technology companies, including those marketing comprehensive, enterprise-wide health information systems as well as niche and "best-of-breed" software application vendors. Competition is based on product quality, ease of use and ease of integration of new products with other existing and planned applications. Many competitive offerings, however, operate on disparate technologies that are linked through complex interfaces. Application Software's integrated approach to its products and technologies enables it to deliver real-time, patient-centric information and process oriented management capabilities that are critical in today's age of enterprise-wide healthcare. E-HEALTH SOLUTIONS e-Health Solutions, through The Per-Se Exchange, the third largest electronic clearinghouse in the healthcare industry, delivers private and Internet-based business-to-business solutions that help providers, payers and patients reduce administrative inefficiencies. The Per-Se Exchange focuses on medical transaction processing for physicians, hospitals and integrated delivery networks. Its solutions include electronic claims and remittance advice processing, real-time eligibility verification, web-based provider compliance and productivity management reporting, an Internet patient portal for healthcare statement review and electronic payment processing, and high speed print and mail services. The Per-Se Exchange processes approximately 240 million transactions on an annual basis. This technology supports more than 1,400 governmental and commercial payer connections in 48 states. Other solutions include managed care / payer administration solutions and a regionally-based ASP physician practice management system for office-based physicians. 2 Competition in the e-health market is based on the number of electronic connections a vendor provides between healthcare providers and payers, as well as the value-added solutions that are offered such as front-end edits, web-based reporting and applications. e-Health Solutions competes against a variety of traditional electronic data interface companies and Internet healthcare technology companies. The division's clearinghouse, The Per-Se Exchange, is focused almost entirely on medical claims in contrast to many competitors that focus on pharmacy claims. RESULTS BY INDUSTRY SEGMENT Information relating to the Company's industry segments, including revenue, segment operating margin and identifiable assets attributable to each division for each of the fiscal years ended 2001, 2000 and 1999 and as of December 31, 2001 and 2000, is presented in Note 18 of Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data. HEALTHCARE INDUSTRY Per-Se's business is affected, among other things, by trends in the U.S. healthcare industry. As healthcare expenditures have grown as a percentage of the U.S. gross national product, increasing focus has been placed on the tremendous administrative costs associated with the delivery of care and the increasing incidence of medical errors. Payers have actively sought to control costs by, among other things, utilizing reimbursement methodologies, such as managed care, fixed fee and capitated reimbursement models, which have supplanted the more traditional fee-for-service structure. These more restrictive reimbursement models, coupled with extensive regulatory control and government focus on fraud and abuse in the healthcare field, have helped to create a significantly complex accounting, coding, billing and collection environment in healthcare. These issues create a positive marketing environment for the sale of services and software that reduce the resources spent by healthcare providers on administrative functions, that help ensure compliance in an ever more complex regulatory environment, and for solutions that can reduce the opportunity for medical errors and improve the quality of care. Both governmental and private payers continue to implement measures to restrict payments for healthcare services, including but not limited to bundling edits, medical necessity edits and post-payment audits. These measures may result in a decrease in revenue to the Company's provider clients and, as a result, a decrease in revenue derived by the Company from such clients as well as an increase in the cost of providing services. The healthcare industry is focusing on the impact that regulations governing standards for electronic transactions, privacy and information security issued under the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") and implementation timeframes for those regulations might have on their operations and information technology solutions. HIPAA was designed to reduce the amount of administrative waste in healthcare today and to protect the privacy of any patient's medical information. HIPAA regulations (those proposed and those already final) identify certain standards for both human processes and automated processes and systems for anyone handling patient medical information and are focused around three areas: electronic transaction processing, patient privacy and patient data security. HIPAA regulations related to standard data formats and data sets for electronic health claim transaction processing became final in 2000. Entities covered by the transaction standards regulations, including certain subsidiaries of the Company, must comply with the standards by October 16, 2002. However, that compliance date can be delayed for one year upon filing a compliance plan by October 15, 2002. The HIPAA regulations related to privacy of medical information became final in 2001. These regulations impose extensive requirements on healthcare providers, healthcare clearinghouses and health plans. In addition, they require those covered entities to impose privacy protections by contract on entities that assist them in handling patient health information. The privacy regulations have a required compliance date of April 2003. Additional HIPAA regulations for health information security have been proposed, but are not yet final. The HIPAA regulations may impose the need for additional required enhancements of the Company's internal systems and those software applications sold, but at the same time, potentially create increased demand for the services and solutions provided by the Company. While the Company will incur 3 costs to become compliant with the HIPAA regulations passed for electronic transaction processing and privacy, management believes these two regulations will not have a significant overall impact on the Company's results of operations. Management will evaluate the overall impact of the security standards once finalized. On March 21, 2002, the Department of Health & Human Services announced a number of proposed changes to the privacy regulations issued under HIPAA. The announced intent of the proposed changes is "to ensure strong privacy protections while correcting certain unintended consequences (under the current regulations) that threatened patients' access to quality healthcare." The proposed changes are expected to address a number of subjects including consent, notice, disclosures and accounting for disclosures, business associate agreements and de-identification of protected health information. The proposed changes are expected to be published in the Federal Register on March 27, 2002, followed by a 30-day comment period. REGULATION Per-Se's business is subject to numerous federal and state laws, a broad range of complex regulations, and programs to combat fraud and abuse and increasing restrictions on reimbursement for healthcare services. Each of the major federal healthcare payment programs (Medicare, Medicaid and TRICARE) has its own set of complex and sometimes conflicting regulations. Additional regulations have been mandated by the Balanced Budget Act of 1997 and HIPAA, and a number of states have also imposed significant regulatory programs applicable to billing and payment for healthcare services. The federal government has maintained a significant emphasis on the prevention of healthcare fraud and abuse. Pursuant to the False Claims Act, the Medicare and Medicaid Patient and Program Protection Act of 1987 and HIPAA, the federal government has statutory authority to impose both civil and criminal sanctions and penalties for submission of false claims to governmental payers. Civil monetary penalties of up to $50,000 per offense may be imposed, as well as exclusion from participation in Medicare and other governmental healthcare programs. In addition, the False Claims Act allows a private party to bring a "qui tam" or "whistleblower" suit alleging the filing of false or fraudulent Medicare or Medicaid claims or other violations of the statute and to share in any damages and civil penalties paid to the government. The U.S. Centers for Medicare & Medicaid Services ("CMS," formerly the Health Care Financing Administration) also offers rewards for information leading to recovery of Medicare funds, and CMS engages private contractors to detect and investigate fraudulent billing practices. The Company has a well-established compliance program modeled after the Office of Inspector General's ("OIG") Compliance Program Guidance for Third-Party Medical Billing Companies that is designed and maintained to detect and prevent regulatory violations. The Company believes its compliance program is effective. However, a compliance program cannot be expected to provide absolute assurance of compliance with the law. The existence of an effective compliance program, though, may reduce the severity of civil and criminal sanctions for certain healthcare related offenses. In accordance with HIPAA, final rules were published in 2000 regarding the standards for electronic transactions as well as standards for privacy of individually identifiable health information. These rules set new or higher standards for the healthcare industry as to handling healthcare transactions and information, with penalties for noncompliance. The transaction standard regulations establish uniform electronic standards for eight of the most common healthcare transactions by reference to technical standards promulgated by recognized standards publishing organizations. Under the new standards, by October 16, 2002, healthcare providers, healthcare clearinghouses and health plans transmitting or receiving health transactions electronically will be required to send and receive data in a single format, rather than the large number of different data formats currently used. However, those covered entities can extend the compliance deadline by one year upon filing a compliance plan by October 15, 2002. Small health plans have until October 2003 to comply and are not required to file a compliance plan. The operations of certain Company subsidiaries fall under the transaction standards regulations. 4 The Company handles patient health information in the ordinary course of its business. HIPAA privacy standards will require certain subsidiaries of the Company to handle such information with great care, to establish safeguards with regard to security, access and use of the information, and to restrict the manner in which the information is used by other parties. Failure to do so may result in governmental enforcement actions. Other subsidiaries will be required by their covered entity customers to institute privacy protections by contract. Although the HIPAA privacy regulations do not provide a private right of action for individuals, they allow states to impose more stringent privacy protections. Thus, there may be state privacy actions that could be brought by individuals who believe their personal information has been misused. Certain subsidiaries of the Company must comply with the HIPAA privacy regulations by April 2003. As noted above, on March 21, 2002, the Department of Health & Human Services announced a number of proposed changes to the privacy regulations issued under HIPAA. EMPLOYEES The Company currently employs approximately 4,800 full-time and part-time employees. The Company has no labor union contracts and believes relations with its employees are satisfactory. FORWARD-LOOKING STATEMENTS Certain statements included in Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report, including certain statements set forth under the captions "Healthcare Industry," "Regulation," "Overview of Critical Accounting Policies," "Results of Operations," "Segment Operating Margin," "Process Improvement Project," "Goodwill/Client List Impairment," "Recent Accounting Pronouncements," "Market for the Registrant's Common Equity and Related Stockholder Matters" and "Liquidity and Capital Resources," are "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Forward-looking statements include the Company's expectations with respect to industry growth segments, effect of industry and regulatory changes on the Company's customer base, use of estimates for revenue recognition, bad debt accruals in reserve for doubtful accounts receivable and other estimates used for accounting purposes, corporate cost structure, the impact of operational improvement or cost reduction initiatives and associated cost savings, effect of adoption of recent accounting pronouncements, overall profitability and the availability of capital. Although the Company believes that the statements it has made are based on reasonable assumptions, they are based on current information and beliefs and, accordingly, the Company can give no assurance that its expectations will be achieved. In addition, these statements are subject to factors that could cause actual results to differ materially from those suggested by the forward-looking statements. These factors include, but are not limited to, factors identified under the caption "Factors That May Affect Future Results of Operations, Financial Condition or Business" in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7. The Company disclaims any responsibility to update any forward-looking statements. ITEM 2. PROPERTIES The Company's principal executive office is leased and is located in Atlanta, Georgia. The lease for that office expires in February 2005. PHYSICIAN SERVICES Physician Services' principal office is leased and is located in Atlanta, Georgia. The lease for that office expires in February 2005. In addition to its principal office, Physician Services operates 105 business offices throughout the United States. One of the facilities is owned. All of the remaining facilities are leased with expiration dates that vary through June 2011. 5 APPLICATION SOFTWARE Application Software's principal office is leased and is located in Atlanta, Georgia. The lease for that office expires in February 2005. In addition to its principal office, Application Software operates six offices in the United States and the United Kingdom. These facilities are leased with expiration dates that vary through November 2006. E-HEALTH SOLUTIONS e-Health Solutions' principal office is leased and is located in Atlanta, Georgia. The lease for that office expires in February 2005. In addition to its principal office, e-Health Solutions operates ten offices in the United States. These facilities are leased with expiration dates that vary through January 2006. ITEM 3. LEGAL PROCEEDINGS The information required by this Item is included in Note 11 of Notes to Financial Statements in Item 8. Financial Statements and Supplementary Data on pages F-17 to F-19. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to security holders for a vote during the fourth quarter of 2001. EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth certain information regarding the executive officers of the Company:
YEAR FIRST NAME AGE POSITION ELECTED OFFICER - ---- --- ----------------------------------- --------------- Philip M. Pead.................... 49 President and Chief Executive 1999 Officer Chris E. Perkins.................. 39 Executive Vice President and Chief 2000 Financial Officer of the Company Karen B. Andrews.................. 47 Senior Vice President of the 2000 Company and the President of the Company's Application Software division William N. Dagher................. 38 Senior Vice President of the 2000 Company and the President of the Company's e-Health Solutions division Frank B. Murphy................... 43 Senior Vice President of the 2000 Company and the President of the Company's Physician Services division
Each of the above executive officers was elected by the Board of Directors to hold office until the next annual election of officers and until his or her successor is elected and qualified or until his or her earlier resignation or removal. Philip M. Pead has served as the President and Chief Executive Officer of the Company since November 2000. He has also been a member of Per-Se's Board of Directors since November 2000. From August 1999 to November 2000, Mr. Pead served as Executive Vice President and Chief Operating Officer of the Company. Mr. Pead joined the Company in April 1997 as a senior executive in the Application Software and e-Health Solutions divisions of the Company's business and he served as President of those divisions from May 1997 until August 1999. From May 1996 to April 1997, Mr. Pead was employed by Dun & Bradstreet Application Software as a senior executive with responsibility for international operations. From August 1994 to May 1996, he was employed by Attachmate Corporation, a leading provider of communications software, as a senior executive with responsibility for Asia Pacific and Latin American operations. 6 Chris E. Perkins has served as Executive Vice President and Chief Financial Officer of the Company since February 2001. From April 2000 to February 2001, Mr. Perkins served as Senior Vice President of Corporate Development. Prior to joining Per-Se in April 2000, Mr. Perkins held various executive management positions with AGCO Corporation. He was appointed as AGCO's Chief Financial Officer in January 1996, after serving as Vice President of Finance and Administration, and in various roles within corporate development. In July 1998, Mr. Perkins was named Vice President of AGCO's parts division, a $500 million global business unit, for which he was responsible for all operations. Mr. Perkins also spent seven years in public accounting with Arthur Andersen. Karen B. Andrews has served as President of the Application Software division since October 2000. In this position, Ms. Andrews is responsible for the entire operations of the Application Software division. From 1997 to October 2000, Ms. Andrews served as Senior Vice President of Customer Service within the Application Software division. Prior to joining Per-Se in 1997, Ms. Andrews was Vice President of Professional Services for Geac SmartStream, formerly Dun & Bradstreet Software. She also served as a senior manager with PricewaterhouseCoopers, focusing on implementing application software solutions and process improvement. William N. Dagher has served as President of the e-Health Solutions division since October 2000. In this position, Mr. Dagher is responsible for the entire operations of the e-Health Solutions division. From 1998 to October 2000, Mr. Dagher was Senior Vice President of Per-Se's e-Health Operations and Chief Information Officer. Prior to 1998, he served for four years in various senior management positions at MedPartners, Inc. (now known as Caremark Rx, Inc.). In his four years at MedPartners, he held the positions of Vice President of Information Systems and Vice President of Mergers and Acquisitions. Prior to joining MedPartners, Mr. Dagher was Director of Client Service at Per-Se. From 1990 to 1993, he was National Director of Physician Practice Management at KPMG Peat Marwick. Frank B. Murphy has served as President of the Physician Services division since October 2000. In this position, Mr. Murphy is responsible for the entire operations of the Physician Services division. Mr. Murphy, who joined Per-Se in 1998, has also served as Senior Vice President, Operations of the Physician Services division and Senior Vice President of the academic and multi-specialty services group within the Physician Services division. Before joining Per-Se, he worked in leadership roles with a strategic consulting company specializing in physician practice management, and a multi-hospital division for an investor-owned company. He also served as President and Chief Executive Officer of Trident Regional Health Systems in Charleston, South Carolina, a wholly-owned subsidiary of Hospital Corporation of America. 7 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock is traded on the Nasdaq National Market under the symbol PSTI. The prices in the table below represent the high and low sales price for the Common Stock as reported on Nasdaq for the periods presented. Such prices are based on inter-dealer bid and asked prices without markup, markdown or commissions and may not represent actual transactions.
YEAR ENDED DECEMBER 31, 2001 HIGH LOW - ---------------------------- ------- ------ First Quarter............................................... $ 7.375 $3.219 Second Quarter.............................................. 8.250 5.375 Third Quarter............................................... 8.950 7.380 Fourth Quarter.............................................. 10.770 7.780
YEAR ENDED DECEMBER 31, 2000 HIGH LOW - ---------------------------- ------- ------ First Quarter............................................... $ 9.875 $5.500 Second Quarter.............................................. 9.406 3.875 Third Quarter............................................... 13.875 8.625 Fourth Quarter.............................................. 12.813 2.125
The last reported sales price of the Common Stock as reported on Nasdaq on March 18, 2002 was $12.34 per share. As of March 18, 2002, the Company's Common Stock was held of record by 3,724 stockholders. Per-Se has never paid cash dividends on its Common Stock and does not anticipate paying cash dividends in the foreseeable future, but intends instead to retain any future earnings for reinvestment in its business. The Indenture dated as of February 20, 1998, with respect to the Company's outstanding 9 1/2% Senior Notes due 2005 (see Note 9), contains restrictions on the Company's ability to declare or pay cash dividends on its Common Stock. 8 ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected consolidated financial information for Per-Se for and as of each of the five fiscal years including the period ended December 31, 2001. The selected consolidated financial information of Per-Se has been derived from the audited consolidated financial statements of Per-Se. The years ended December 31, 1997, 1998 and 1999 present the operations of Medaphis Services Corporation ("Hospital Services") and Impact Innovations Group ("Impact"), which primarily consists of Rapid Systems and BSG, as discontinued operations. Hospital Services was sold in 1998 and Impact was sold in 1999 as part of management's plan to divest non-core business operations.
YEAR ENDED DECEMBER 31, --------------------------------------------------------- 2001 2000 1999 1998 1997 -------- -------- -------- --------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) STATEMENTS OF OPERATIONS DATA Revenue............................ $328,877 $310,008 $322,129 $ 349,823 $392,420 Salaries and wages................. 199,254 193,952 212,940 226,894 242,228 Other operating expenses........... 92,421 94,364 104,192 126,183 123,094 Depreciation....................... 12,401 15,562 20,177 23,848 22,481 Amortization....................... 13,245 10,125 9,293 18,077 21,069 Interest expense, net.............. 17,159 14,525 16,102 23,494 23,398 Goodwill and client lists impairment....................... -- -- -- 390,641 -- Process improvement project........ 3,423 501 -- -- -- Litigation settlements............. -- 1,147 24,811 35,987 52,500 Non-recurring, restructuring and other expenses................... 593 2,382 -- 5,191 16,741 Income tax expense (benefit)....... 607 (695) (610) 58,465 (16,568) Loss from continuing operations.... (10,226) (21,855) (64,776) (558,957) (92,523) Net loss (1)....................... (6,338) (48,202)(2) (33,702) (560,214)(3) (19,303)(4) Weighted average shares outstanding...................... 29,915 29,852 28,097 25,673 24,226 PER SHARE DATA Basic and diluted loss from continuing operations......... $ (0.34) $ (0.74) $ (2.31) $ (21.77) $ (3.82) Basic and diluted net loss....... $ (0.21) $ (1.62) $ (1.20) $ (21.82) $ (0.80)
AS OF DECEMBER 31, ------------------------------------------------------ 2001 2000 1999 1998 1997 -------- -------- -------- -------- -------- (IN THOUSANDS) BALANCE SHEET DATA Working capital....................... $ 24,307 $ 27,179 $ 93,304 $ 86,215 $ 64,522 Intangible assets..................... 77,268 72,695 46,446 48,241 459,129 Total assets.......................... 202,891 214,126 265,017 286,721 847,145 Total debt............................ 175,091 175,000 177,138 176,080 200,691 Stockholders' (deficit) equity........ (50,130) (44,136)(2) 1,440 2,323 501,781
- --------------- (1) Reflects the results from discontinued operations of $3.9 million, $11.3 million, $31.1 million, $7.1 million and $(0.7) million for 2001, 2000, 1999, 1998 and 1997, respectively. (2) Reflects a $37.7 million expense for the change in accounting for revenue pursuant to Staff Accounting Bulletin Number 101, Revenue Recognition in Financial Statements ("SAB 101") and the corresponding increase in the Company's deferred tax valuation allowance. (3) Reflects an $8.4 million extraordinary expense for the early extinguishment of debt. 9 (4) Reflects extraordinary income of $76.4 million related to the sale of Healthcare Recoveries, Inc. ("HRI") and a $2.5 million expense for the change in accounting for business process reengineering costs incurred in connection with an information technology project, pursuant to Emerging Issues Task Force Consensus No. 97-13, Accounting for Costs Incurred in Connection with a Consulting or an Internal Project that Combines Business Process Reengineering and Information Technology. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following "Management's Discussion and Analysis of Financial Condition and Results of Operations" contains forward-looking statements about circumstances that have not yet occurred. All statements, trend analysis and other information contained below relating to markets, our products and trends in revenue, as well as other statements including words such as "anticipate", "believe" or "expect" and statements in the future tense are forward-looking statements. These forward-looking statements are subject to business and economic risks and actual events or our actual future results could differ materially from those set forth in the forward-looking statements due to such risks and uncertainties. The Company disclaims any responsibility to update any forward-looking statement. Risks and uncertainties that may affect our future results and performance include, but are not limited to, those discussed under the heading "Factors That May Affect Future Results of Operations, Financial Condition or Business" at pages 21 to 23 of this Annual Report on Form 10-K. RECENT ACCOUNTING PRONOUNCEMENTS In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 141, Business Combinations ("SFAS No. 141"), which eliminates the pooling method of accounting for all business combinations initiated after June 30, 2001, and addresses the initial recognition and measurement of goodwill and other intangible assets acquired in a business combination. The Company adopted SFAS No. 141 for business combinations initiated after June 30, 2001. It had no impact on the Company's Consolidated Statements of Operations. In June 2001, the FASB issued Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets ("SFAS No. 142"). Under SFAS No. 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually for impairment. The Company adopted the standard on January 1, 2002. As required by SFAS No. 142, the Company will complete the impairment test of its goodwill by June 30, 2002. No asset impairment write-downs are expected to occur as a result of adoption. In August 2001, the FASB issued Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS No. 144"). SFAS No. 144 replaces Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of ("SFAS No. 121"). SFAS No. 144 requires that long-lived assets to be disposed of by sale, including those of discontinued operations, be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or in discontinued operations. Discontinued operations will no longer be measured at net realizable value or include amounts for operating losses that have not yet been incurred. SFAS No. 144 also broadens the reporting of discontinued operations to include all components of an entity with operations that can be distinguished from the rest of the entity and that will be eliminated from the ongoing operations of the entity in a disposal transaction. The Company adopted the standard on January 1, 2002. No asset impairment is expected to occur as a result of adoption. OVERVIEW OF CRITICAL ACCOUNTING POLICIES Critical accounting policies are those accounting policies that management believes are the most "critical" -- that is, they are both most important to the portrayal of the Company's financial condition and results, and they require management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. 10 The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. REVENUE RECOGNITION The Company's revenue is derived from products and services delivered to the healthcare industry through its three operating divisions: Physician Services provides business management outsourcing services to hospital-affiliated physicians, physicians in academic settings and other large physician practices. Fees for these services are primarily based on a percentage of net collections on our clients' accounts receivable. Revenue is recognized when our customers receive payment on those accounts receivable. The Physician Services division does not rely, to any material extent, on estimates in the recognition of this revenue. Application Software provides enterprise-wide financial, clinical and administrative software to acute care healthcare organizations. For contracts under which the division is required to make significant production, modification or customization changes, revenue from software licenses and services is recognized using the percentage-of-completion method over the implementation period. When the Company receives payment prior to shipment or fulfillment of significant vendor obligations, such payments are recorded as deferred revenue and are recognized as revenue upon shipment or fulfillment of significant vendor obligations. An unbilled receivable is recorded when the Company recognizes revenue on the percentage-of-completion basis prior to achieving a contracted billing milestone. For minor add-on software license sales where no significant customization remains outstanding, the fee is fixed, an agreement exists and collectibility is probable, the division recognizes revenue upon shipment. Software maintenance payments received in advance are deferred and recognized ratably over the term of the maintenance agreement, which is typically one year. The Application Software division relies on estimates of work to be completed when recognizing revenue on contracts using percentage-of-completion accounting. Because revenue could be impacted if the estimates of the extent of completion differ from actual results, periodic reviews of the estimated hours or days to complete major projects are made by the Application Software division and compared to budgeted hours or days to support the revenue recognized on that project. Approximately 27% of the division's revenue is determined using percentage-of-completion accounting for the year ended December 31, 2001. e-Health Solutions delivers private and internet-based business-to-business solutions that help healthcare providers, payers and patients reduce administrative inefficiencies. Revenue related to electronic claims and remittance advice processing and real-time eligibility verification is recognized on a per transaction basis net of electronic claims rebates. Revenue related to high-speed print and mail services is billed and recognized when the services are delivered and includes all costs of delivering the product; the division includes all costs of delivering the product in operating expenses. For software contracts under which the division is required to make significant production, modification or customization changes, revenue from software licenses and services is recognized using the percentage-of-completion method over the implementation period. Approximately 1.9% of the division's revenue is determined using percentage-of-completion accounting for the year ended December 31, 2001. Revenue related to the ASP physician practice management system is recognized as monthly subscription revenue AMORTIZATION OF INTANGIBLES Amortization of intangible assets includes the amortization of goodwill, client lists, trademark, developed technology and software development costs. The Company relies on estimates of the useful lives of these assets on which to base its amortization. The estimation of an asset's remaining useful life is 11 determined based on the Company's historical experience, market conditions and the product or services provided. The Company periodically evaluates whether changes have occurred that would require revision of the remaining estimated useful lives of the intangible. Additionally under SFAS No. 121, the Company evaluates whether there have been any changes that would render its intangibles impaired. Conditions that may indicate an impairment issue exists include an economic downturn or change in future operations. In the event a condition is identified that indicates an impairment might exist, an assessment is performed using a variety of methodologies including cash flow analysis, estimates of sales proceeds and independent appraisals. Where applicable, an appropriate interest rate is utilized based on appropriate borrowing rates. In accordance with Accounting Principles Board Opinion 16, Business Combinations, the Company finalized the purchase price allocation of its most recent acquisitions, with a portion of the amount previously allocated to goodwill being reallocated to finite-lived intangible assets. The amounts reallocated to finite-lived intangible assets totaled approximately $9.2 million. Due to this reallocation, amortization expense related to these finite-lived intangibles will result in an increase in amortization expense of $1.6 million in 2002, which will be offset by a reduction in goodwill amortization of $3.5 million due to adoption of SFAS No. 142. The net reduction in amortization expense in 2002 will be $1.9 million, or $0.06 per share on a fully diluted basis. Goodwill -- Goodwill represents the excess of the cost of businesses acquired in the e-Health Solutions division from 1995 to 2001, over the fair market value of their identifiable net assets. Prior to the adoption of SFAS No. 142 on January 1, 2002, the Company amortized its goodwill over its estimated useful life of no greater than twenty years. Under SFAS No. 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually for impairment. Client Lists -- Client lists represent the value of clients acquired in the Physician Services division from 1992 to 1996 and the e-Health Solutions division from 1995 to 2001. Client lists are being amortized over their estimated useful lives, which range from five to ten years. Other Intangibles -- Developed Technology represents the value of the systems acquired in the e-Health Solutions division from 2000 to 2001. These intangible assets are being amortized over their estimated useful lives of five years. Trademark represents the value of the trademarks acquired in the e-Health Solutions division from 2000 to 2001. Under SFAS No. 142, this indefinite lived intangible asset will not be amortized. Software Development Costs -- Software development includes costs incurred in the development or the enhancement of software developed by the Application Software and e-Health Solutions divisions for resale. Software development costs are capitalized upon the establishment of technological feasibility for each product and capitalization ceases when the product or process is available for general release to customers. Software development costs are amortized over the greater of the ratio that current revenues bear to total and anticipated future revenues for the applicable product or straight-line method over the estimated economic lives of the assets, which are generally three to five years. The Company monitors the net realizable value of all capitalized software development costs to ensure that the investment will be recovered through margins from future sales. DEFERRED TAXES As of December 31, 2001 and 2000, the Company reassessed the recoverability of its deferred tax asset. Based on its analysis, the Company determined a full valuation allowance against the deferred tax asset of $246.2 million and $247.1 million was required as of December 31, 2001 and December 31, 2000, respectively. Realization of the net deferred tax asset is dependent upon the Company generating sufficient taxable income prior to the expiration of the federal net operating loss carryforwards. When it becomes more likely than not that the Company will generate sufficient taxable income to realize the deferred tax asset, the Company will adjust this valuation allowance accordingly. 12 ACCRUED EXPENSES The Company relies on estimates to determine the amounts that are recorded in accrued expenses. Estimates of the legal activity and demands within our business and industry are used to accrue legal expenses. Estimates of the performance of Knowledgeable Healthcare Solutions, Inc., an acquisition made in 2000, are used to accrue the costs of businesses acquired. Income tax accruals are made using estimates based on historical experience of the Company and the current business environment. Restructuring and severance cost accruals are made using estimates of the costs required to effect the desired change within the Company. BAD DEBT ESTIMATES The Company relies on estimates to determine the bad debt expense and the adequacy of the reserve for doubtful accounts receivable. These estimates are based on the historical experience of the Company and the industry in which it operates. If the financial condition of the Company's customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The Company actively reviews its accounts receivable and believes any variation of actual results from the Company's estimates would not have a material impact on the financial condition of the Company. OTHER The Company does not have: - material exposure to foreign exchange fluctuations; - any derivative financial instruments; - any material off-balance sheet arrangements other than its operating leases disclosed in Note 10 of Notes to Financial Statements in Item 8; or - any material related party transactions. RESULTS OF OPERATIONS This discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying notes. YEARS ENDED DECEMBER 31, 2001 AND 2000 Revenue. Revenue classified by the Company's reportable segments ("divisions") is as follows:
YEAR ENDED DECEMBER 31, ----------------------- 2001 2000 ---------- ---------- (IN THOUSANDS) Physician Services.......................................... $223,875 $225,102 Application Software........................................ 58,840 60,635 e-Health Solutions.......................................... 57,910 35,276 Eliminations................................................ (11,748) (11,005) -------- -------- $328,877 $310,008 ======== ========
Revenue for the Physician Services division declined slightly in 2001 compared to 2000. The decline is due to a high level of client-initiated discontinuances in 2000 of approximately 14%. The rampdown of revenue associated with these clients adversely affected 2001 revenue by $27.1 million. This decline was partially offset by the implementation of new sales from 2000 and 2001 which resulted in revenue recognized in 2001 of $16.0 million and revenue growth related to existing customers of approximately 13 10%. Revenue stability in 2001 was a result of the Company's intense focus on client satisfaction that resulted in client retention of 95% on a full year basis. Revenue for the Application Software division decreased slightly in 2001. Although new sales increased approximately $20.7 million, revenue decreased due to client delays in implementations, which impact revenue recognition under percentage-of-completion accounting, and to the low backlog that was in place at the beginning of 2001. As a result, the backlog in the division increased from $28.9 million at December 31, 2000 to $43.0 million at December 31, 2001, an increase of approximately 49%. Backlog represents contracts that have been sold and have yet to be completed. The e-Health Solutions division experienced significant growth during 2001 with revenues increasing $22.6 million or approximately 64% over 2000. The increase is largely due to the acquisitions of Health Data Services, Inc. and Patient Account Management Services, Inc. ("HDS/PAMS") (December 2000), Virtual Information Systems, Inc. ("VIS") and OfficeMed.com LLC ("OfficeMed") (April 2001) as well as organic growth of 20% over the prior year. Segment Operating Margin. Segment operating margin, which is net income/(loss) excluding net interest expense, the process improvement project costs, litigation settlements, non-recurring, restructuring and other expenses, income taxes and discontinued operations net of taxes, classified by the Company's divisions is as follows:
YEAR ENDED DECEMBER 31, ------------------------ 2001 2000 ---------- ---------- (IN THOUSANDS) Physician Services.......................................... $ 12,470 $ 4,267 Application Software........................................ 5,473 2,859 e-Health Solutions.......................................... 5,228 3,401 Corporate................................................... (11,614) (14,522) -------- -------- $ 11,557 $ (3,995) ======== ========
Physician Services' segment operating margin increase of $8.2 million or 192% is due to cost savings realized from the productivity initiatives in the division such as the Process Improvement Project (see "Process Improvement Project" below and Note 5 of Notes to Financial Statements in Item 8). In 2001, Application Software's segment operating margin increased $2.6 million or 91% compared to 2000. The increase is attributable to reduced operating expenses that resulted from management's continued focus on productivity improvements related to implementations and on cost containment. Specific improvements occurred in salaries and wages, contract labor and travel expenses. The e-Health Solutions segment experienced growth in segment operating margin of $1.8 million or 53% in 2001 compared to 2000. The increase in segment profit is attributable to the growth from recent acquisitions, which contributed $1.1 million of the increase and increased volume from existing customers, which contributed $0.7 million. The Company's corporate overhead expenses declined 20% in 2001 compared to 2000. The decrease is attributable to management's efforts to control expenses and create a corporate support structure that has a more normalized level of expense. Specific improvements included a 15% decrease in salaries and wages and a 58% decrease in depreciation expense due to a major financial system becoming fully depreciated as of December 31, 2000. Interest. Net interest expense increased 18% from $14.5 million in 2000 to $17.2 million in 2001. The increase is attributable to a reduction in interest income due to lower cash balances in 2001 combined with a decrease in investment rates available. The lower cash balance resulted from the Company's strategic acquisitions during 2001. Process Improvement Project. The Company incurred approximately $3.4 million and $0.5 million of expense in 2001 and 2000, respectively, associated with the implementation of a process improvement 14 project within the Physician Services division (the "Project"). The Project installs a formalized set of productivity and quality measures, workflow processes and a management operating system in certain of the Company's major processing centers. The Project focuses on productivity improvements that result in both improved client service as well as improved profitability for the division. The costs associated with the Project primarily consist of professional fees paid to outside consultants retained exclusively for implementation of the Project. The first phase of the Project, which involved implementation in twelve of the division's larger processing centers, was completed in the third quarter of 2001 with all costs for this phase incurred as of September 30, 2001. Annualized cost savings resulting from phase one are expected to be $6.0 million, of which, $4.0 million were realized in 2001. In the first quarter of 2002, the Company began the second phase of the Project, which will implement the productivity improvement model into fifteen additional offices. This phase of the Project will be implemented with internal resources, and the Company will not incur external project costs going forward. Estimated annualized cost savings for phase two of the Project are forecasted at $2.0 to $2.5 million, of which, $1.0 to $1.5 million should be realized in 2002. Litigation Settlements. There were no material litigation settlements in 2001. In December 2000, the Company recorded an estimated litigation settlement expense of $1.15 million related to a lawsuit that was pending against Medical Management Sciences, Inc. ("MMS") when the Company acquired MMS in December 1995, but which was not resolved until December 2000. In February 2001, the Company paid the full amount of the net award of $1.15 million. Non-recurring, Restructuring and Other Expenses. During the first quarter of 2001, the Company recorded severance expense of approximately $0.6 million associated with former executive management. In December 2000, the Company recorded $1.4 million of non-recurring expenses related to e-Health Solutions' retirement of a software product that was replaced by a superior software product at Health Data Services, Inc. and Patient Account Management Services, Inc. ("HDS/PAMS"), companies acquired by the Company in December 2000. In connection with the retirement of the software product, the Company also recorded $0.4 million of severance for approximately 20 employees associated with the retired software product that had been notified of their termination. The Company recorded a net expense of $0.6 million for the period ended December 31, 2000 for severance costs associated with former executive management. The expense includes a $0.3 million reduction of a prior period severance cost associated with former executive management. Income Taxes. Income tax expense, which was primarily related to state income taxes, was $0.6 million in 2001 compared to an income tax benefit of $0.7 million in 2000 related to a state income tax refund. As of December 31, 2001 and 2000, the Company reassessed the recoverability of its deferred tax asset. Based on its analysis, the Company determined a full valuation allowance against the deferred tax asset of $246.2 million and $247.1 million was required as of December 31, 2001 and December 31, 2000, respectively. Realization of the net deferred tax asset is dependent upon the Company generating sufficient taxable income prior to the expiration of the federal net operating loss carryforwards. When it becomes more likely than not that the Company will generate sufficient taxable income to realize the deferred tax asset, the Company will adjust this valuation allowance accordingly. At December 31, 2001, the Company had federal net operating loss carryforwards ("NOLs") for income tax purposes of approximately $386.4 million. The NOLs will expire at various dates between 2002 and 2020. Discontinued Operations. In 1999, the Company completed the sale of both divisions of Impact Innovations Group ("Impact"). The Company sold the commercial division of Impact to Complete Business Solutions, Inc. ("CBSI") effective April 15, 1999 for $14.4 million, net of the final closing balance sheet adjustment of $0.6 million, which was paid on July 16, 1999. Final CBSI post acquisition matters were resolved in the third quarter of 2000 resulting in an additional charge to discontinued operations of $0.4 million. The government division of Impact was sold on December 17, 1999 to J3 Technology Services Corp. for $46.5 million, including a purchase price adjustment of $1.5 million 15 received on March 30, 2000 based on the division's tangible net worth at closing. The purchase price adjustment resulted in the recognition of an additional gain of $1.5 million through discontinued operations. Additionally, the sale agreement stipulated that $1.0 million of the purchase price be put in escrow to pay potential claims. The term of the escrow expired on September 30, 2001. In October of 2001, the Company received $1.0 million in cash, which was recognized through discontinued operations. The Company accrued $5.3 million for the period ended September 30, 1999 through discontinued operations as a result of an agreement with SCI Management Corporation ("SCI"), a former client of the commercial division of Impact. SCI filed a complaint against the commercial division of Impact in January of 1998 seeking recovery for alleged damages in connection with work performed by Impact under a consulting contract. Although the commercial division of Impact was sold effective April 15, 1999, the Company remained responsible for the SCI complaint. The Company paid $3.2 million to SCI on November 4, 1999. The Company issued a promissory note for the balance of $2.1 million bearing interest at 8.25%, which was paid on October 31, 2000. In May of 2001, the Company received an insurance settlement related to the SCI matter of approximately $3.0 million, which was recognized through discontinued operations. On November 30, 1998, the Company completed the sale of Medaphis Services Corporation ("Hospital Services") to NCO Group, Inc. ("NCO") for initial consideration of $107.5 million. During the first quarter of 1999, the Company received additional consideration of $0.8 million based on the Hospital Services' final closing balance sheet and payment on certain Hospital Services' accounts receivable retained by the Company. The additional consideration resulted in the recognition of an additional gain of $0.5 million, net of tax of $0.3 million, which was recognized through discontinued operations. In addition, the Company received a purchase price adjustment of $10.0 million in cash from NCO on May 5, 2000 based on Hospital Services' achievement of various operational targets in 1999. The purchase price adjustment resulted in the recognition of an additional gain of approximately $9.2 million in the quarter ended June 30, 2000 through discontinued operations. YEARS ENDED DECEMBER 31, 2000 AND 1999 Revenue. Revenue classified by the Company's reportable segments ("divisions") is as follows:
YEAR ENDED DECEMBER 31, ----------------------- 2000 1999 ---------- ---------- (IN THOUSANDS) Physician Services.......................................... $225,102 $240,200 Application Software........................................ 60,635 62,145 e-Health Solutions.......................................... 35,276 31,343 Eliminations................................................ (11,005) (11,559) -------- -------- $310,008 $322,129 ======== ========
Revenue for the Physician Services division decreased 6% in 2000 compared to 1999. The revenue decline is primarily attributable to Company-initiated and client-initiated discontinuances throughout 1999 and 2000. Company-initiated discontinuances were a result of management's ongoing review and evaluation of marginally profitable and unprofitable clients that yield returns unacceptable to management. These discontinuances are partially offset by the addition of new business in 2000 and 1999. Revenue for the Application Software division decreased 2% from 1999 to 2000. The decline in revenue is primarily attributable to decreased consulting revenue due to fewer conversion services being performed related to the date change to the year 2000. The decrease in consulting revenue is partially offset by an increase in recurring maintenance revenue due to an increase in the customer base. e-Health Solutions revenue increased 13% in 2000 as compared with 1999. The increase is attributable to an increase in volume from existing customers in addition to volume from new customers in the Company's electronic statement processing center. 16 Segment Operating Margin. Segment operating margin, which is net loss excluding net interest expense, the process improvement project costs, litigation settlements, non-recurring, restructuring and other expenses, income taxes, discontinued operations net of taxes and cumulative effect of accounting change net of tax, classified by the Company's divisions is as follows:
YEAR ENDED DECEMBER 31, ----------------------- 2000 1999 ---------- ---------- (IN THOUSANDS) Physician Services.......................................... $ 4,267 $ (5,541) Application Software........................................ 2,859 (1,071) e-Health Solutions.......................................... 3,401 (190) Corporate................................................... (14,522) (17,671) -------- -------- $ (3,995) $(24,473) ======== ========
Physician Services experienced a growth in operating margin of $9.8 million in 2000 as compared to 1999. The improvement is attributable to workforce reductions, productivity enhancements and management's focus on discontinuing marginally profitable and unprofitable customer engagements. Application Software experienced a growth in operating margin of $3.9 million in 2000 as compared to 1999. The improvement in operating profit is attributable to management's continued focus on cost containment, specifically in the areas of salaries and wages, outside services, travel and marketing expenses. The year 2000 was e-Health Solutions' first full year of operation as a separate, externally focused business segment and the division experienced a growth in operating margin of $3.6 million in 2000 compared to 1999. The increase in operating profit is attributable to the previously mentioned revenue increase while operational expenses remained stable. The Company's corporate overhead costs decreased by 18% in 2000 compared to 1999. The reduction is due to management's efforts to create a normalized corporate support structure. Specific improvements included an 11% decrease in salaries and wages, and a 40% decline in depreciation expense due to equipment becoming fully depreciated. Interest. Net interest expense was $14.5 million for the year ended December 31, 2000 as compared to $16.1 million in the same period in 1999. The decrease is primarily related to interest income of $3.8 million generated from the short-term investment of cash during 2000. Process Improvement Project. The Company incurred $0.5 million of expense in the period ended December 31, 2000 for a process improvement project within the Physician Services division. The Project is an effort to improve productivity in certain of the division's processing centers. In the fourth quarter of 2000, the Project produced a formalized set of productivity and quality measures, workflow processes as well as a management operating system within one of the processing centers which served as the Project's pilot. Litigation Settlements. In December 2000, the Company recorded an estimated litigation settlement expense of $1.15 million related to a lawsuit that was pending against MMS when the Company acquired MMS in December 1995, but which was not resolved until December 2000. In February 2001, the Company paid the full amount of the net award of $1.15 million. In June 1999, the Company recorded an estimated litigation settlement liability of $21.5 million related to the Company's legal dispute with a former shareholder of Health Data Sciences Corporation, arising from the Company's June 1996 acquisition. The estimated liability was based upon an agreement in principle with this former shareholder. When the agreement was finalized in October 1999, the cost to the Company was reduced to $17.0 million and, as a result, the litigation settlement liability was reduced by $4.4 million. 17 Also in June 1999, the Company recorded litigation settlement expenses of $6.0 million related to litigation arising from the Company's December 1995 acquisition of MMS. In addition, the Company paid $1.8 million to settle contract claims against the Company's wholly-owned operating subsidiary, PST Emergency Medicine Services, Inc. (formerly known as Gottlieb's Financial Services, Inc.) which arose in January 1998 in the ordinary course of business. Non-recurring, Restructuring and Other Expenses. In December 2000, the Company recorded $1.4 million of non-recurring expenses related to e-Health Solutions' retirement of a software product that was replaced by a superior software product at Health Data Services, Inc. and Patient Account Management Services, Inc., companies acquired by the Company in December 2000. In connection with the retirement of the software product, the Company also recorded $0.4 million of severance for approximately 20 employees associated with the retired software product that had been notified of their termination. In addition, the Company recorded a net expense of $0.6 million for the period ended December 31, 2000 for severance costs associated with former executive management. The expense includes a $0.3 million reduction of a prior period severance cost associated with former executive management. In 1999, the Company evaluated the adequacy of its reserves for lease termination costs established in prior periods. As a result of this evaluation, the Company increased its lease termination reserve for Physician Services by $0.3 million and reduced Application Software's lease termination reserve by $0.3 million. Income Taxes. As of December 31, 2000 and 1999, the Company reassessed the recoverability of its deferred tax asset. Based on its analysis, the Company determined a full valuation allowance against the deferred tax asset of $247.1 million and $236.8 million was required as of December 31, 2000 and December 31, 1999, respectively. The increase in the valuation allowance from December 31, 1999 is primarily related to the elimination of the Company's unbilled accounts receivable (see Cumulative Effect of Accounting Change discussion below) and as such, $15.0 million was recorded against the cumulative effect of accounting change. The increase was offset by an adjustment to the Company's net operating loss carryforwards based on 1999 actual tax returns. When it becomes more likely than not that the Company will generate sufficient taxable income to realize the deferred tax asset, the Company will adjust this valuation allowance accordingly. Discontinued Operations. Summarized financial information for the discontinued operations for the year ended December 31, 1999 is as follows:
FOR THE YEAR ENDED DECEMBER 31, 1999 IMPACT ------------------ (IN THOUSANDS) Revenue..................................................... $54,916 ======= Income from discontinued operations before taxes............ 3,958 Income tax expense.......................................... 555 ------- Income from discontinued operations, net of tax............. $ 3,403 =======
In 1998, management initiated a plan to focus the Company's financial and management resources on its three core healthcare segments in an effort to return the Company to profitability. Management defined these segments as: Physician Services, Application Software and e-Health Solutions. Management began to seek alternatives for the remaining non-core business segments: Medaphis Services Corporation ("Hospital Services") and Impact. Although Hospital Services provided business management and accounts receivable management services to approximately 1,200 hospitals, the Company's management deemed the segment non-core as a substantial portion of the services offered was bad debt collection. Impact was deemed non-core as it did not provide consulting services to the healthcare industry. The 18 results of operations for Impact have been classified as discontinued operations for the year ended December 31, 1999. On November 30, 1998, the Company completed the sale of Hospital Services to NCO Group, Inc. for initial consideration of $107.5 million. During the first quarter of 1999, the Company received additional consideration of $0.8 million based on the Hospital Services' final closing balance sheet and payment on certain Hospital Services' accounts receivable retained by the Company. The additional consideration resulted in the recognition of an additional gain of $0.5 million, net of tax of $0.3 million, which was recognized through discontinued operations. In addition, the Company received a purchase price adjustment of $10.0 million in cash from NCO on May 5, 2000 based on Hospital Services' achievement of various operational targets in 1999. The purchase price adjustment resulted in the recognition of an additional gain of approximately $9.2 million through discontinued operations for the year ended December 31, 2000. In 1999, the Company completed the sale of both divisions of Impact. The Company sold the commercial division of Impact to Complete Business Solutions, Inc. effective April 15, 1999 for $14.4 million, net of the final closing balance sheet adjustment of $0.6 million which was paid on July 16, 1999. Final CBSI post acquisition matters were resolved in the third quarter of 2000 resulting in an additional charge to discontinued operations of $0.4 million. The government division of Impact was sold on December 17, 1999 to J3 Technology Services Corp. for $46.5 million, including a purchase price adjustment of $1.5 million received on March 30, 2000 based on the division's tangible net worth at closing. The purchase price adjustment resulted in the recognition of an additional gain of $1.5 million through discontinued operations. The Company accrued $5.3 million for the period ended September 30, 1999 through discontinued operations as a result of an agreement with SCI Management Corporation, a former client of the commercial division of Impact. SCI filed a complaint against the commercial division of Impact in January of 1998 seeking recovery for alleged damages in connection with work performed by Impact under a consulting contract. Although the commercial division of Impact was sold effective April 15, 1999, the Company remained responsible for the SCI complaint. The Company paid $3.2 million to SCI on November 4, 1999. The Company issued a promissory note for the balance of $2.1 million bearing interest at 8.25%, which was paid on October 31, 2000. In May of 2001, the Company received an insurance settlement related to the SCI matter of approximately $3.0 million, which was recognized through discontinued operations. Cumulative Effect of Accounting Change. On December 3, 1999, the Securities and Exchange Commission (the "Commission") issued Staff Accounting Bulletin Number 101, Revenue Recognition in Financial Statements ("SAB 101"). SAB 101 summarizes certain of the Commission's views in applying generally accepted accounting principles to revenue recognition in financial statements. SAB 101 provides interpretative guidance on the unbilled accounts receivable and related revenue recognition within the Company's industry. Therefore, consistent with the Commission's guidance and changing industry practice, the Company began recognizing revenue in its Physician Services segment on an "as billed" basis January 1, 2000. The change in accounting method resulted in the elimination of $37.7 million of unbilled accounts receivable. The one-time, cumulative non-cash expense in the Company's statement of operations for the year ended December 31, 2000 reflects the $22.7 million elimination of the unbilled accounts receivable on a net of tax basis and a corresponding $15.0 million increase in the Company's deferred tax valuation allowance. LIQUIDITY AND CAPITAL RESOURCES As of December 31, 2001, the Company had working capital of $24.3 million compared to $27.2 million at December 31, 2000. Restricted cash totaled $4.4 million as of December 31, 2001 compared to $7.4 million at December 31, 2000. Restricted cash principally represents restrictions on the 19 Company's cash as security for the Company's letters of credit. Cash and cash equivalents totaled $36.5 million at December 31, 2001, an increase of $5.5 million compared to 2000. Cash provided by continuing operations was $22.0 million in 2001 compared to cash used by continuing operations in 2000 of $8.7 million. This improvement in cash flow was driven by improvements in operations, net of depreciation and amortization that resulted in the loss before cumulative effect of accounting change of $6.3 million in 2001 versus a loss before cumulative effect of accounting change of $10.5 million in 2000. Also, improvements in the collection of accounts receivable generated cash of $8.5 million in 2001 compared to a use of $6.3 million in 2000. During 2002, the Company expects to fund its working capital needs through cash provided by operations. The Company used $20.1 million in cash for investing activities during 2001 compared to $33.1 million during 2000. The improvement was primarily driven by $14.0 million lower capital expenditures in 2001, as well as a $14.3 million reduction in investments in strategic acquisitions during 2001. These improvements were offset by $11.3 million in proceeds received in 2000 for the sale of subsidiaries in 1999 and 1998. Cash used by financing activities was $0.3 million in 2001 compare to cash provided of $0.6 million in 2000. These amounts were primarily attributable to deferred financing costs in 2001 compared to proceeds from the issuance of common stock and the exercise of stock options in 2000. On February 20, 1998, the Company issued $175 million of 9 1/2% Senior Notes due on February 15, 2005 (the "Notes"), which bear interest at the rate of 9 1/2% per annum, payable semi-annually on February 15 and August 15, which commenced on August 15, 1998. The Notes are redeemable at the option of the Company, in whole or in part, at any time at a declining premium to par until 2004 and at par thereafter, plus accrued and unpaid interest. Payment of principal, premium, if any, and interest on the Notes is fully and unconditionally guaranteed, on a senior unsecured basis, jointly and severally by all of the Company's present and future domestic restricted subsidiaries (the "Subsidiary Guarantors"). The financial statements of the Subsidiary Guarantors have not been presented as all subsidiaries, except certain insignificant foreign subsidiaries, have provided guarantees and the parent company does not have any significant operations or assets, separate from its investment in subsidiaries. Any non-guarantor subsidiaries are insignificant individually and in the aggregate to the consolidated financial statements. Under the Indenture governing the Notes, the balance of net proceeds, as defined, from the sale of any asset having a fair value in excess of $1.0 million, must be invested in the Company's business within 360 days of receipt of proceeds related to the sale. The Company may use the net proceeds for capital expenditures, to acquire long-term assets, to repay debt and/or to acquire a controlling interest in another company. To the extent that such net proceeds are not invested within 360 days, such amount constitutes "excess proceeds." If the aggregate of excess proceeds is greater than $10.0 million, the Company is required to offer to repurchase the Notes at par with such excess proceeds. As of December 31, 2001, the Company did not have excess proceeds greater than $10 million. The Company entered into a $50 million credit facility (the "Credit Facility") on April 6, 2001. Availability under the Credit Facility is determined by a borrowing base calculated based on eligible billed accounts receivable of the Borrowing Base Parties, as defined in the Credit Facility. The Company has the option of entering into "LIBOR" based loans or "index rate" loans under the Credit Facility. LIBOR based loans bear interest at LIBOR plus amounts ranging from 1.85% to 2.65% based on the Company's leverage ratio, as defined in the Credit Facility, after the first year. Index rate loans bear interest at rates approximating Prime plus amounts ranging from 0.35% to 1.15% based on the Company's leverage ratio, as defined, after the first year. LIBOR based loans bear interest at LIBOR plus 2.50% and index rate loans bear interest at rates approximating Prime plus 1.0% for the first twelve months of the Credit Facility. In addition, the Company pays a quarterly commitment fee on the unused portion of the Credit Facility of 0.375% per annum. 20 The Credit Facility contains financial and other restrictive covenants, including, without limitation, those restricting the incurrence of additional indebtedness, creation of liens, payment of dividends, sales of assets, stock offerings, capital expenditures and prepayment of the Notes and those requiring maintenance of minimum EBITDA, as defined, and minimum fixed charge coverage, as defined. The initial term of the Credit Facility is 42 months expiring on October 6, 2004. The Company and the lender can mutually agree to extend this term by 18 months if certain conditions have been met. There are no outstanding borrowings under the Credit Facility. The level of the Company's indebtedness could adversely impact the Company's ability to obtain additional financing. A substantial portion of the Company's cash flow from operations could be dedicated to the payment of principal and interest on its indebtedness. The Company believes that its current cash flow will be sufficient to meet working capital needs and capital expenditures for the next twelve months. FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS, FINANCIAL CONDITION OR BUSINESS As discussed under the caption "Forward-Looking Statements" in Item 1, Per-Se provides the following risk factor disclosures in connection with its continuing efforts to qualify its written and oral forward-looking statements for the safe harbor protection of the Reform Act and any other similar safe harbor provisions. Important factors currently known to management that could cause actual results to differ materially from those in forward-looking statements include, but are not limited to, the following: Competition with Business Management Outsourcing Services Companies and In-house Providers The business management outsourcing business, especially surrounding the areas of billings and collections, is highly competitive. The Company competes with regional physician reimbursement organizations, national information and data processing organizations, and physician groups that provide their own business management services. Successful competition within this industry is dependent on numerous industry and market conditions. Potential industry and market changes that could adversely affect the Company's ability to compete for business management outsourcing services include an increase in the number of competitors providing comparable services, and new alliances between healthcare providers and third-party payers in which healthcare providers are employed by such third-party payers. Competition with Information Technology Companies The business of providing application software, information technology and consulting services is also highly competitive. The Company competes with national and regional companies in this regard. Some competitors have longer operating histories and greater financial, technical and marketing resources than that of the Company. The Company's successful competition within this industry is dependent on numerous industry and market conditions. Major Client Projects The Company's Application Software division involves projects designed to reengineer customer operations through the strategic use of imaging, client/server and other advanced technologies. Failure to meet customers' expectations with respect to a major project could, possibly, have the following consequences: damage the Company's reputation and standing in this marketplace; impair its ability to attract new client/server information technology business; and inhibit its ability to collect for services performed on a project. Changes in the Healthcare Industry The markets for the Company's software and e-commerce products and services as well as our business management outsourcing services are characterized by rapidly changing technology, evolving industry standards and frequent new product introductions. The Company's ability to keep pace with 21 changes in the healthcare industry may be dependent on a variety of factors, including its ability to enhance existing products and services; introduce new products and services quickly and cost effectively; achieve market acceptance for new products and services; and respond to emerging industry standards and other technological changes. Competitors may develop competitive products that could adversely affect the Company's operating results. It is possible that the Company will be unsuccessful in refining, enhancing and developing our software and billing systems going forward. The costs associated with refining, enhancing and developing its software and billing systems may increase significantly in the future. Existing software and technology may become obsolete as a result of ongoing technological developments in the marketplace. Consolidation in the Marketplace In general, consolidation initiatives in the healthcare marketplace may result in fewer potential customers for the Company's services. Some of these types of initiatives include employer initiatives such as creating purchasing cooperatives (GPOs); provider initiatives, such as risk-sharing among healthcare providers and managed care companies through capitated contracts; and integration among hospitals and physicians into comprehensive delivery systems. Continued consolidation of management and billing services through integrated delivery systems may result in a decrease in demand for the Company's business management outsourcing services for particular physician practices. Government Regulations As discussed in Item 1 under the captions "Healthcare Industry" and "Regulation," the healthcare industry is highly regulated and is subject to changing political, economic and regulatory influences. Federal and state legislatures have periodically considered programs to reform or amend the U.S. healthcare system at both the federal and state level and to change healthcare financing and reimbursement systems, such as the Balanced Budget Act. These programs may contain proposals to increase governmental involvement in healthcare, lower reimbursement rates or otherwise change the environment in which healthcare industry participants operate. Current or future government regulations or healthcare reform measures may affect our business. Healthcare industry participants may respond by reducing their investments or postponing investment decisions, including investments in the Company's products and services. Medical billing and collection activities are governed by numerous federal and state civil and criminal laws. Federal and state regulators use these laws to investigate healthcare providers and companies that provide billing and collection services. In connection with these laws, the Company may be subjected to federal or state government investigations and possible penalties may be imposed upon the Company, false claims actions may have to be defended, private payers may file claims against the Company, and the Company may be excluded from Medicare, Medicaid and/or other government funded healthcare programs. In the past, the Company has been the subject of federal investigations, and it may become the subject of false claims litigation or additional investigations relating to its billing and collection activities. Any such proceeding or investigation could have a material adverse effect on the Company's business. The final HIPAA rules for the standards for electronic transactions and standards of privacy of individually identifiable health information were published in 2000. The implementation deadline for the standards for electronic transactions is October 2002 with the possibility of a one year delay for healthcare providers, healthcare clearinghouses and large health plans upon filing an extension. The implementation deadline for the standards of privacy is April 2003. These rules set new or higher standards for the healthcare industry as to handling healthcare transactions and information and will require changes to the manner in which the industry handles such information. One of the most contentious areas of HIPAA reform is in the area of privacy and security. 22 Currently in the area of privacy and security of health information, numerous federal and state civil and criminal laws govern the collection, use, storage and disclosure of health information. Penalties for noncompliance, both criminal and civil, may be brought by federal or state governments. Persons who believe their health information has been misused or disclosed improperly may bring claims and payers who believe instances of noncompliance with privacy and security standards have occurred may bring administrative sanctions or remedial actions against offending parties. Passage of HIPAA is part of a wider healthcare reform initiative. The Company expects that healthcare reform will continue to be widely debated. The Company also expects that the federal government as well as state governments will pass laws and issue regulations addressing healthcare issues and reimbursement of healthcare providers. The Company cannot predict whether new legislation and regulations will be enacted and, if enacted, whether such new developments will affect its business. Debt The Company has a significant amount of long-term indebtedness and, as a result, obligations to make interest payments on that debt. If unable to make the required debt payments, the Company could be required to reduce or delay capital expenditures, sell certain assets, restructure or refinance its indebtedness, or seek additional equity capital. The Company's ability to make payments on its debt obligations will depend on future operating performance, which will be affected by certain conditions that are beyond the Company's control. Litigation The Company is involved in litigation arising in the ordinary course of its business, which may expose it to loss contingencies. These matters include, but are not limited to, claims brought by former customers with respect to the operation of our business. The Company has also received written demands from customers and former customers that have not yet resulted in legal action. Many of the Company's software products provide data for use by healthcare providers in providing care to patients. Although no claims have been brought against the Company to date regarding injuries related to the use of its products, such claims may be made in the future. The Company may not be able to successfully resolve such legal matters, or other legal matters that may arise in the future. In the event of an adverse outcome with respect to such legal matters or other legal matters in which the Company may become involved, there is the risk that its insurance coverage, product liability coverage or otherwise, may not fully cover any damages assessed against the Company. Although the Company maintains all insurance coverage in amounts that it believes is sufficient for its business, there can be no assurance that such coverage will prove to be adequate or that such coverage will continue to remain available on acceptable terms, if at all. A successful claim brought against the Company, which is uninsured or under-insured, could materially harm its business, results of operations of financial condition. Stock Price Volatility The trading price of the Company's common stock may be volatile. The market for the Company's common stock may experience significant price and volume fluctuations in response to a number of factors including actual or anticipated quarterly variations in operating results, changes in expectations of future financial performance or changes in estimates of securities analysts, government regulatory action, healthcare reform measures, client relationship developments and other factors, many of which are beyond the Company's control. Furthermore, the stock market in general and the market for software, healthcare and high technology companies in particular, has experienced extreme volatility that often has been unrelated to the operating performance of particular companies. These broad market and industry fluctuations may adversely affect the trading price of the company's common stock, regardless of actual operating performance. 23 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK INTEREST RATE SENSITIVITY The Company occasionally invests excess cash in commercial paper, money market funds and other highly liquid short-term investments. Due to the limited amounts of these investments and their short-term nature, any fluctuation in the prevailing interest rates is expected to have an immaterial effect on the Company's financial statements. The Company has the option of entering into loans based on LIBOR or index rates under the Credit Facility. If the Company were to borrow amounts under the Credit Facility, the Company could experience fluctuations in the indexed rates. The Company has never incurred borrowings under the Credit Facility. EXCHANGE RATE SENSITIVITY The majority of the Company's sales and expenses are denominated in U.S. dollars. As a result, the Company has not experienced any significant foreign exchange gains and losses to date. The Company conducts only limited transactions in foreign currencies and does not expect material foreign exchange gains or losses in the future. The Company does not engage in any foreign exchange hedging activities. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Company's Consolidated Financial Statements appear beginning at page F-1. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE On June 14, 2001, following a competitive review and request for proposal process in which a number of nationally recognized accounting firms were requested to participate, the Registrant dismissed PricewaterhouseCoopers LLP ("PricewaterhouseCoopers") as the Registrant's principal accountants and engaged Ernst & Young LLP as the Registrant's new principal accountants. The decision to change accountants was recommended by the Audit Committee of the Registrant's Board of Directors (the "Board") and approved by the Board. This information is also included in the Company's report filed on Form 8-K on June 21, 2001, and is incorporated herein by reference. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this Item with respect to directors and executive officers of the Registrant, except certain information regarding executive officers which is contained in Part I of this Report pursuant to General Instruction G of this Form 10-K, is included in the sections entitled "Management of the Company" and "Compliance with Section 16(a) of the Securities Exchange Act of 1934" of the Proxy Statement for the Annual Meeting of Stockholders to be held on May 2, 2002, and is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is included in the sections entitled "Certain Information Regarding Executive Officers," "Compensation Committee Report on Executive Compensation," "Compensation Committee Interlocks and Insider Participation" and "Stock Price Performance Graph" of the Proxy Statement for the Annual Meeting of Stockholders to be held on May 2, 2002, and is incorporated herein by reference. 24 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is included in the sections entitled "Management Common Stock Ownership" and "Principal Stockholders" of the Proxy Statement for the Annual Meeting of Stockholders to be held on May 2, 2002, and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this Item is included in the section entitled "Certain Relationships and Related Transactions" of the Proxy Statement for the Annual Meeting of Stockholders to be held on May 2, 2002, and is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)1. Financial Statements Reports of Independent Auditors; Consolidated Balance Sheets -- as of December 31, 2001 and 2000; Consolidated Statements of Operations -- years ended December 31, 2001, 2000 and 1999; Consolidated Statements of Cash Flows -- years ended December 31, 2001, 2000 and 1999; Consolidated Statements of Stockholders' (Deficit) Equity -- years ended December 31, 2001, 2000 and 1999; and Notes to Consolidated Financial Statements. 2. Financial Statement Schedules Included in Part IV of the report: Reports of Independent Auditors on Financial Statement Schedule; Schedule II -- Valuation and Qualifying Accounts -- years ended December 31, 2001, 2000 and 1999 Schedules, other than Schedule II, are omitted because of the absence of the conditions under which they are required. 3. Exhibits The following list of exhibits includes both exhibits submitted with this Form 10-K as filed with the Commission and those incorporated by reference to other filings:
EXHIBIT NUMBER DOCUMENT - ------- -------- 2.1 -- Stock Purchase Agreement dated as of October 15, 1998, between Registrant and NCO Group, Inc. (incorporated by reference to Exhibit 2.1 to Quarterly Report on Form 10-Q for the quarter ended September 30, 1998). 2.2 -- Stock Purchase Agreement dated as of April 20, 1999, among Complete Business Solutions, Inc., E-Business Solutions.com, Inc., Impact Innovations Holdings, Inc. and Registrant (incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K filed on May 5, 1999). 2.3 -- Stock Purchase Agreement dated as of November 4, 1999, among J3 Technology Services Corp., Impact Innovations Holdings, Inc., Impact Innovations Government Group, Inc. and Registrant (incorporated by reference to Exhibit 2.3 to Quarterly Report on Form 10-Q for the quarter ended September 30, 1999).
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EXHIBIT NUMBER DOCUMENT - ------- -------- 2.4 -- Stock Purchase Agreement dated as of December 8, 2000, among Registrant, Health Data Services, Inc., Patient Account Management Services, Inc., and Marc Saltzberg, Raymond DelBrocco, Charles Moore, and Larry Shaw (incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K filed on December 20, 2000). 2.5 -- Asset Purchase Agreement dated as of April 27, 2001, among Registrant, Health Data Services, Inc., Virtual Information Systems, Inc., and Paul M. Helmick and William T. Adams (incorporated by reference to Exhibit 2.5 to Quarterly Report on Form 10-Q for the quarter ended March 31, 2001). 2.6 -- Asset Purchase Agreement dated as of April 27, 2001, among Registrant, Per-Se Transaction Services, Inc., officemed.com LLC, SoftLinc, Inc., and Daniel Mansfield (incorporated by reference to Exhibit 2.6 to Quarterly Report on Form 10-Q for the quarter ended March 31, 2001). 3.1 -- Restated Certificate of Incorporation of Registrant (incorporated by reference to Exhibit 3.1 to Annual Report on Form 10-K for the year ended December 31, 1999 (the "1999 Form 10-K")). 3.2 -- Restated By-laws of Registrant (incorporated by reference to Exhibit 3.2 to the 1999 Form 10-K). 4.1 -- Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the 1999 Form 10-K). 4.2 -- Form of Option Agreement relating to Registrant's Second Amended and Restated Non-Qualified Stock Option Plan (incorporated by reference to Exhibit 4.2 to the 1999 Form 10-K). 4.3 -- Form of Option Agreement relating to Registrant's Non-Qualified Stock Option Plan for Employees of Acquired Companies (incorporated by reference to Exhibit 4.4 to Registration Statement on Form S-3, File No. 33-71552). 4.4 -- Form of Option Agreement relating to Registrant's Non-Employee Director Stock Option Plan (incorporated by reference to Exhibit 4.5 to the 1999 Form 10-K). 4.5 -- Form of Option Agreement relating to Registrant's Non-Qualified Stock Option Plan for Non-Executive Employees (incorporated by reference to Exhibit 4.6 to the 1999 Form 10-K). 4.6 -- Form of Option Agreement relating to Registrant's Restricted Stock Plan (incorporated by reference to Exhibit 4.5 to Annual Report on Form 10-K for the year ended December 31, 1995 (the "1995 Form 10-K")). 4.7 -- Indenture dated as of February 20, 1998, among Registrant, as Issuer, the Subsidiary Guarantors named in the Indenture and State Street Bank and Trust Company, as Trustee (including form of note) (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed on March 3, 1998). 4.8 -- Warrant Agreement dated as of July 8, 1998, between Registrant and SunTrust Bank, Atlanta, as Warrant Agent (including form of warrant certificate) (incorporated by reference to Exhibit 4.2 to Registration Statement on Form 8-A filed on July 21, 1998). 4.9 -- Settlement Agreement dated as of June 24, 1999, by and among Lori T. Caudill, William J. DeZonia, Carol T. Shumaker, Alyson T. Stinson, James F. Thacker, James F. Thacker Retained Annuity Trust, Paulanne H. Thacker Retained Annuity Trust and Borrower (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended June 30, 1999). 4.10 -- Rights Agreement dated as of February 11, 1999, between Registrant and American Stock Transfer & Trust Company (including form of rights certificates) (incorporated by reference to Exhibit 4 to Current Report on Form 8-K filed on February 12, 1999). 4.11 -- First Amendment to Rights Agreement dated as of February 11, 1999, between Registrant and American Stock Transfer & Trust Company, entered into as of May 4, 2000 (incorporated by reference to Exhibit 4.4 to Quarterly Report of Form 10-Q for the quarter ended March 31, 2000).
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EXHIBIT NUMBER DOCUMENT - ------- -------- 4.12 -- Second Amendment to Rights Agreement dated as of February 11, 1999, between Registrant and American Stock Transfer & Trust Company, entered into as of December 6, 2001, to be effective as of March 6, 2002. 10.1 -- Credit Agreement dated as of April 6, 2001, among the Registrant, as Borrower, certain subsidiaries of the Registrant, as the other Credit Parties, the lenders signatory thereto from time to time, as Lenders, and General Electric Capital Corporation, as Agent and Lender (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on April 23, 2001). 10.2 -- Second Amended and Restated Per-Se Technologies, Inc. Non-Qualified Stock Option Plan (incorporated by reference to Exhibit 10.1 to the 1999 Form 10-K). 10.3 -- First Amendment to Second Amended and Restated Per-Se Technologies, Inc. Non-Qualified Stock Option Plan (incorporated by reference to Exhibit 10.45 to the 1999 Form 10-K). 10.4 -- Registrant's Non-Qualified Stock Option Plan for Employees of Acquired Companies (incorporated by reference to Exhibit 99.1 to Registration Statement on Form S-8, File No. 33-67752). 10.5 -- First Amendment to Registrant's Non-Qualified Stock Option Plan for Employees of Acquired Companies (incorporated by reference to Exhibit 99 to Registration Statement on Form S-8, File No. 33-71556). 10.6 -- Second Amendment to Registrant's Non-Qualified Stock Option Plan for Employees of Acquired Companies (incorporated by reference to Exhibit 99 to Registration Statement on Form S-8, File No. 33-88442). 10.7 -- Third Amendment to Registrant's Non-Qualified Stock Option Plan for Employees of Acquired Companies (incorporated by reference to Exhibit 10.14 to the 1995 Form 10-K). 10.8 -- Fourth Amendment to Registrant's Non-Qualified Stock Option Plan for Employees of Acquired Companies (incorporated by reference to Exhibit 99.2 to Registration Statement on Form S-8, File No. 333-3213). 10.9 -- Fifth Amendment to Registrant's Non-Qualified Stock Option Plan for Employees of Acquired Companies (incorporated by reference to Exhibit 99.1 to Registration Statement on Form S-8, File No. 333-07627). 10.10 -- Sixth Amendment to Registrant's Non-Qualified Stock Option Plan for Employees of Acquired Companies (incorporated by reference to Exhibit 10.21 to Annual Report on Form 10-K for the year ended December 31, 1996 (the "1996 Form 10-K")). 10.11 -- Seventh Amendment to Registrant's Non-Qualified Stock Option Plan for Employees of Acquired Companies (incorporated by. reference to Exhibit 10.23 to Annual Report on Form 10-K for the year ended December 31, 1998 (the "1998 Form 10-K")). 10.12 -- Eighth Amendment to Registrant's Non-Qualified Stock Option Plan For Employees of Acquired Companies (incorporated by reference to Exhibit 10.12 to the 1999 Form 10-K). 10.13 -- Ninth Amendment to Registrant's Non-Qualified Stock Option Plan For Employees of Acquired Companies (incorporated by. reference to Exhibit 10.12 to Annual Report on Form 10-K for the year ended December 31, 2000 (the "2000 Form 10-K")). 10.14 -- Registrant's Non-Employee Director Stock Option Plan, dated as of August 12, 1994 (incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q for the quarter ended September 30, 1994). 10.15 -- First Amendment to Registrant's Non-Employee Director Stock Option Plan (incorporated by reference to Exhibit 10.25 to the 1998 Form 10-K). 10.16 -- Second Amendment to Registrant's Non-Employee Director Stock Option Plan (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended March 31, 1999). 10.17 -- Third Amendment to Registrant's Non-Employee Director Stock Option Plan (incorporated by reference to Exhibit 10.16 to the 1999 Form 10-K).
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EXHIBIT NUMBER DOCUMENT - ------- -------- 10.18 -- Fourth Amendment to Registrant's Non-Employee Director Stock Option Plan (incorporated by reference to Exhibit 10.46 to the 1999 Form 10-K). 10.19 -- Registrant's Non-Qualified Stock Option Plan for Non-Executive Employees (incorporated by reference to Exhibit 10.23 to the 1996 Form 10-K). 10.20 -- First Amendment to Registrant's Non-Qualified Stock Option Plan for Non-Executive Employees (incorporated by reference to Exhibit 10.24 to the 1996 Form 10-K). 10.21 -- Second Amendment to Registrant's Non-Qualified Stock Option Plan for Non-Executive Employees (incorporated by reference to Exhibit 10.25 to Annual Report on Form 10-K for the year ended December 31, 1997 (the "1997 Form 10-K")). 10.22 -- Third Amendment to Registrant's Non-Qualified Stock Option Plan for Non-Executive Employees (incorporated by reference to Exhibit 10.26 to the 1997 Form 10-K). 10.23 -- Fourth Amendment to Registrant's Non-Qualified Stock Option Plan for Non-Executive Employees (incorporated by reference to Exhibit 10.27 to the 1997 Form 10-K). 10.24 -- Fifth Amendment to Registrant's Non-Qualified Stock Option Plan for Non-Executive Employees (incorporated by reference to Exhibit 10.28 to the 1997 Form 10-K). 10.25 -- Sixth Amendment to Registrant's Non-Qualified Stock Option Plan for Non-Executive Employees (incorporated by reference to Exhibit 10.32 to the 1998 Form 10-K). 10.26 -- Seventh Amendment to Registrant's Non-Qualified Stock Option Plan for Non-Executive Employees (incorporated by reference to Exhibit 10.24 to the 1999 Form 10-K). 10.27 -- Eighth Amendment to Registrant's Non-Qualified Stock Option Plan for Non-Executive Employees (incorporated by reference to Exhibit 10.26 to the 2000 Form 10-K). 10.28 -- Restricted Stock Plan of the Registrant, dated as of August 12, 1994 (incorporated by reference to Exhibit 10.2 to Registration Statement on Form S-4, File No. 33-88910). 10.29 -- The Per-Se Technologies Employees' Retirement Savings Plan (incorporated by reference to Exhibit 10.26 to the 1999 Form 10-K). 10.30 -- First Amendment to the Per-Se Technologies Employees' Retirement Savings Plan (incorporated by reference to Exhibit 10.29 to the 2000 Form 10-K). 10.31 -- Second Amendment to the Per-Se Technologies Employees' Retirement Savings Plan (incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q for the quarter ended June 30, 2001). 10.32 -- Third Amendment to the Per-Se Technologies Employees' Retirement Savings Plan (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended September 30, 2001). 10.33 -- Retirement Savings Trust (incorporated by reference to Exhibit 10.10 to Registration Statement on Form S-1, File No. 33-42216). 10.34 -- Registrant's Deferred Compensation Plan (incorporated by reference to Exhibit 99 to Registration Statement on Form S-8, Registration No. 33-90874). 10.35 -- First Amendment to Registrant's Deferred Compensation Plan (incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q for the quarter ended September 30, 1997). 10.36 -- Second Amendment to Registrant's Deferred Compensation Plan (incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q for the quarter ended September 30, 1997). 10.37 -- Third Amendment to Registrant's Deferred Compensation Plan (incorporated by reference to Exhibit 10.76 to the 1997 Form 10-K). 10.38 -- Fourth Amendment to Registrant's Deferred Compensation Plan (incorporated by reference to Exhibit 10.32 to the 1999 Form 10-K).
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EXHIBIT NUMBER DOCUMENT - ------- -------- 10.39 -- Fifth Amendment to Registrant's Deferred Compensation Plan (incorporated by reference to Exhibit 10.36 to the 2000 Form 10-K). 10.40 -- Per-Se Technologies, Inc. Executive Deferred Compensation Plan effective as of January 1, 2002. 10.41 -- Written description of Registrant's Non-Employee Director Compensation Plan. 10.42 -- Registrant's Non-Employee Director Deferred Stock Credit Plan (incorporated by reference to Exhibit 10.5 to Quarterly Report on Form 10-Q for the quarter ended September 30, 1997). 10.43 -- First Amendment to Registrant's Non-Employee Director Deferred Stock Credit Plan. 10.44 -- Per-Se Technologies, Inc. Deferred Stock Unit Plan. 10.45 -- Registrant's Long Term Incentive Plan (incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q for the quarter ended September 30, 1998). 10.46 -- Employment Agreement dated November 19, 1996, between Registrant and David E. McDowell (incorporated by reference to Exhibit 10.49 to the 1996 Form 10-K). 10.47 -- Amendment Number 1 to Employment Agreement between Registrant and David E. McDowell, dated October 20, 1999 (incorporated by reference to Exhibit 10.37 to the 1999 Form 10-K). 10.48 -- Employment Agreement dated as of November 13, 2000, between Registrant and Philip M. Pead (incorporated by reference to Exhibit 10.42 to the 2000 Form 10-K). 10.49 -- Employment Agreement dated April 14, 2000, between Registrant and Chris E. Perkins (incorporated by reference to Exhibit 10.43 to the 2000 Form 10-K). 10.50 -- Amendment Number 1 to Employment Agreement between Registrant and Chris E. Perkins, dated as of February 7, 2001 (incorporated by reference to Exhibit 10.44 to the 2000 Form 10-K). 10.51 -- Employment Agreement dated January 30, 1998, between Registrant and William Dagher (incorporated by reference to Exhibit 10.45 to the 2000 Form 10-K). 10.52 -- Employment Agreement dated June 5, 1998, between Registrant and Frank B. Murphy (incorporated by reference to Exhibit 10.46 to the 2000 Form 10-K). 10.53 -- Employment Agreement dated as of March 22, 2001, between Registrant and Karen B. Andrews (incorporated by reference to Exhibit 10.48 to the 2000 Form 10-K). 10.54 -- Corporate Integrity Agreement between the Office of the Inspector General of the Department of Health and Human Services and Registrant (incorporated by reference to Exhibit 10.4 to Quarterly Report on Form 10-Q for the quarter ended September 30, 1998). 21 -- Subsidiaries of Registrant. 23.1 -- Consent of Ernst & Young LLP. 23.2 -- Consent of PricewaterhouseCoopers LLP.
- --------------- The exhibits, which are referenced in the above documents, are hereby incorporated by reference. Such exhibits have been omitted for purposes of this filing but will be furnished supplementary to the Commission upon request. (b) Reports on Form 8-K The Company did not file any reports on Form 8-K during the quarter ended December 31, 2001. 29 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. PER-SE TECHNOLOGIES, INC. (Registrant) By: /s/ CHRIS E. PERKINS ------------------------------------ Chris E. Perkins Executive Vice President and Chief Financial Officer /s/ MARY C. CHISHOLM ------------------------------------ Mary C. Chisholm Vice President and Controller (Principal Accounting Officer) Date: March 26, 2002 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ DAVID E. MCDOWELL Chairman and Director March 26, 2002 ------------------------------------------------ David E. McDowell /s/ PHILIP M. PEAD President, Chief Executive March 26, 2002 ------------------------------------------------ Officer, and Director Philip M. Pead /s/ CHRIS E. PERKINS Executive Vice President and Chief March 26, 2002 ------------------------------------------------ Financial Officer Chris E. Perkins /s/ MARY C. CHISHOLM Vice President and Controller March 26, 2002 ------------------------------------------------ (Principal Accounting Officer) Mary C. Chisholm /s/ CRAIG MACNAB Director March 26, 2002 ------------------------------------------------ Craig Macnab /s/ DAVID R. HOLBROOKE, M.D. Director March 26, 2002 ------------------------------------------------ David R. Holbrooke, M.D.
30 /s/ STEPHEN A. GEORGE, M.D. Director March 26, 2002 ------------------------------------------------ Stephen A. George, M.D. /s/ JOHN C. POPE Director March 26, 2002 ------------------------------------------------ John C. Pope /s/ C. CHRISTOPHER TROWER Director March 26, 2002 ------------------------------------------------ C. Christopher Trower
31 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholders Per-Se Technologies, Inc. We have audited the accompanying consolidated balance sheet of Per-Se Technologies, Inc. (the "Company") as of December 31, 2001, and the related consolidated statements of operations, stockholders' (deficit) equity, and cash flows for the year ended December 31, 2001. 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 auditing standards generally accepted in the United States. 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, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Per-Se Technologies, Inc. at December 31, 2001, and the consolidated results of its operations and its cash flows for the year ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP Atlanta, Georgia February 4, 2002 F-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Per-Se Technologies, Inc.: In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, stockholders' (deficit) equity and cash flows present fairly, in all material respects, the financial position of Per-Se Technologies, Inc. and its subsidiaries (the "Company") at December 31, 2000 and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. 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 of these statements in accordance with auditing standards generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Atlanta, Georgia February 5, 2001 F-2 PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31, ------------------------- 2001 2000 ----------- ----------- (IN THOUSANDS, EXCEPT PAR VALUE DATA) Current Assets: Cash and cash equivalents................................. $ 36,493 $ 30,970 Restricted cash........................................... 4,419 7,352 --------- --------- Total cash and cash equivalents................... 40,912 38,322 Accounts receivable, billed (less allowances of $5,144 and $7,635, respectively).................................. 45,719 53,309 Accounts receivable, unbilled (less allowances of $1,345 and $4,338, respectively).............................. 4,150 5,786 Other..................................................... 5,000 5,793 --------- --------- Total current assets.............................. 95,781 103,210 Property and equipment, net................................. 25,012 32,813 Intangible assets........................................... 77,268 72,695 Other....................................................... 4,830 5,408 --------- --------- $ 202,891 $ 214,126 ========= ========= Current Liabilities: Accounts payable.......................................... $ 6,085 $ 11,002 Accrued compensation...................................... 23,884 18,652 Accrued expenses.......................................... 21,705 21,712 Accrued litigation settlements............................ -- 1,602 --------- --------- 51,674 52,968 Deferred revenue.......................................... 19,800 23,063 --------- --------- Total current liabilities......................... 71,474 76,031 Long-term debt.............................................. 175,091 175,000 Other obligations........................................... 6,456 7,231 --------- --------- Total liabilities................................. 253,021 258,262 --------- --------- Commitments and Contingencies (Notes 10 and 11)............. -- -- Stockholders' Deficit: Preferred stock, no par value, 20,000 authorized; none issued................................................. -- -- Common stock, voting, $0.01 par value, 200,000 authorized, 29,969 and 29,902 issued and outstanding as of December 31, 2001 and December 31, 2000, respectively........... 300 299 Common stock, non-voting, $0.01 par value, 600 authorized; none issued............................................ -- -- Paid-in capital........................................... 774,983 774,603 Warrants.................................................. 1,495 1,495 Accumulated deficit....................................... (826,908) (820,533) --------- --------- Total stockholders' deficit....................... (50,130) (44,136) --------- --------- $ 202,891 $ 214,126 ========= =========
See notes to consolidated financial statements. F-3 PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, --------------------------------------- 2001 2000 1999 ----------- ----------- ----------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Revenue..................................................... $328,877 $310,008 $322,129 -------- -------- -------- Salaries and wages.......................................... 199,254 193,952 212,940 Other operating expenses.................................... 92,421 94,364 104,192 Depreciation................................................ 12,401 15,562 20,177 Amortization................................................ 13,245 10,125 9,293 Interest expense, net....................................... 17,159 14,525 16,102 Process improvement project................................. 3,423 501 -- Litigation settlements...................................... -- 1,147 24,811 Non-recurring, restructuring and other expenses............. 593 2,382 -- -------- -------- -------- Total expenses.................................... 338,496 332,558 387,515 -------- -------- -------- Loss before income taxes.................................... (9,619) (22,550) (65,386) Income tax expense (benefit)................................ 607 (695) (610) -------- -------- -------- Loss from continuing operations............................. (10,226) (21,855) (64,776) -------- -------- -------- Discontinued operations, net of tax......................... 3,888 11,337 31,074 -------- -------- -------- Loss before cumulative effect of accounting change.......... (6,338) (10,518) (33,702) Cumulative effect of accounting change, net of tax.......... -- (37,684) -- -------- -------- -------- Net loss.......................................... $ (6,338) $(48,202) $(33,702) ======== ======== ======== Basic and diluted net loss per share: Loss from continuing operations........................... $ (0.34) $ (0.74) $ (2.31) Discontinued operations, net of tax....................... 0.13 0.38 1.11 Cumulative effect of accounting change, net of tax........ -- (1.26) -- -------- -------- -------- Net loss.......................................... $ (0.21) $ (1.62) $ (1.20) ======== ======== ======== Weighted average shares outstanding used in basic and diluted net loss per share................................ 29,915 29,852 28,097 ======== ======== ========
See notes to consolidated financial statements. F-4 PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, ------------------------------ 2001 2000 1999 -------- -------- -------- (IN THOUSANDS) Cash Flows From Operating Activities: Net loss.................................................. $ (6,338) $(48,202) $(33,702) Adjustments to reconcile net loss to net cash provided by (used for) operating activities: Depreciation and amortization........................... 25,646 25,687 29,470 Discontinued operations................................. (3,888) (11,337) (31,400) Impairment loss (gain) on long-lived assets............. -- 1,185 (4,772) Cumulative effect of accounting change.................. -- 37,684 -- Non-cash litigation settlement costs.................... -- -- 16,433 Changes in assets and liabilities, excluding effects of acquisitions and divestitures: Restricted cash...................................... 2,008 (1,002) (572) Accounts receivable, billed.......................... 6,883 (5,834) 8,703 Accounts receivable, unbilled........................ 1,637 (503) 3,863 Accounts payable..................................... (4,929) 760 1,455 Accrued compensation................................. 5,232 (3,207) 608 Accrued expenses..................................... (1,699) (6,650) (6) Accrued litigation settlements....................... (1,602) (2,441) (11,971) Deferred revenue..................................... (2,436) 2,667 2,107 Other, net........................................... 1,520 2,477 820 -------- -------- -------- Net cash provided by (used for) continuing operations......................................... 22,034 (8,716) (18,964) Net cash provided by (used for) discontinued operations......................................... 3,919 (2,100) (2,942) -------- -------- -------- Net cash provided by (used for) operating activities...................................... 25,953 (10,816) (21,906) -------- -------- -------- Cash Flows From Investing Activities: Purchases of property and equipment....................... (4,836) (18,801) (10,418) Software development costs................................ (5,940) (6,137) (7,498) Proceeds from sale of property and equipment.............. 1,537 5,658 12,003 Net proceeds from sale of subsidiaries.................... -- 11,337 47,986 Acquisitions, net of cash acquired........................ (10,846) (25,193) (32) Other..................................................... (31) -- -- -------- -------- -------- Net cash (used for) provided by investing activities...................................... (20,116) (33,136) 42,041 -------- -------- -------- Cash Flows From Financing Activities: Proceeds from issuance of stock........................... -- 298 920 Proceeds from the exercise of stock options............... 299 379 217 Payments of debt.......................................... (74) (38) (1,042) Deferred financing costs/debt issuance costs.............. (539) (71) (285) -------- -------- -------- Net cash (used for) provided by financing activities...................................... (314) 568 (190) -------- -------- -------- Cash and Cash Equivalents: Net change................................................ 5,523 (43,384) 19,945 Balance at beginning of period............................ 30,970 74,354 54,409 -------- -------- -------- Balance at end of period.................................. $ 36,493 $ 30,970 $ 74,354 ======== ======== ========
See notes to consolidated financial statements. F-5 PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
COMMON PREFERRED TREASURY COMMON STOCK PREFERRED STOCK PAID-IN ACCUMULATED STOCK SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT WARRANTS AMOUNT ------- ------ --------- --------- -------- ----------- -------- -------- (IN THOUSANDS) BALANCE AT DECEMBER 31, 1998....... 78,745 $ 787 -- $ -- $740,014 $(738,390) $ -- $(88) Issuance of common stock........... 316 3 -- -- 917 -- -- -- Exercise of stock options.......... 159 2 -- -- 215 -- -- -- Funding of litigation settlements...................... 9,500 95 -- -- 30,131 -- 1,495 -- Reverse 1 for 3 stock split (see Note 12)......................... (59,151) (591) -- -- 567 -- -- -- Net loss........................... -- -- -- -- -- (33,702) -- -- Other.............................. 6 -- -- -- 20 (123) 88 ------- ----- --- ---- -------- --------- ------ ---- BALANCE AT DECEMBER 31, 1999....... 29,575 296 -- -- 771,864 (772,215) 1,495 -- Issuance of common stock........... 42 -- -- -- 298 -- -- -- Issuance of common stock in acquisitions..................... 236 2 -- -- 1,998 -- -- -- Exercise of stock options.......... 48 1 -- -- 378 -- -- -- Net loss........................... -- -- -- -- -- (48,202) -- -- Other.............................. 1 -- -- -- 65 (116) ------- ----- --- ---- -------- --------- ------ ---- BALANCE AT DECEMBER 31, 2000....... 29,902 299 -- -- 774,603 (820,533) 1,495 -- Issuance of common stock........... -- -- -- -- -- -- -- -- Issuance of common stock in acquisitions..................... 5 -- -- -- 35 -- -- -- Exercise of stock options.......... 62 1 -- -- 295 -- -- -- Net loss........................... -- -- -- -- -- (6,338) -- -- Other.............................. -- -- -- -- 50 (37) -- -- ------- ----- --- ---- -------- --------- ------ ---- BALANCE AT DECEMBER 31, 2001....... 29,969 $ 300 -- $ -- $774,983 $(826,908) $1,495 $ -- ======= ===== === ==== ======== ========= ====== ==== TOTAL STOCKHOLDERS' (DEFICIT) EQUITY ---------------- (IN THOUSANDS) BALANCE AT DECEMBER 31, 1998....... $ 2,323 Issuance of common stock........... 920 Exercise of stock options.......... 217 Funding of litigation settlements...................... 31,721 Reverse 1 for 3 stock split (see Note 12)......................... (24) Net loss........................... (33,702) Other.............................. (15) -------- BALANCE AT DECEMBER 31, 1999....... 1,440 Issuance of common stock........... 298 Issuance of common stock in acquisitions..................... 2,000 Exercise of stock options.......... 379 Net loss........................... (48,202) Other.............................. (51) -------- BALANCE AT DECEMBER 31, 2000....... (44,136) Issuance of common stock........... -- Issuance of common stock in acquisitions..................... 35 Exercise of stock options.......... 296 Net loss........................... (6,338) Other.............................. 13 -------- BALANCE AT DECEMBER 31, 2001....... $(50,130) ========
See notes to consolidated financial statements. F-6 PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation. The consolidated financial statements include the accounts of Per-Se Technologies, Inc. and its subsidiaries ("Per-Se" or the "Company"). The e-Health Solutions division revenue includes intersegment revenues for services provided to the Physician Services division, which has been eliminated in total consolidated revenue. Certain amounts in the prior years' consolidated financial statements have been reclassified to conform to the current year presentation. Per-Se completed the sale of Impact Innovations Group ("Impact") in 1999. The results of Impact are classified as discontinued operations for the year ended December 31, 1999. See Note 3 for further discussion of the Company's discontinued operations. Recent Accounting Pronouncements. In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 141 Business Combinations ("SFAS No. 141"), which eliminates the pooling method of accounting for all business combinations initiated after June 30, 2001, and addresses the initial recognition and measurement of goodwill and other intangible assets acquired in a business combination. The Company adopted SFAS No. 141 for business combinations initiated after June 30, 2001. In June 2001, the FASB issued Statement of Financial Accounting Standards No. 142 Goodwill and Other Intangible Assets ("SFAS No. 142"). Under SFAS No. 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually for impairment. The Company adopted the standard on January 1, 2002. As part of the adoption of SFAS No. 142, the Company re-examined the purchase price allocation of its most recent acquisitions, with a portion of the amount previously allocated to goodwill being re-allocated to finite-lived intangible assets. As required by SFAS No. 142, the Company will complete the impairment test of its goodwill by June 30, 2002. No asset impairment write-downs are expected as a result of adoption. In August 2001, the FASB issued Statement of Financial Accounting Standards No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS No. 144"). SFAS No. 144 replaces Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of ("SFAS No. 121"). SFAS No. 144 requires that long-lived assets to be disposed of by sale, including those of discontinued operations, be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or in discontinued operations. Discontinued operations will no longer be measured at net realizable value or include amounts for operating losses that have not yet been incurred. SFAS No. 144 also broadens the reporting of discontinued operations to include all components of an entity with operations that can be distinguished from the rest of the entity and that will be eliminated from the ongoing operations of the entity in a disposal transaction. The Company adopted the standard on January 1, 2002. No asset impairment is expected to occur as a result of adoption. 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 revenue and expenses during the reporting period. Actual results could differ from those estimates. Revenue Recognition. The Company's revenue is derived from products and services delivered to the healthcare industry through its three operating divisions: Physician Services provides business management outsourcing services to hospital-affiliated physicians, physicians in academic settings and other large physician practices. Fees for these services are primarily based on a percentage of net collections on our clients' accounts receivable. Revenue is F-7 PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) recognized when our customers receive payment on those accounts receivable. The Physician Services division does not rely, to any material extent, on estimates in the recognition of this revenue. Application Software provides enterprise-wide financial, clinical and administrative software to acute care healthcare organizations. For contracts under which the division is required to make significant production, modification or customization changes, revenue from software licenses and services is recognized using the percentage-of-completion method over the implementation period. When the Company receives payment prior to shipment or fulfillment of significant vendor obligations, such payments are recorded as deferred revenue and are recognized as revenue upon shipment or fulfillment of significant vendor obligations. An unbilled receivable is recorded if the Company can recognize revenue on the percentage-of-completion basis prior to achieving a contracted billing milestone. For minor add-on software license sales where no significant customization remains outstanding, the fee is fixed, an agreement exists and collectibility is probable, the division recognizes revenue upon shipment. Software maintenance payments received in advance are deferred and recognized ratably over the term of the maintenance agreement, which is typically one year. The Application Software division relies on estimates of work to be completed when recognizing revenue on contracts using percentage-of-completion accounting. Because revenue could be impacted if the estimates of the extent of completion differ from actual results, periodic reviews of the estimated hours or days to complete major projects are made by the Application Software division and compared to budgeted hours or days to support the revenue recognized on that project. e-Health Solutions delivers private and internet-based business-to-business solutions that help healthcare providers, payers and patients reduce administrative inefficiencies. Revenue related to electronic claims and remittance advice processing and real-time eligibility verification is recognized on a per transaction basis net of electronic claims rebates. Revenue related to high-speed print and mail services is billed and recognized when the services are delivered and includes all costs of delivering the product; the division includes all costs of delivering the product in operating expenses. For software contracts under which the division is required to make significant production, modification or customization changes, revenue from software licenses and services is recognized using the percentage-of-completion method over the implementation period. Revenue related to the ASP physician practice management system is recognized as monthly subscription revenue Cash and Cash Equivalents. Cash and cash equivalents include all highly liquid investments with an initial maturity of no more than three months at the date of purchase. Restricted Cash. As of December 31, 2001, restricted cash principally represents restrictions on the Company's cash as security for certain of the Company's letters of credit. Property and Equipment. Property and equipment, including equipment under capital leases, are stated at cost, less accumulated depreciation. Depreciation is computed using the straight line method over the estimated useful lives of the assets, generally ten years for furniture and fixtures, three to ten years for equipment and twenty years for buildings. Intangible Assets. Intangible assets are composed of goodwill, client lists, workforce, trademark, developed technology and software development costs. The Company periodically evaluates whether changes have occurred that would require revision of the remaining estimated useful lives of the intangible. Additionally under SFAS No. 121, the Company evaluates whether there have been any changes that would render its intangibles impaired. Conditions that may indicate an impairment issue exists include an economic downturn or change in future operations. In the event a condition is identified that indicates an impairment might exist, an assessment is performed using a variety of methodologies including cash flow F-8 PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) analysis, estimates of sales proceeds and independent appraisals. Where applicable, an appropriate interest rate is utilized based on appropriate borrowing rates. Goodwill. Goodwill represents the excess of the cost of businesses acquired in the e-Health Solutions division from 1995 to 2001, over the fair market value of their identifiable net assets. Prior to the adoption of SFAS No. 142 on January 1, 2002, the Company amortized its goodwill over its estimated useful life of no greater than twenty years. Under SFAS No. 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually for impairment. Client Lists. Client lists represent the value of clients acquired in the Physician Services division from 1992 to 1996 and the e-Health Solutions division from 1995 to 2001. Client lists are being amortized over their estimated useful lives, which range from five to ten years. Other Intangibles. Developed Technology represents the value of the systems acquired in the e-Health Solutions division from 2000 to 2001. These intangible assets are being amortized over their estimated useful lives of five years. Trademark represents the value of the trademarks acquired in the e-Health Solutions division from 2000 to 2001. Under SFAS No. 142, this indefinite lived intangible asset will not be amortized. Software Development Costs. Software development includes costs incurred in the development or the enhancement of software developed by the Application Software and e-Health Solutions divisions for resale. Software development costs are capitalized upon the establishment of technological feasibility for each product and capitalization ceases when the product or process is available for general release to customers. Software development costs are amortized over the greater of the ratio that current revenues bear to total and anticipated future revenues for the applicable product or straight-line method over the estimated economic lives of the assets, which are generally three to five years. The Company monitors the net realizable value of all capitalized software development costs to ensure that the investment will be recovered through margins from future sales. In December 2000, the Company recorded $1.4 million of non-recurring expenses related to the e-Health Solutions' retirement of a software product that was replaced by a superior software product at Health Data Services, Inc. and its affiliate company, Patient Account Management Services, Inc. ("HDS/ PAMS"), a company acquired by Per-Se in December 2000. Research and Development Costs. Research and development costs are expensed as incurred. The Company recorded research and development costs of approximately $11.3 million, $9.5 million and $9.2 million in 2001, 2000 and 1999, respectively. Advertising Costs. Advertising costs are expensed as incurred. The Company recorded advertising costs of approximately $0.6 million, $0.5 million and $0.7 million in 2001, 2000 and 1999, respectively. Stock-based Compensation Plans. The Company accounts for its stock-based compensation plans under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB No. 25"). In Note 14, the Company presents the disclosure requirements of Statement of Financial Accounting Standards No. 123, Accounting for Stock-based Compensation ("SFAS No. 123"). SFAS No. 123 requires that companies that elect to not account for stock-based compensation as prescribed by that statement shall disclose, among other things, the pro forma effects on net income (loss) and net income (loss) per share as if SFAS No. 123 had been adopted. Legal Costs. Legal and administrative fees, costs and expenses are expensed as incurred. Damages or settlement losses that the Company determines to be probable are accrued at such time when they are estimable. F-9 PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Income Taxes. Deferred income taxes are recognized for the tax consequences of "temporary differences" between financial statement carrying amounts and the tax bases of existing assets and liabilities. The measurement of deferred tax assets and liabilities is predominantly determined by reference to the tax laws and changes to such laws. Management includes the consideration of future events in assessing the likelihood that tax benefits will be realized. See Note 15 where the Company discusses the realizability of the deferred tax assets. Net Loss per Share. Basic net loss per common share is based on the weighted average number of shares of common stock outstanding during the period. The Company has excluded all stock options and warrants from the calculation of diluted loss per common share because all such securities are anti-dilutive for all periods presented. The total number of shares excluded from the calculation of diluted loss per share was 6.9 million in 2001, 4.4 million in 2000, and 3.1 million in 1999. Diluted earnings per share is shown for the fourth quarter in Note 19 -- Quarterly Financial Information. The potential dilution that would occur if stock options and warrants were exercised is reconciled to the average outstanding shares used as follows:
QUARTER ENDED DECEMBER 31, 2001 ----------------- (IN THOUSANDS) Weighted average shares outstanding (basic)................. 29,939 Effect of dilutive securities: Stock options............................................. 1,496 ------ 31,435 ======
Cumulative Effect of Accounting Change. On December 3, 1999, the Securities and Exchange Commission (the "Commission") issued Staff Accounting Bulletin Number 101, Revenue Recognition in Financial Statements ("SAB 101"). SAB 101 summarizes certain of the Commission's views in applying generally accepted accounting principles to revenue recognition in financial statements. SAB 101 provides interpretative guidance on unbilled accounts receivable and related revenue recognition. Consistent with the Commission's guidance and changing industry practice, the Company began recognizing revenue in its Physician Services segment on an "as billed" basis January 1, 2000. The change in accounting method resulted in the elimination of $37.7 million of unbilled accounts receivable. The one-time, cumulative non-cash expense in the Company's statement of operations for the year ended December 31, 2000 reflects the $22.7 million elimination of the unbilled accounts receivable on a net of tax basis and a corresponding $15.0 million increase in the Company's deferred tax valuation allowance. Derivative Instruments and Hedging Activities. In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 requires companies to record derivatives as assets or liabilities and measure those instruments at fair value. Gains or losses resulting from changes in the values of those derivatives will be recorded either in current earnings or as a component of comprehensive income. The Company adopted SFAS No. 133 effective January 1, 2001. It had no impact on the Company's Consolidated Statements of Operations. The majority of the Company's international contracts are denominated in U.S. dollars. Comprehensive Income. On January 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income. The Company's net loss, as presented in the Consolidated Statements of Operations, approximates the Company's other comprehensive income amount, as defined, for all periods presented. F-10 PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 2. ACQUISITIONS On April 27, 2001, the Company acquired all of the assets of Virtual Information Systems, Inc. ("VIS") for consideration of $7.0 million in cash. The purchase agreement also provides for a purchase price adjustment of up to $1.5 million payable in cash should VIS meet certain financial targets over the twelve months following the date of acquisition. The Company anticipates VIS will meet these financial targets and therefore has recorded a purchase price adjustment of $1.5 million as of December 31, 2001. VIS's core product, Virtual Remittance Processing System, is an automated remittance processing solution, which ensures accurate and efficient processing of cash collections. Additionally, on April 27, 2001, the Company acquired all of the assets of OfficeMed.com LLC ("OfficeMed") for consideration of $3.25 million in cash. OfficeMed offers a web-based application service provider (ASP) solution that gives healthcare and payer organizations the ability to perform secure, real- time benefits inquiries against patients' insurance plans ensuring eligibility at the point-of-care. On December 8, 2000, the Company acquired all the issued and outstanding shares of capital stock of HDS/PAMS for consideration of approximately $25.0 million. HDS/PAMS offer fully integrated electronic medical claims clearing and other services for hospitals and integrated delivery networks. The HDS/PAMS, VIS and OfficeMed acquisitions were recorded using the purchase method of accounting and, accordingly, the purchase price has been allocated to the assets acquired and the liabilities assumed based on their estimated fair market value at the date of acquisition. Approximately $20.4 million of the purchase price was allocated to goodwill and prior to adoption of SFAS No. 142 was being amortized using the straight-line method over twenty years. In 2001, the Company finalized the purchase price allocation of these acquisitions, and approximately $12.4 million previously allocated to goodwill was reallocated to finite-lived intangible assets with lives ranging from 5 to 10 years. The operating results of HDS/PAMS, VIS and OfficeMed are included in the Company's Consolidated Statements of Operations from the date of acquisition in the e-Health Solutions division. On February 9, 2000, the Company acquired the outstanding capital stock of Knowledgeable Healthcare Solutions, Inc. ("KHS") for consideration of $3.1 million, consisting of $1.1 million cash and approximately 236,000 shares, or $2.0 million, of the Company's Common Stock. In addition, the purchase agreement provides for a purchase price adjustment of up to $6.0 million, that was recorded in December 2000, payable in cash and the Company's Common Stock, should KHS meet certain operational targets over the three years from the date of acquisition. The Company was required under the purchase agreement to make a purchase price adjustment in April 2001 totaling $0.1 million, 25% of which was paid through the issuance of the Company's common stock. The KHS acquisition was recorded using the purchase method of accounting and, accordingly, the purchase price was allocated to the assets acquired and the liabilities assumed based on their estimated fair market value at the date of acquisition. Approximately $8.9 million of the purchase price was allocated to goodwill and prior to adoption of SFAS No. 142 was being amortized using the straight-line method over five years. The operating results of KHS are included in the Company's Consolidated Statements of Operations from the date of acquisition. The pro-forma impact of these acquisitions was immaterial to the financial statements of the Company and therefore has not been presented. 3. DISCONTINUED OPERATIONS AND DIVESTITURES In 1998, management initiated a plan to focus the Company's financial and management resources on its three core healthcare segments in an effort to return the Company to profitability. Management defined these segments as: Physician Services, Application Software and e-Health Solutions. Management began F-11 PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) to seek alternatives for the remaining non-core business segments: Medaphis Services Corporation ("Hospital Services") and Impact Innovations Group ("Impact"). Although Hospital Services provided business management and accounts receivable management services to approximately 1,200 hospitals, the Company's management deemed the segment non-core as a substantial portion of the services offered was bad debt collection. Impact was deemed non-core as it did not provide consulting services to the healthcare industry. Pursuant to APB No. 30, Reporting the Results of Operations -- Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, the consolidated financial statements of the Company have been presented to reflect Impact as discontinued operations for the year ended December 31, 1999. In 1999, the Company completed the sale of both divisions of Impact. The Company sold the commercial division of Impact to Complete Business Solutions, Inc. ("CBSI") effective April 15, 1999 for $14.4 million, net of the final closing balance sheet adjustment of $0.6 million which was paid on July 16, 1999. Final CBSI post acquisition matters were resolved in the third quarter of 2000 resulting in an additional charge to discontinued operations of $0.4 million. The government division of Impact was sold on December 17, 1999 to J3 Technology Services Corp. for $46.5 million, including a purchase price adjustment of $1.5 million received on March 30, 2000 based on the division's tangible net worth at closing. The purchase price adjustment resulted in the recognition of an additional gain of $1.5 million, which was recognized through discontinued operations. Additionally, the sale agreement stipulated that $1.0 million of the purchase price be put in escrow to pay potential claims. The term of the escrow expired on September 30, 2001. In October of 2001, the Company received $1.0 million in cash, which was recognized through discontinued operations. The Company accrued $5.3 million for the period ended September 30, 1999 through discontinued operations as a result of an agreement with SCI Management Corporation ("SCI"), a former client of the commercial division of Impact. SCI filed a complaint against the commercial division of Impact in January of 1998 seeking recovery for alleged damages in connection with work performed by Impact under a consulting contract. Although the commercial division of Impact was sold effective April 15, 1999, the Company remained responsible for the SCI complaint. The Company paid $3.2 million to SCI on November 4, 1999. The Company issued a promissory note for the balance of $2.1 million bearing interest at 8.25%, which was paid on October 31, 2000. In May of 2001, the Company received an insurance settlement related to the SCI matter of approximately $3.0 million, which was recognized through discontinued operations. On November 30, 1998, the Company completed the sale of Hospital Services to NCO Group, Inc. ("NCO") for initial consideration of $107.5 million. During the first quarter of 1999, the Company received additional consideration of $0.8 million based on the Hospital Services' final closing balance sheet and payment on certain Hospital Services' accounts receivable retained by the Company. The additional consideration resulted in the recognition, in discontinued operations, of an additional gain of $0.5 million, net of tax of $0.3 million. In addition, the Company received a purchase price adjustment of $10.0 million in cash from NCO on May 5, 2000 based on Hospital Services' achievement of various operational targets in 1999. The purchase price adjustment resulted in the recognition of an additional gain of approximately $9.2 million in the quarter ended June 30, 2000 through discontinued operations. The net operating results of these segments have been reported in the Consolidated Statements of Operations as "Discontinued operations, net of tax" and the net cash flows have been reported in the Consolidated Statements of Cash Flows as "Net cash provided by (used for) discontinued operations" for the year ended December 31, 1999. F-12 PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Summarized financial information for the discontinued operations is as follows:
FOR THE YEAR ENDED DECEMBER 31, 1999 ------------------- IMPACT ------------------- (IN THOUSANDS) Revenue..................................................... $54,916 ======= Income from discontinued operations before income taxes..... $ 3,958 Income tax expense.......................................... 555 ------- $ 3,403 =======
4. NON-RECURRING, RESTRUCTURING AND OTHER EXPENSES Components of non-recurring and other expenses are as follows:
2001 2000 1999 ---- ------ ---- (IN THOUSANDS) Severance costs............................................. $593 $ 562 $ -- Other....................................................... -- 1,820 -- ---- ------ ---- $593 $2,382 $ -- ==== ====== ====
Severance Costs. In 2001 and 2000, the Company recorded net expenses of $0.6 million and $0.6 million, respectively, for severance costs associated with former executive management. In 2000, the expense includes a $0.3 million reduction of a prior period severance cost associated with former executive management. Other. In December 2000, the Company recorded $1.4 million of non-recurring expenses related to the e-Health Solutions division's retirement of a software product that was replaced by a superior software product at HDS/PAMS, companies acquired by Per-Se in December 2000. In connection with the retirement of the software product, the Company also recorded $0.4 million of severance for approximately 20 employees associated with the retired software product that had been notified of their termination. Restructuring Expenses. Under Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain Employee Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring), ("EITF 94-3"), the Company discloses certain information related to restructuring charges. In early 1995, the Company initiated a reengineering program focused upon its billing and accounts receivable management operations (the "Reengineering Project"). As part of the Physician Services Restructuring Plan, the Company recorded restructuring reserves in 1995 through 1996. In 1996, the Company abandoned its Reengineering Project. The Company periodically reevaluates the adequacy of the reserves established for the Physician Services Restructuring Plan. In 1997 and 1999 the Company recorded an additional expense of $1.7 million and $0.3 million, respectively, for lease termination costs. In 1997, the Company adopted a plan to combine the operations of its software and consulting companies. In 1999, the Company revised its plan to combine the operations of its software and consulting companies and reduced the reserve for lease termination costs by $0.3 million. In 1998, Application Software recorded approximately $1.3 million of restructuring costs for severance when management decided to restructure its operations to more appropriately align Application Software's resources with future operational needs and new product development. The severance costs relate to F-13 PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) approximately 35 employees, primarily in the areas of professional services and research and development, who had been notified of their termination. A description of the type and amount of restructuring costs recorded at the commitment date and subsequently incurred for all of the restructurings discussed above is as follows:
RESERVE COSTS RESERVE COSTS RESERVE COSTS RESERVE BALANCE APPLIED BALANCE APPLIED BALANCE APPLIED BALANCE JANUARY 1, AGAINST DECEMBER 31, RESERVE AGAINST DECEMBER 31, AGAINST DECEMBER 31, 1999 RESERVE 1999 ADJUSTMENTS RESERVE 2000 RESERVE 2001 ---------- -------- ------------ ----------- -------- ------------ ------- ------------ Lease termination costs.................. $4,292 $ (764) $3,528 $ -- $(655) $2,873 $(535) $2,338 Severance................ 1,148 (875) 273 (273) -- -- -- -- ------ ------- ------ ----- ----- ------ ----- ------ $5,440 $(1,639) $3,801 $(273) $(655) $2,873 $(535) $2,338 ====== ======= ====== ===== ===== ====== ===== ======
The terminated leases have various expiration dates through 2011. 5. PROCESS IMPROVEMENT PROJECT The Company incurred approximately $3.4 million and $0.5 million of expense in 2001 and 2000, respectively, associated with the implementation of a process improvement project within the Physician Services division (the "Project"). The Project installs a formalized set of productivity and quality measures, workflow processes and a management operating system in certain of the Company's major processing centers. The Project focuses on productivity improvements that result in both improved client service for the division's clients as well as improved profitability for the division. The costs associated with the Project primarily consist of professional fees paid to outside consultants retained exclusively for implementation of the Project. The first phase of the Project, which involved implementation in twelve processing centers, was completed in the third quarter with all costs for this phase incurred as of September 30, 2001. 6. PROPERTY AND EQUIPMENT Property and equipment consists of the following:
2001 2000 -------- -------- (IN THOUSANDS) Land........................................................ $ 590 $ 590 Buildings................................................... 2,751 2,750 Furniture and fixtures...................................... 16,497 16,353 Equipment................................................... 123,802 124,551 Leasehold improvements...................................... 5,629 9,628 -------- -------- 149,269 153,872 Less accumulated depreciation............................... 124,257 121,059 -------- -------- $ 25,012 $ 32,813 ======== ========
F-14 PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 7. INTANGIBLE ASSETS Intangible assets consist of the following:
2001 2000 ------- ------- (IN THOUSANDS) Goodwill.................................................... $44,749 $43,170 Client lists................................................ 44,308 39,681 Developed Technology........................................ 4,616 -- Trademark................................................... 1,313 -- Software development costs.................................. 54,574 49,718 ------- ------- 149,560 132,569 Less accumulated amortization............................... 72,292 59,874 ------- ------- $77,268 $72,695 ======= =======
In accordance with Accounting Principles Board Opinion 16, Business Combinations, the Company finalized the purchase price allocation of its most recent acquisitions, with a portion of the amount previously allocated to goodwill being reallocated to finite-lived intangible assets. The amounts reallocated to finite-lived intangible assets totaled approximately $9.2 million. The amortization period of the amounts allocated to client lists ranges from five to ten years. The amortization period of the amounts allocated to developed technology is five years. The Company adopted SFAS No. 142 on January 1, 2002. Under SFAS No. 142, goodwill and indefinite lived intangible assets are no longer amortized but will be reviewed annually for impairment. Expenditures on capitalized software development costs were approximately $5.9 million, $6.1 million and $7.5 million in 2001, 2000 and 1999, respectively. Amortization expense related to the Company's capitalized software costs totaled $5.8 million, $4.7 million and $4.5 million in 2001, 2000 and 1999, respectively. The unamortized balance of software development costs at December 31, 2001 and 2000 was $15.3 million and $15.5 million, respectively. Software development costs are amortized over the greater of the ratio that current revenues bear to total and anticipated future revenues for the applicable product or straight-line method over the estimated useful lives of the assets, which are generally three to five years. 8. ACCRUED EXPENSES Accrued expenses consist of the following:
2001 2000 ------- ------- (IN THOUSANDS) Interest.................................................... $ 6,235 $ 6,668 Accrued restructuring and severance costs, current.......... 1,198 1,450 Accrued legal costs......................................... 762 469 Accrued taxes............................................... 1,237 725 Funds due clients........................................... 1,568 1,710 Accrued costs of businesses acquired........................ 3,958 2,861 Other....................................................... 6,747 7,829 ------- ------- $21,705 $21,712 ======= =======
F-15 PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 9. LONG-TERM DEBT Long-term debt consists of the following:
2001 2000 -------- -------- (IN THOUSANDS) 9 1/2% Senior Notes due February 15, 2005 (the "Notes")..... $175,000 $175,000 Capital lease obligations, weighted average effective interest rate of 6.0% in 2001............................. 91 -- -------- -------- 175,091 175,000 Less current portion........................................ -- -- -------- -------- $175,091 $175,000 ======== ========
On February 20, 1998, the Company issued the Notes. The Notes bear interest at the rate of 9 1/2% per annum, payable semi-annually on February 15 and August 15, which commenced on August 15, 1998 and will mature on February 15, 2005. The Notes may be redeemed at the option of the Company, in whole or in part, at any time at a declining premium to par until 2004 and at par thereafter, plus accrued and unpaid interest. Payment of principal, premium, if any, and interest on the Notes is fully and unconditionally guaranteed, on a senior unsecured basis, jointly and severally by all of the Company's present and future domestic restricted subsidiaries (the "Subsidiary Guarantors"). The financial statements of the Subsidiary Guarantors have not been presented as all subsidiaries, except for certain insignificant foreign subsidiaries, have provided guarantees and the parent company does not have any significant operations or assets, separate from its investment in subsidiaries. Any non-guarantor subsidiaries are inconsequential individually and in the aggregate to the consolidated financial statements. Under the Indenture governing the Notes, the balance of net proceeds, as defined, from the sale of any assets having a fair value in excess of $1.0 million must be invested in the Company's business within 360 days of receipt of proceeds related to the sale or they become excess proceeds. If the aggregate of excess proceeds is greater than $10.0 million, the Company is required to offer to repurchase the Notes at par with such excess proceeds. As of December 31, 2001, the Company did not have excess proceeds (as defined by the Indenture governing the Notes) related to the sale of non-core operations and other assets. At December 31, 2001, the estimated fair value of the Notes is approximately $161.0 million, or 92% of par, based on the quoted market price for these Notes. Although the fair value of the Notes is less than the carrying amount, settlement at the reported fair value may not be possible. The Company entered into a $50 million credit facility (the "Credit Facility") on April 6, 2001. Availability under the Credit Facility is determined by a Borrowing Base calculated based on eligible billed accounts receivable of the Company's Physician Services and e-Health Solutions divisions, as defined in the Credit Facility. The Company has the option of making "LIBOR" based loans or "index rate" loans under the Credit Facility. LIBOR based loans bear interest at LIBOR plus amounts ranging from 1.85% to 2.65% based on the Company's leverage ratio, as defined in the Credit Facility, after the first year. Index rate loans bear interest at Prime plus amounts ranging from 0.35% to 1.15% based on the Company's leverage ratio, as defined, after the first year. LIBOR based loans bear interest at LIBOR plus 2.50% and index rate loans bear interest at Prime plus 1.0% for the first twelve months of the Credit Facility. In addition, the Company pays a quarterly commitment fee on the unused portion of the Credit Facility of 0.375% per annum. The Credit Facility contains financial and other restrictive covenants, including without limitation those restricting the incurrence of additional indebtedness, the creation of liens, the payment of dividends, F-16 PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) sales of assets, stock offerings, capital expenditures, and prepayment of the Notes, those requiring maintenance of minimum EBITDA (as defined) and minimum fixed charge coverage (as defined). The initial term of the Credit Facility is 42 months, expiring on October 6, 2004. The Company and the Lender can mutually agree to extend this term by 18 months if certain conditions have been met. The Company did not have any borrowings outstanding under the Credit Facility at December 31, 2001. The Company intends to use the Credit Facility, as needed, for future investments in its operations including capital expenditures, acquisitions and other general corporate purposes. It is the Company's policy to amortize debt issuance costs using the straight-line method over the life of the debt agreement. Amortization expense related to debt issuance costs, on both the Notes and the Credit Facility, for the years ended 2001, 2000 and 1999 were $1.3 million, $1.1 million and $1.2 million, respectively. The Company's capital leases consisted principally of leases for equipment. As of December 31, 2001, the net book value of equipment subject to capital leases totaled $0.1 million. The aggregate maturities of long-term debt are as follows (in thousands): 2002........................................................ $ -- 2003........................................................ 91 2004........................................................ -- 2005........................................................ 175,000 Thereafter.................................................. -- -------- $175,091 ========
10. LEASE COMMITMENTS The Company leases office space and equipment under noncancelable operating leases, which expire at various dates through 2011. Rent expense was $16.6 million, $17.5 million and $16.7 million for the years ended December 31, 2001, 2000 and 1999, respectively. Future minimum lease payments under noncancelable operating leases are as follows (in thousands): 2002........................................................ $16,215 2003........................................................ 14,325 2004........................................................ 12,364 2005........................................................ 6,454 2006........................................................ 3,397 Thereafter.................................................. 5,599 ------- $58,354 =======
11. LEGAL MATTERS PENDING LEGAL MATTERS The Company is subject to claims, litigation and official billing inquiries arising in the ordinary course of its business. These matters include, but are not limited to, lawsuits brought by former customers with respect to the operation of the Company's business. The Company has also received written demands from customers and former customers that have not yet resulted in legal action. Within the Company's industry, federal and state civil and criminal laws govern medical billing and collection activities. These laws provide F-17 PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) for various fines, penalties, multiple damages, assessments and sanctions for violations, including possible exclusion from federal and state healthcare programs. The Company believes that it has meritorious defenses to the claims and other issues asserted in pending legal matters; however, there can be no assurance that such matters or any future legal matters will not have an adverse effect on the Company. Since the Company is often unable to estimate a range of awards or losses, if any, in pending legal matters, amounts thereof have not been reflected in the financial statements unless estimable and probable. SETTLED LEGAL MATTERS In December 1995, the Company acquired Medical Management Sciences, Inc. ("MMS") (now a part of Physician Services). At acquisition, a lawsuit was pending against MMS for the alleged breach of two related billing and asset purchase contracts entered into by MMS in 1994. In November 1996, a jury in that lawsuit returned a verdict that produced a net award to MMS of approximately $900,000. The trial court reversed the net award to MMS and awarded the plaintiffs approximately $1.2 million in 1998, which was reduced to $950,000 by appeals court in May 2000. In July 2000, MMS was granted a stay of the judgment against it pending a petition by MMS to the U.S. Supreme Court. MMS filed a Petition for Writ of Certiorari with the U.S. Supreme Court in October 2000 seeking to overturn the decision of the appeals court and reinstate the jury verdict in MMS favor. That petition was denied in December 2000, and the Company accrued $1.1 million at December 31, 2000 for the estimated amount of the net award. In February 2001, the Company paid the full amount of the net award of $1.2 million in favor of the plaintiffs, and the matter was concluded. On January 28, 1998, a former client filed a complaint against BSG Alliance/IT, Inc. (later known as Impact Innovations Group, Inc.) seeking recovery for alleged damages in connection with work performed by the commercial division of Impact under a consulting contract. The Company sold the commercial division of Impact effective April 15, 1999, but retained responsibility for this matter. The Company and the plaintiff reached an agreement to refund $5.3 million to the plaintiff and on November 4, 1999, the Company paid $3.2 million to the plaintiff and issued a promissory note for $2.1 million bearing interest at 8.25%, which was paid on October 31, 2000. In May 2001, the Company and American International Specialty Lines Insurance Company ("AISLIC") settled litigation arising out of AISLIC's denial of coverage under an errors and omissions insurance policy for damages incurred by the Company in connection with this matter. The case was settled with the payment by AISLIC of $3 million to the Company. On June 16, 1999, the Company agreed to settle certain contract claims arising out of a 1996 contract for emergency room billing services to be provided by PST Emergency Medicine Services, Inc., a former subsidiary of the Company then known as Gottlieb's Financial Services, Inc. (the "Emergency Medicine division") to a former client. The Company paid the plaintiff $1.75 million in cash in exchange for a release of all claims against the Emergency Medicine division for breach of contract. On June 21, 1999, the Company finalized the settlement with the United States government concerning its investigation of the Emergency Medicine division, requiring the Company to pay to the United States and the various states a total of $15.0 million. The Company paid $6.8 million to the United States on June 29, 1999, $1.2 million on September 30, 1999, $2.2 million, in the aggregate, to the participating states on October 1, 1999 and $1.2 million to the United States on December 31, 1999. The balance of $3.6 million was paid in $0.9 million increments to the United States on March 31, 2000, July 3, 2000, October 2, 2000 and January 2, 2001. The interest rate on the deferred portion of the settlement payment was the one-year Treasury Bill rate. All pending claims against the Company by the United States and the Relator in underlying qui tam litigation have been dismissed with prejudice and the United States has released the Company from all civil and administrative claims arising out of the F-18 PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) emergency room billing of government programs services provided by the Emergency Medicine division from 1993 through the date of the settlement agreement with the United States. The settlement agreements with the participating states provide for the release of the Company by the states of all civil and administrative claims arising out of the emergency room billing services provided by the Emergency Medicine division from 1993 through the date of the settlement agreement with the individual state. On June 24, 1999, the Company entered into a settlement agreement with the former shareholders of MMS related to claims arising out of Per-Se's acquisition of MMS in December of 1995. The litigation has been dismissed with prejudice. The settlement agreement provided for the issuance by the Company to the MMS Shareholders of 166,667 shares of Common Stock and warrants to purchase an additional 166,667 shares of Common Stock. In addition, the Company entered into a five-year consulting agreement with a company controlled by a former MMS shareholder, providing for a $300,000 up front payment and $150,000 a year for the five-year term. The Company also paid the MMS shareholders $375,000 for the MMS Shareholders' interest in a legal malpractice claim. In October 1999, the Company and a former shareholder of Health Data Sciences Corporation ("HDSC"), settled litigation arising out of Per-Se's acquisition of HDSC in June of 1996. Pursuant to the settlement, the plaintiff realized $25.0 million from its investment in HDSC, consisting of $3.6 million from the sale of 325,590 shares of Per-Se Common Stock received by the plaintiff in the June 1996 HDSC transaction, $4.6 million in cash funded by the Company's insurers, $5.0 million in cash paid by the Company and $11.8 million from the October 1999 sale by the plaintiff of 1,333,333 shares of Per-Se Common Stock issued to the plaintiff. 12. CAPITAL STOCK On November 23, 1999, a special meeting of the Company's stockholders was held at which the stockholders approved a one-for-three reverse split of the Company's Common Stock (the "Reverse Split"). The Reverse Split reduced the number of shares of the Company's Common Stock outstanding to approximately 30 million from approximately 90 million. This enabled the Company to bring its number of outstanding shares down to a level more consistent with companies of similar size and to maintain compliance with The Nasdaq Stock Market(R) ("Nasdaq") listing requirements. The Reverse Split had no effect on the number of shares that the Company is authorized to issue and no effect on the $0.01 par value of the Common Stock. No fractional shares were issued in the Reverse Split; instead, stockholders were paid cash for any fractional shares. The numbers of shares, per share amounts and market prices of the Company's Common Stock set forth herein have been retroactively adjusted for all periods presented to reflect the Reverse Split. 13. STOCKHOLDERS' RIGHTS PLAN On January 21, 1999, the Board approved a stockholders' rights plan (the "Rights Plan"). Pursuant to the Rights Plan, the Company declared a dividend of one right for each outstanding share of Common Stock to stockholders of record at the close of business on February 16, 1999. Each right entitles the registered holder to purchase from the Company a unit (a "Unit") consisting of one one-hundredth of a share of Series A Junior Participating Preferred Stock, without par value, at a purchase price of $75 per Unit, as adjusted for the Reverse Split. Initially, the rights are deemed to be attached to certificates representing all outstanding shares of Common Stock, and they are not represented by separate rights certificates. Subject to certain exceptions specified in the Rights Plan, the rights will separate from the Common Stock and become exercisable upon the earlier to occur of (i) 10 business days following a public announcement that a person or group of affiliated or associated persons (an "Acquiring Person") has acquired beneficial ownership of 15% or F-19 PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) more of the outstanding Common Stock or (ii) 10 business days following the commencement of a tender offer for the Common Stock. In the event that a person becomes an Acquiring Person, except pursuant to an offer for all outstanding shares of Common Stock which the independent directors of the Company determine to be fair and otherwise in the best interests of the Company and its stockholders (after receiving advice from one or more investment banking firms), each holder of a right will thereafter have the right to receive, upon exercise, Common Stock (or, in certain circumstances, cash, property or other securities of the Company) having a value equal to two times the exercise price of the right (i.e., $150 per Unit). Until a right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends. While the distribution of the rights will not be taxable to stockholders or to the Company, stockholders may, depending upon the circumstances, recognize taxable income in the event that the rights become exercisable for Common Stock (or other consideration) of the Company, or for common stock of the acquiring company, or in the event of the redemption of the rights as set forth above. As of December 31, 2001 and 2000, no rights have become exercisable under this plan. On May 4, 2000, the Company amended the Rights Plan to provide that the meaning of the term "Acquiring Person" shall not include Basil P. Regan and Regan Partners, L.P. (collectively, "Regan Fund Management"), so long as Regan Fund Management does not become the beneficial owner of 20% or more of the outstanding shares of Common Stock. Effective March 6, 2002, the Company amended the Rights Plan to rescind the May 4, 2000 amendment, thereby making Regan Fund Management subject to the 15% beneficial ownership threshold described above. 14. COMMON STOCK OPTIONS AND STOCK AWARDS The Company has several stock option plans including a Non-Qualified Stock Option Plan, a Non-Qualified Stock Option Plan for Employees of Acquired Companies and a Non-Qualified Stock Option Plan for Non-Executive Employees. Granted options expire 10 to 11 years after the date of grant and generally vest over a three-to-five-year period. The total number of options available for future grant under these stock option plans was approximately 1.6 million at December 31, 2001. The Company also has a Non-Qualified Non-Employee Director Stock Option Plan (the "Director Plan") for non-employees who serve on the Company's Board of Directors. The Director Plan provides for an initial grant of 10,000 options at a strike price corresponding to the average of the fair market values for the five trading days prior to the date of the grant. Additionally, each non-employee director receives an annual grant of 10,000 options at each subsequent annual meeting in which the non-employee director is a member of the Board of Directors. All options granted under the Director Plan originally vested over a five-year period and expired eleven years from the date of grant. On April 1, 1999, the Director Plan was amended so that all future options granted under the Director Plan fully vest as of the date of grant, but shall not become exercisable until one year after the date of grant. As of December 31, 2001, the Company had 108,543 options available for future grant under this plan. The Company had a Senior Executive Non-Qualified Stock Option Plan that permitted certain of the Company's former executive officers to purchase shares of the Company's Common Stock. All options under this plan expired January 16, 2001. In June of 1999, in connection with the settlement with the former shareholders of MMS, the Company issued warrants to purchase 166,667 shares of Common Stock. These warrants are currently exercisable at an exercise price of $15.9375 per share and will expire in 2004. F-20 PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) During 1998, in connection with the settlement of a putative class action lawsuit, the Company issued warrants to purchase 1,769,841 shares of Common Stock. There are currently warrants outstanding to purchase 1,769,798 shares of Common Stock resulting from this settlement. These warrants are currently exercisable at an exercise price of $36.00 per share and will expire in 2003. The Company has reserved 2.1 million shares for future issuance for the warrants outstanding and the purchase price adjustment associated with the KHS acquisition. Activity related to all stock option plans is summarized as follows (shares in thousands):
2001 2000 1999 -------------------------- -------------------------- ------------------------- WEIGHTED-AVERAGE WEIGHTED-AVERAGE WEIGHTED-AVERAGE SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE ------- ---------------- ------- ---------------- ------ ---------------- Options outstanding as of January 1........ 4,449 $10.65 3,120 $16.00 3,705 $16.62 Granted............... 4,250 6.77 2,660 6.19 401 10.15 Exercised............. (62) 4.80 (48) 7.95 (53) 4.03 Canceled.............. (1,703) 11.73 (1,283) 13.64 (933) 16.65 ------- ------- ------ Options outstanding as of December 31...... 6,934 $ 8.07 4,449 $10.90 3,120 $16.00 ======= ======= ====== Options exercisable as of December 31...... 1,831 $12.00 1,685 $16.66 1,592 $17.23 ======= ======= ====== Weighted-average fair value of options granted during the year................ $ 3.10 $ 4.06 $ 6.31 ======= ======= ======
The following table summarizes information about stock options outstanding and excercisable at December 31, 2001 (shares in thousands):
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ---------------------------------------- -------------------------- WEIGHTED- NUMBER AVERAGE WEIGHTED- NUMBER WEIGHTED- OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT AVERAGE DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE RANGE OF EXERCISE PRICES 2001 LIFE PRICE 2001 PRICE - ------------------------ -------------- ----------- --------- -------------- --------- $0.66 to $6.00............. 1,942 9.88 $5.12 268 $3.65 $6.02 to $13.05............ 4,160 9.76 7.47 757 8.59 $16.125 to $22.3125........ 771 6.02 16.82 745 16.84 $26.10 to $29.343.......... 49 6.88 28.80 49 28.80 $30.00 to $135.00.......... 12 5.07 45.97 12 46.37 ----- ----- $0.66 to $135.00........... 6,934 9.35 8.07 1,831 12.00 ===== =====
The Company accounts for its stock-based compensation plans under APB No. 25. As a result, the Company has not recognized compensation expense for stock options granted to employees with an exercise price equal to the quoted market price of the Common Stock on the date of grant and which vest based solely on continuation of employment by the recipient of the option award. The Company adopted SFAS No. 123 for disclosure purposes in 1996. For SFAS No. 123 purposes, the fair value of each option F-21 PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) grant and stock based award has been estimated as of the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:
2001 2000 1999 ----- ----- ----- Expected life (years)....................................... 4.8 4.0 4.5 Risk-free interest rate..................................... 3.85% 6.23% 5.78% Dividend rate............................................... 0.00% 0.00% 0.00% Expected volatility......................................... 64.96% 80.88% 76.22%
Had compensation cost been determined consistent with SFAS No. 123, utilizing the assumptions detailed above, the Company's pro forma net loss and pro forma basic loss per share would have increased to the following pro forma amounts:
2001 2000 1999 ----------- ----------- ----------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Net loss: As reported........................................ $ (6,338) $(48,202) $(33,702) Pro forma -- for SFAS No. 123...................... $(11,339) $(53,020) $(38,840) Basic net loss per share: As reported........................................ $ (0.21) $ (1.62) $ (1.20) Pro forma -- for SFAS No. 123...................... $ (0.38) $ (1.78) $ (1.38)
Because the method of accounting under SFAS No. 123 has not been applied to options granted prior to January 1, 1995, the resulting pro forma compensation cost may not be representative of that expected in future years. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimates, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of the Company's employee stock options. Per-Se has never paid cash dividends on its Common Stock. The Indenture dated as of February 20, 1998, with respect to the Company's outstanding 9 1/2% Senior Notes due 2005 as well as the Credit Facility entered into on April 6, 2001, contain restrictions on the Company's ability to declare or pay cash dividends on its Common Stock. F-22 PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 15. INCOME TAXES Income tax expense (benefit) is comprised of the following:
2001 2000 1999 ----- ------- ------- (IN THOUSANDS) Current: Federal................................................. $ -- $ -- $ -- State................................................... 607 (695) (1,165) Deferred: Federal................................................. (823) (9,062) (5,806) State................................................... (113) (1,243) (797) Valuation allowance....................................... 936 10,305 6,603 ----- ------- ------- Total income tax expense (benefit)........................ 607 (695) (1,165) Income tax benefit on discontinued operations............. -- -- 555 ----- ------- ------- Income tax expense (benefit) on continuing operations..... $ 607 $ (695) $ (610) ===== ======= =======
A reconciliation between the amount determined by applying the federal statutory rate to loss before income taxes and income tax expense (benefit) is as follows:
2001 2000 1999 ------- ------- -------- (IN THOUSANDS) Income tax benefit at federal statutory rate........... $(1,136) $(9,453) $(11,582) State taxes, net of federal benefit.................... 494 (1,296) (1,588) Nondeductible goodwill amortization.................... 208 195 -- Nondeductible litigation settlement.................... -- -- 6,749 Valuation allowance.................................... 936 10,305 6,603 Other.................................................. 105 (446) (792) ------- ------- -------- $ 607 $ (695) $ (610) ======= ======= ========
F-23 PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Deferred taxes are recorded based upon differences between the financial statement and tax bases of assets and liabilities and available tax credit carryforwards. The components of deferred taxes at December 31, 2001 and 2000 are as follows:
2001 2000 --------- --------- (IN THOUSANDS) CURRENT: Accounts receivable, unbilled............................... $ (523) $ (943) Acquisition accruals........................................ 2,364 155 Accrued expenses............................................ 28,096 26,684 Valuation allowance......................................... (25,150) (23,686) Other....................................................... (4,787) (2,210) --------- --------- $ -- $ -- ========= ========= NONCURRENT: Net operating loss carryforwards............................ $ 159,850 $ 153,742 Valuation allowance......................................... (221,054) (223,454) Depreciation and amortization............................... 59,191 67,699 Other....................................................... 2,013 2,013 --------- --------- $ -- $ -- ========= =========
At December 31, 2001, the Company had federal net operating loss carryforwards ("NOLs") for income tax purposes of approximately $386.4 million, which consist of $323.5 million of consolidated NOLs and $62.9 million of separate return limitation year NOLs. The NOLs will expire at various dates between 2002 and 2020 as follows:
AMOUNTS EXPIRING ------------- (IN MILLIONS) between 2002 and 2005....................................... $ 20.7 between 2006 and 2009....................................... 54.4 between 2010 and 2013....................................... 191.4 between 2014 and 2020....................................... 119.9 ------ $386.4 ======
As of December 31, 2001, the Company has a net deferred tax asset of $246.2 million, which is offset by a valuation allowance of $246.2 million. Realization of the net deferred tax asset is dependent upon the Company generating sufficient taxable income prior to the expiration of the NOLs. If, during future periods, management believes the Company will generate sufficient taxable income to realize the net deferred tax asset, the Company will adjust this valuation reserve accordingly. 16. EMPLOYEE BENEFIT PLANS The Company has various defined contribution plans whereby employees meeting certain eligibility requirements can make specified contributions to the plans, a percentage of which are matched by the Company. The Company's contribution expense was $1.6 million, $1.7 million and $1.8 million for the years ended December 31, 2001, 2000 and 1999, respectively. F-24 PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company maintained a noncontributory money purchase pension plan that covered substantially all employees who were retained by the Company primarily to service specific physician clients. Effective as of the close of business on December 31, 2000, the Company's noncontributory money purchase pension plan was terminated. The Company's contributions to the plan were $37,000 and $0.3 million for the years ended December 31, 2000 and 1999, respectively In July 1999, the Company's Board of Directors approved the termination of the Company's Employee Stock Purchase Plan ("ESPP") effective as of the close of business on December 31, 1999. 17. CASH FLOW INFORMATION Supplemental disclosures of cash flow information and non-cash investing and financing activities are as follows:
2001 2000 1999 ------- ------- ------- (IN THOUSANDS) Non-cash investing and financing activities: Additions to capital lease obligations................ $ 165 $ -- $ -- Liabilities assumed in acquisitions................... 311 7,672 -- Common Stock issued upon funding of litigation settlements........................................ -- -- 30,266 Common Stock issued in acquisition.................... 35 2,000 -- Issuance of promissory note........................... -- -- 2,100 Issuance of stock warrants............................ -- -- 1,495 Cash paid for: Interest.............................................. 16,731 16,987 16,956 Income taxes.......................................... 189 1,017 946
18. SEGMENT REPORTING The Company's reportable segments are operating units that offer different services and products. Per-Se provides its services and products through its three operating divisions: Physician Services, Application Software and e-Health Solutions. Physician Services provides business management outsourcing services to the hospital-affiliated physician practice market, physicians in academic settings and other large physician practices. Services include clinical data collection, data input, medical coding, billing, contract management, cash collections and accounts receivable management. These services are designed to assist healthcare providers with the business management functions associated with the delivery of healthcare services, allowing physicians to focus on providing quality patient care. These services also assist physicians in improving cash flows and reducing administrative costs and burdens. The Application Software segment provides enterprise-wide financial, clinical and administrative software to acute care healthcare organizations, including patient financial management software, clinical information software and patient and staff scheduling systems. These applications enable healthcare organizations to simultaneously optimize the quality of care delivered and the profitability of business operations. The e-Health Solutions segment provides healthcare providers and payers with connectivity and business intelligence solutions that help reduce administrative costs and enhance revenue cycle management. Solutions include electronic claims processing, referral submissions, eligibility verification and other electronic and paper transaction processing. In addition, e-Health Solutions offers physician practice F-25 PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) management software as an Application Service Provider ("ASP") to physician practices and managed care solutions to payers in ASP, turnkey or outsourced formats. The Company evaluates each segment's performance based on segment operating margin. The e-Health Solutions segment revenue includes intersegment revenues for services provided to the Physician Services segment, which are shown in Eliminations to reconcile to total consolidated revenue. Information concerning the operations in these reportable segments is as follows:
2001 2000 1999 -------- -------- -------- (IN THOUSANDS) Revenue: Physician Services................................. $223,875 $225,102 $240,200 Application Software............................... 58,840 60,635 62,145 e-Health Solutions................................. 57,910 35,276 31,343 Eliminations....................................... (11,748) (11,005) (11,559) -------- -------- -------- $328,877 $310,008 $322,129 ======== ======== ======== Segment operating expenses(1): Physician Services................................. $211,405 $220,835 $245,741 Application Software............................... 53,367 57,776 63,216 e-Health Solutions................................. 52,682 31,875 31,533 Corporate.......................................... 11,614 14,522 17,671 Eliminations....................................... (11,748) (11,005) (11,559) -------- -------- -------- $317,320 $314,003 $346,602 ======== ======== ======== Segment operating margin(1): Physician Services................................. $ 12,470 $ 4,267 $ (5,541) Application Software............................... 5,473 2,859 (1,071) e-Health Solutions................................. 5,228 3,401 (190) Corporate.......................................... (11,614) (14,522) (17,671) -------- -------- -------- $ 11,557 $ (3,995) $(24,473) ======== ======== ======== Interest expense, net................................ $ 17,159 $ 14,525 $ 16,102 ======== ======== ======== Non-recurring, restructuring and other expenses (including goodwill and client lists impairment, process improvement project expenses and litigation settlements): Physician Services................................. $ 3,406 $ 1,793 $ 2,086 Application Software............................... -- (273) (336) e-Health Solutions................................. -- 1,820 -- Corporate.......................................... 611 690 23,061 -------- -------- -------- $ 4,017 $ 4,030 $ 24,811 ======== ======== ========
F-26 PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2001 2000 1999 -------- -------- -------- (IN THOUSANDS) Loss before income taxes............................. $ (9,619) $(22,550) $(65,386) ======== ======== ======== Depreciation and amortization: Physician Services................................. $ 11,246 $ 12,988 $ 15,674 Application Software............................... 7,210 7,295 6,793 e-Health Solutions................................. 6,071 2,716 2,429 Corporate.......................................... 1,119 2,688 4,574 -------- -------- -------- $ 25,646 $ 25,687 $ 29,470 ======== ======== ======== Capital expenditures: Physician Services................................. $ 2,055 $ 11,377 $ 7,422 Application Software............................... 407 2,996 1,242 e-Health Solutions................................. 1,958 2,987 882 Corporate.......................................... 416 1,441 872 -------- -------- -------- $ 4,836 $ 18,801 $ 10,418 ======== ======== ========
2001 2000 -------- -------- (IN THOUSANDS) Identifiable Assets:(2) Physician Services........................................ $ 55,812 $ 70,241 Application Software...................................... 33,172 54,488 e-Health Solutions........................................ 65,713 44,033 Corporate................................................. 48,194 45,364 -------- -------- $202,891 $214,126 ======== ========
- --------------- (1) Excludes net interest expense, Physician Services process improvement project, litigation settlements, non-recurring, restructuring and other expenses, and income taxes. (2) Assets related to KHS of $9.1 million which were reflected in Application Software in 2000, have been shown in the e-Health Solutions division in 2001. F-27 PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 19. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
QUARTER ENDED ----------------------------------------------- MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 -------- ------- ------------ ----------- (IN THOUSANDS, EXCEPT PER SHARE DATA) 2001(1) Revenue......................................... $ 79,978 $83,233 $81,885 $83,781 (Loss) income from continuing operations........ (6,187) (3,297) (1,795) 1,053 Discontinued operations, net of tax............. (31) 2,942 1 976 Net (loss) income............................... (6,218) (355) (1,794) 2,029 Basic (loss) income per common share from continuing operations......................... (0.21) (0.11) (0.06) 0.04 Discontinued operations, net of tax, per common share............................... -- 0.10 -- 0.03 Net (loss) income per common share............ (0.21) (0.01) (0.06) 0.07 Basic weighted average shares outstanding..... 29,902 29,904 29,914 29,939 Diluted income per common share from continuing operations.................................... (0.21) (0.11) (0.06) 0.03 Discontinued operations, net of tax, per common share............................... -- 0.10 -- 0.03 Net income per share.......................... (0.21) (0.01) (0.06) 0.06 Diluted weighted average shares outstanding... 29,902 29,904 29,914 31,435 2000(2) Revenue......................................... $ 78,829 $78,879 $75,381 $76,919 Loss from continuing operations................. (6,829) (1,821) (3,569) (9,636) Discontinued operations, net of tax............. 1,654 9,241 (351) 793 (Loss) income before extraordinary item and cumulative effect of accounting change........ (5,175) 7,420 (3,920) (8,843) Cumulative effect of accounting change, net of tax........................................... (37,684) -- -- -- Net (loss) income............................... (42,859) 7,420 (3,920) (8,843) Basic and diluted loss per common share from continuing operations......................... (0.23) (0.06) (0.12) (0.33) Discontinued operations, net of tax, per common share......................................... 0.06 0.31 (0.01) 0.03 (Loss) income before extraordinary item and cumulative effect of accounting change per common share.................................. (0.17) 0.25 (0.13) (0.30) Cumulative effect of accounting change, net of tax, per common share......................... (1.27) -- -- -- Basic and diluted net (loss) income per common share......................................... (1.44) 0.25 (0.13) (0.30) Weighted average shares outstanding........... 29,757 29,868 29,882 29,902
- --------------- (1) The quarterly periods ended March 31, 2001, June 30, 2001 and September 30, 2001 also included the impact of $1.6 million, $1.2 million and $1.2 million, respectively, of process improvement project and other non-recurring expenses that are not shown in the above table. (2) The quarterly period ended December 31, 2000 also included the impact of $0.5 million of Physician Services' process improvement project, $1.1 million of litigation settlements and $2.4 million of non-recurring, restructuring and other expenses that are not shown in the above table. F-28 PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 20. SUBSEQUENT EVENTS In February 2002, the Company settled claims for breach of contract arising out of a 1997 contract for emergency room billing services to be provided by the Emergency Medicine division to a former client. The Company and its insurance carrier each paid the plaintiff $2.0 million in cash in exchange for a release of all claims asserted against the Company. The Company expects reimbursement of the $2.0 million by its insurance carrier during 2002. F-29 REPORT OF INDEPENDENT AUDITORS We have audited the consolidated financial statements of Per-Se Technologies, Inc. as of December 31, 2001 and for the year then ended and have issued our report thereon dated February 4, 2002 (included elsewhere in this Annual Report on Form 10-K). Our audit also included the financial statement schedule as of December 31, 2001 and for the year then ended listed in Item 14(a) of this Annual Report on Form 10-K. This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audit. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ Ernst & Young LLP Atlanta, Georgia February 4, 2002 F-30 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors and Stockholders of Per-Se Technologies, Inc.: Our audits of the consolidated financial statements referred to in our report dated February 5, 2001 appearing in the 2001 Annual Report to Shareholders of Per-Se Technologies, Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /s/ PricewaterhouseCoopers LLP Atlanta, Georgia February 5, 2001 F-31 PER-SE TECHNOLOGIES, INC. SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
ADDITIONS --------------------- CHARGED BALANCE AT CHARGED TO TO BALANCE AT BEGINNING COSTS AND OTHER END OF DESCRIPTION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS YEAR - ----------- ---------- ---------- -------- ---------- ----------- YEAR ENDED DECEMBER 31, 2001 Allowance for doubtful accounts......... $ 11,973 $ 1,995 -- $ (7,479) $ 6,489 Valuation allowance for deferred taxes................................ 247,140 -- (936) 246,204 YEAR ENDED DECEMBER 31, 2000 Allowance for doubtful accounts......... $ 14,501 $ 4,651 -- $ (7,179) $ 11,973 Valuation allowance for deferred taxes................................ 236,835 10,305 -- 247,140 YEAR ENDED DECEMBER 31, 1999 Allowance for doubtful accounts......... $ 20,723 $ 4,991 -- $(11,213) $ 14,501 Valuation allowance for deferred taxes................................ 230,232 6,603 -- 236,835
F-32 EX-4.12 3 g74880ex4-12.txt SECOND AMENDMENT TO RIGHTS AGREEMENT EXHIBIT 4.12 SECOND AMENDMENT TO RIGHTS AGREEMENT This SECOND amendment TO RIGHTS AGREEMENT is made and entered into as of December 6, 2001, to be effective as of March 6, 2002, by and between Per-Se Technologies, Inc., a Delaware corporation formerly known as Medaphis Corporation ("Per-Se"), and American Stock Transfer & Trust Company, a New York banking corporation, as Rights Agent (the "Rights Agent"). Preface Reference is made to the Rights Agreement dated as of February 11, 1999, by and between Per-Se (then known as Medaphis Corporation) and the Rights Agent (the "Rights Agreement"), as amended by the First Amendment to Rights Agreement dated as of May 4, 2000, between Per-Se and the Rights Agent (the "First Amendment"). Capitalized terms used herein and not otherwise defined shall have the same meanings ascribed thereto in the Rights Agreement. The Rights Agreement provides for a dividend distribution of one Right for each share of common stock of Per-Se outstanding, each Right initially representing the right to purchase one one-hundredth of a share of Series A Junior Participating Preferred Stock. Certain events are triggered under the Rights Agreement upon any person becoming an "Acquiring Person," as defined in Section 1(a) of the Rights Agreement. Section 27(a) of the Rights Agreement provides for the amendment or modification of the Rights Agreement. In the First Amendment, Per-Se provided for the exclusion of Basil P. Regan and Regan Partners, L.P. (collectively, "Regan Fund Management") from the definition of the term "Acquired Person," so long as Regan Fund Management does not become the Beneficial Owner of 20% or more of the then outstanding shares of Common Stock. Per-Se now desires to amend the Rights Agreement a second time pursuant to Section 27(a) thereof, to delete the exclusion of Regan Fund Management provided for in the First Amendment, and to restore the text of Section 1(a) of the Rights Agreement to its form prior to the First Amendment, thereby rescinding the exclusion of Regan Fund Management from the definition of the term "Acquired Person." Statement of Amendment Effective as of March 6, 2002, the Rights Agreement is amended as follows: Section 1(a) of the Rights Agreement is amended by deleting subsection (vi) of clause (x) thereof in its entirety, and inserting the word "or" immediately preceding subsection (v) of that clause. 1 Except as specifically amended herein, the Rights Agreement shall remain in full force and effect. IN WITNESS WHEREOF, each of the parties has caused this Second Amendment to the Rights Agreement to be executed by its duly authorized representative as of the day and year first above written. PER-SE TECHNOLOGIES, INC. AMERICAN STOCK TRANSFER & TRUST COMPANY, as Rights Agent By: /s/ PHILIP M. PEAD By: /s/ HERBERT J. LEMMER ------------------------------------------- --------------------------------------- Philip M. Pead Name: Herbert J. Lemmer President and Chief Executive Officer Title: Vice President
2 EX-10.40 4 g74880ex10-40.txt EXECUTIVE DEFERRED COMPENSATION PLAN PER-SE TECHNOLOGIES, INC. EXECUTIVE DEFERRED COMPENSATION PLAN Effective as of January 1, 2002 TABLE OF CONTENTS
Page ---- ARTICLE I PURPOSE OF PLAN..................................... 1 1.1 Purpose of Plan..................................... 1 ARTICLE II DEFINITIONS......................................... 1 2.1 Account ............................................ 1 2.2 Beneficiary ........................................ 1 2.3 Board .............................................. 1 2.4 Cause .............................................. 1 2.5 Change in Control .................................. 2 2.6 Code ............................................... 2 2.7 Committee .......................................... 2 2.8 Company ............................................ 2 2.9 Company Contribution ............................... 2 2.10 Compensation ....................................... 3 2.11 Effective Date ..................................... 3 2.12 Election Date ...................................... 3 2.13 Election Form ...................................... 3 2.14 Election Change Form ............................... 3 2.15 Eligible Employee .................................. 3 2.16 Good Reason ........................................ 3 2.17 Participant ........................................ 4 2.18 Per-Se ............................................. 4 2.19 Plan ............................................... 4 2.20 Plan Year .......................................... 4 2.21 Trust .............................................. 4 2.22 Trustee ............................................ 4 2.23 Unforeseeable Hardship ............................. 4 2.24 Valuation Date ..................................... 4 ARTICLE III ELIGIBILITY AND PARTICIPATION....................... 4 3.1 Requirements ....................................... 4 3.2 Change of Employment Category ...................... 5 ARTICLE IV NONQUALIFIED DEFERRAL CONTRIBUTIONS................. 5 4.1 Deferral Elections ................................. 5 4.2 Election Form ...................................... 5 4.3 Continuing Elections ............................... 5 4.4 Changing a Prior Election .......................... 5 4.5 Participant Becomes Ineligible ..................... 6 4.6 Timing of Contribution to Account .................. 6
ARTICLE V COMPANY CONTRIBUTION................................ 6 5.1 Company Contribution ............................... 6 5.2 Timing of Contribution ............................. 6 5.3 Vesting ............................................ 6 ARTICLE VI PLAN ACCOUNTS ..................................... 6 6.1 Establishment of Accounts .......................... 6 6.2 Participant Deferral Account ....................... 6 6.3 Company Contribution Account ....................... 6 ARTICLE VII ALLOCATION OF FUNDS................................. 7 7.1 Allocation of Earnings or Losses on Accounts ....... 7 7.2 Accounting for Distributions ....................... 7 7.3 Interim Valuations ................................. 7 ARTICLE VIII VESTING............................................. 7 8.1 Deferral Contributions ............................. 7 8.2 Company Contributions .............................. 7 ARTICLE IX PAYMENTS OF BENEFITS................................ 8 9.1 Distributions During Employment .................... 8 9.2 Distributions After Termination of Employment ...... 8 9.3 Payments Upon Hardship ............................. 8 ARTICLE X THE TRUST........................................... 9 10.1 Establishment of Trust ............................. 9 10.2 Investment Funds ................................... 9 ARTICLE XI ADMINISTRATION ..................................... 10 11.1 Administrator ...................................... 10 11.2 Administrative Authority ........................... 10 11.3 Mutual Exclusion of Responsibility ................. 11 11.4 Uniformity of Discretionary Acts ................... 11 11.5 Litigation ......................................... 11 11.6 Payment of Expenses ................................ 11 11.7 Claims Procedure ................................... 11 11.8 Taxes .............................................. 13 11.9 Attorney's Fees .................................... 13 11.10 No Guaranty of Employment .......................... 13 11.11 Alienation of Benefits ............................. 13 11.12 General Creditor Status ............................ 13
ARTICLE XII AMENDMENT, TERMINATION, OR MERGER OF PLAN........... 14 12.1 Amendment .......................................... 14 12.2 Termination ........................................ 14 12.3 Notice of Amendment or Termination ................. 14 ARTICLE XIII MISCELLANEOUS..................................... . 14 13.1 Use and Form of Words .............................. 14 13.2 Headings ........................................... 14 13.3 References to Laws, Regulations and Findings ....... 14 13.4 Severability ....................................... 14 13.5 Governing Law ...................................... 14
ARTICLE I -- PURPOSE OF PLAN 1.1 Purpose of Plan. Per-Se Technologies, Inc. intends and desires by the adoption of this Plan to recognize the value to the Company (as defined below) of the services rendered by Eligible Employees covered by the Plan and to encourage and assure their continued service with the Company by making more adequate provisions for their future retirement security. This Plan has been adopted to provide certain management and/or highly compensated employees of the Company the opportunity to accumulate deferred compensation, including deferrals of base salary, awards pursuant to the Per-Se Technologies 2001 Incentive Plan and other forms of remuneration that the Committee and/or the Board of Directors may from time to time designate as available for deferral into the Plan. This Plan is intended to be "a plan which is unfunded and maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees" within the meaning of Sections 201(2) and 301(a)(3) of the Employee Retirement Income Security Act of 1974 ("ERISA") and shall be interpreted and administered in a manner consistent with that intent. ARTICLE II -- DEFINITIONS 2.1 "Account" means those separate accounts established and maintained under the Plan in the name of each Participant as required pursuant to the provisions of Article VI. 2.2 "Beneficiary" means a Participant's beneficiary or beneficiaries designated most recently in writing by the Participant to the Committee. 2.3 "Board" means the Board of Directors of Per-Se Technologies, Inc. 2.4 "Cause" as a reason for an employee Participant's termination of employment shall have the meaning assigned such term in the employment agreement, if any, between such Participant and the Company or an affiliated company, provided, however that if there is no such employment agreement in which such term is defined, "Cause" shall mean any of the following acts by the Participant, as determined by the Committee: (i) the Participant materially breaches any of the terms or conditions set forth in an agreement between the Company and the Participant, (ii) the Participant commits an act materially detrimental to the business or reputation of the Company; or (iii) the Participant commits or is convicted of any crime involving fraud, deceit or moral turpitude. -1- 2.5 "Change in Control" means and includes the occurrence of any one or more of the following events: (i) a consolidation or merger of Per-Se with or into any other corporation, or any other entity or person, other than a wholly-owned subsidiary of Per-Se, excluding any transaction in which the shares of Per-Se's common stock outstanding immediately prior to any such consolidation or merger represents immediately thereafter more than 50% of the combined voting power of the resulting entity after the transaction; (ii) any corporate reorganization, including an exchange offer, in which Per-Se shall not be the continuing or surviving entity resulting from such reorganization, excluding any transaction in which the shares of Per-Se's common stock outstanding immediately prior to any such reorganization represents immediately thereafter more than 50% of the combined voting power of the resulting entity after the transaction; or (iii) the sale of a substantial portion of Per-Se's assets, which shall be deemed to occur on the date that any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from Per-Se that (a) have a total fair market value equal to more than 50% of the total fair market value of all the assets of Per-Se immediately prior to such acquisition or acquisitions, or (b) represents a majority of the common stock of any (1) subsidiary of Per-Se, the revenues of which, in the most recent fiscal year, represent more than 75% of the consolidated gross revenues of Per-Se and its subsidiaries. Notwithstanding the foregoing, a transfer of assets or common stock in a subsidiary by Per-Se will not be treated as a sale of a substantial portion of Per-Se's assets if the assets are transferred to an entity, 50% or more of the total value or voting power of which is owned, directly or indirectly, by Per-Se. 2.6 "Code" means the Internal Revenue Code of 1986 and the regulations thereunder, as amended from time to time. 2.7 "Committee" means the Compensation Committee of the Board. 2.8 "Company" means (i) Per-Se Technologies, Inc. and (ii) any legal entity that is treated as a single employer with Per-Se pursuant to Code sections 414(b), 414(c), 414(m) or 414(o) that, with approval of the Board, has adopted the Plan, and (iii) any company that is a successor to Per-Se as a result of merger, consolidation, liquidation, transfer of assets, or other reorganization. 2.9 "Company Contribution" means an amount contributed by the Company pursuant to the provisions of Article V. -2- 2.10 "Compensation" means base salary, awards pursuant to the Per-Se Technologies 2001 Incentive Plan, or other forms of remuneration the Committee and/or the Board may from time to time designate as available for deferral, without regard to the limits imposed by Section 401(a)(17) of the Code. 2.11 "Effective Date" means the date on which the Board adopts the Plan, or such other effective date as designated by the Board. 2.12 "Election Date" for a Plan Year means the last date upon which an Election Form may be received by the Committee in order to effect a valid deferral of Compensation for such Plan Year. Unless otherwise specified by the Committee from time to time, (i) the Election Date in the case of deferrals of salary shall be December 31 of the year prior to the Plan Year with respect to which such salary will be earned (or in the case of a newly eligible Participant, no later than 30 days after such employee first become eligible to participate in the Plan), and (ii) the Election Date in the case of deferrals of bonus or other non-salary elements of Compensation shall be November 30 of the Plan Year for which such bonus or other non-salary Compensation will be earned. The Committee from time to time may impose any earlier Election Dates as it deems appropriate or advisable. 2.13 "Election Form" means the form on which a Participant elects to defer Compensation hereunder and on which the Participant makes certain other designations as required thereon. 2.14 "Election Change Form" means the form on which a Participant may make certain prospective changes to his deferral election or distribution options as provided in Article IV. 2.15 "Eligible Employee" means a person employed by the Company who is determined by the Company to be a member of a select group of management or highly compensated employees and is designated by the Committee to be eligible under the Plan. 2.16 "Good Reason" for a Participant's termination of employment shall have the meaning assigned such term in the employment agreement, if any, between such Participant and the Company or an affiliated company, provided, however that if there is no such employment agreement in which such term is defined, "Good Reason" shall mean any of the following acts by the Company without the consent of the Participant: (i) a reduction of greater than 10% in the Participant's annual base salary; (ii) a change in the Participant's work location to a work location more than 50 miles from his existing work location, except for required travel on the Company's business to an extent consistent with the Participant's then current business travel obligations; (iii) an assignment to any duties inconsistent in any material adverse respect with the Participant's current position, duties or responsibilities, other than an insubstantial and inadvertent act that is remedied -3- by the Company promptly after receipt of notice thereof given by the Participant; or (iv) the failure by the Company to continue any material benefit or compensation plan in which the Participant is participating unless the Participant is provided with comparable benefits. 2.17 "Participant" means any person so designated in accordance with the provisions of Article III, including, where appropriate according to the context of the Plan, any former employee who is or may become (or whose Beneficiaries may become) eligible to receive a benefit under the Plan. 2.18 "Per-Se" means Per-Se Technologies, Inc., a Delaware corporation. 2.19 "Plan" means this Per-Se Technologies, Inc. Executive Deferred Compensation Plan. 2.20 "Plan Year" means the calendar year. 2.21 "Trust" means the "rabbi" trust fund established pursuant to Article X of the Plan. 2.22 "Trustee" means the trustee named in the agreement establishing the Trust and such successor and/or additional trustees as may be named pursuant to the terms of the agreement establishing the Trust. 2.23 "Unforeseeable Hardship" means a severe financial hardship to the Participant of unforeseeable circumstances beyond the control of the Participant. The determination of whether an Unforeseeable Hardship has occurred, as well as the application of the facts making such determination, shall be made by the Committee in its sole and absolute discretion and shall not be overturned unless such decision is arbitrary and capricious. 2.24 "Valuation Date" means the last day of each Plan Year and any other date that the Committee, in its sole discretion, designates as a Valuation Date. ARTICLE III -- ELIGIBILITY AND PARTICIPATION 3.1 Requirements. Eligible Employees as of the Effective Date who are designated by the Committee shall be eligible to become a Participant on the first day of the Plan Year occurring after the Effective Date. Every other Eligible Employee who is designated by the Committee shall become a Participant on the first day of the Plan Year occurring after the date on which he becomes an Eligible Employee. No individual shall become a Participant, however, if he is not an Eligible Employee on the date his participation is to begin. -4- Participation in the Plan is voluntary. In order to participate, an otherwise Eligible Employee must execute a valid Election Form in such manner as the Committee may require as provided in Article IV. 3.2 Change of Employment Category. During any period in which a Participant remains in the employ of the Company, but ceases to be an Eligible Employee, he shall not be eligible to make additional deferral of Compensation under this Plan. ARTICLE IV -- DEFERRAL ELECTIONS 4.1 Deferral Elections. A Participant who wishes to defer Compensation under the Plan for a Plan Year must irrevocably elect to do so on or prior to the Election Date for such Plan Year, by delivering a valid Election Form to the Committee in accordance with rules established by the Committee. A Participant may elect to defer up to 100% of his eligible Compensation. Deferred amounts shall be deducted through payroll withholding from the Participant's cash Compensation payable by the Company. 4.2 Election Form. In the Election Form, the Participant shall indicate (i) the percentage of Compensation (in increments of 1%) to be credited to the Participant's Account for the Plan Year, (ii) the Participant's investment allocation preferences from among the benchmark investment funds available under the Plan from time to time, (iii) the beginning date for distribution of the Participant's Account for such Plan Year, which may be either the date of the Participant's termination of employment or the second or any later anniversary of the last day of the Plan Year to which such deferral election relates, and (iv) the method of payment of the Account, which shall be either in one lump sum or in five or ten annual installments beginning as soon as practical after the distribution date. 4.3 Continuing Elections. A Participant may enter into a separate Election Form for each Plan Year. An Election Form filed with respect to one Plan Year shall remain effective for all following Plan Years during the term of the Plan, unless (i) a new Election Form with respect to a subsequent Plan Year is timely filed with the Committee, (ii) the Committee is notified in writing that the Participant does not wish to participate in the Plan for a subsequent Plan Year, or (iii) the Participant becomes ineligible to participate in the Plan. 4.4 Changing a Prior Election. A Participant may, by filing a new Election Form with the Committee, change his election as to distribution date and/or method of distribution for the Account with respect to a Plan Year. Such new Election Form shall not be effective until one year after it is properly filed with the Committee. Participants are limited to one changed Election Form for each separate Plan Year. -5- 4.5 Participant Becomes Ineligible. A Participant's Election Form shall be canceled immediately when he becomes ineligible to participate in the Plan. 4.6 Timing of Contribution to Account. A Participant's deferral of Compensation shall be credited to the Participant's Account at the time such Compensation would otherwise be paid to the Participant in cash. ARTICLE V -- COMPANY CONTRIBUTIONS 5.1 Company Contribution. In its sole discretion, the Company may make a Company Contribution on behalf of Participant, in an amount determined by the Company in accordance with (a) and/or (b) below: (a) A percentage of each Participant's Compensation for the Plan Year; (b) A percentage of some or the entire Participant's deferred Compensation under the Plan for the Plan Year. 5.2 Timing of Contribution. Company Contributions shall be made as soon as administratively feasible after declared by the Board. 5.3 Vesting. Company Contributions shall have such vesting provisions as shall be specified by the Board at the time of its approval of such contributions. ARTICLE VI -- PLAN ACCOUNTS 6.1 Establishment of Accounts. The Company shall establish and maintain separate Accounts in the name of each Participant, as required and as described in this Article VI. 6.2 Participant Deferral Account. The Company shall establish an Account to which is credited the Participant's deferred Compensation, as indicated on the Participant's Election Form, plus amounts equal to any income, gains, or losses (to the extent realized, based upon fair market value of the Account's assets) attributable or allocable to interest or applicable investment returns. 6.3 Company Contribution Account. The Company shall establish an Account to which is credited the Participant's Company Contributions, plus amounts equal to any income, gains, or losses (to the extent realized, based upon fair market value of the Account's assets) attributable or allocable to interest or applicable investment returns. -6- ARTICLE VII -- ALLOCATION OF FUNDS 7.1 Allocation of Earnings or Losses on Accounts. Each Participant's Account shall be invested in such investments as the Trustee shall determine. The Trustee may (but is not required to) consider the Participant's investment preferences when investing amounts credited to the Participant's Accounts. Such investment preferences shall be related to the Trustee at the time and in the manner prescribed by the Company, in its sole discretion. The Participant's Account will be credited or debited with the increase or decrease in the realizable net asset value or credited interest, as applicable, of each investment, as follows. As of each Valuation Date, an amount equal to the net increase or decrease in realizable net asset value or credited interest, as applicable (as determined by the Trustee), of each investment option within the Trust since the preceding Valuation Date shall be allocated among all Participants' Accounts to be invested in that investment option in accordance with the ratio which the portion of the Account of each Participant which is to be invested within that investment option, determined as provided herein, bears to the aggregate of all amounts to be invested within that investment option. 7.2 Accounting for Distributions. As of the date of any distribution under the Plan to a Participant or his Beneficiary or Beneficiaries, such distribution shall be charged to the applicable Participant's Account. 7.3 Interim Valuations. If it is determined by the Committee that the value of the Trust as of any date on which distributions are to be made differs materially from the value of the Trust on the prior Valuation Date upon which the distribution is to be based, the Committee, in its discretion, shall have the right to designate any date in the interim as a Valuation Date for the purpose of revaluing the Trust so that the Account from which the distribution is being made will, prior to the distribution, reflect its share of such material difference in value. ARTICLE VIII -- VESTING 8.1 Deferral Contributions. A Participant shall always be one hundred percent (100%) vested in amounts credited to his Participant Deferral Account. 8.2 Company Contributions. Company Contributions shall have such vesting provisions as shall be specified by the Board at the time of its approval of such contributions. -7- ARTICLE IX -- PAYMENTS OF BENEFITS 9.1 Distributions During Employment. (a) Timing. Except as otherwise provided in Section 9.2, distributions from a Participant's Accounts shall begin at the date designated by the Participant in the Election Form. (b) Form of Distribution. The Participant's entire vested Account balance shall be paid in cash, delivered in the number of installments designated pursuant to the Election Form(s), except as otherwise provided in Section 9.2. 9.2 Distributions After Termination of Employment. (a) Death, Resignation without Good Reason or Termination for Cause. Regardless of the distribution election in the Participant's Election Form(s), the Participant's entire vested Account balance shall be distributed as soon as administratively feasible after the Participant's death, resignation without Good Reason or termination for Cause. The Accounts shall be paid in one lump sum cash payment. In the case of the death of the Participant, such payment shall be made to his Beneficiary. (b) Termination for Any Other Reason. In the case of the Participant's termination of employment for any other reason (including, for example, retirement, disability, termination without Cause or resignation for Good Reason), the timing of the distribution shall be pursuant to the terms of the Participant's applicable Election Form(s). The Accounts shall be paid in cash in the number of installments designated in the applicable Election Form(s). (c) Change in Control. Upon the termination of employment of a Participant for any reason after a Change in Control, the Participant's entire vested Account balance shall be distributed within three months after such termination of employment. The Accounts shall be paid in one lump sum cash payment. 9.3 Payments Upon Hardship. The Committee may, in its sole discretion, accelerate the distribution to a Participant of an amount reasonably necessary to handle an Unforseeable Hardship. The determination of whether an Unforeseeable Hardship has occurred, as well as the application of the facts making such determination, shall be made by the Committee in its sole and absolute discretion and shall not be overturned unless such decision is arbitrary and capricious. Upon a finding of hardship, the Committee shall instruct the Trustee to make the appropriate distribution to the Participant from amounts contributed to the Trust by the Company in respect of the Participant's Account. In no event shall the aggregate amount of the distribution exceed the value of the Participant's -8- Account. For purposes of this Section, the value of the Participant's Account shall be determined as of the date of the distribution. A distribution may be made under this Section only with the consent of the Committee. ARTICLE X -- THE TRUST 10.1 Establishment of Trust. The Company shall establish the Trust with the Trustee, pursuant to such terms and conditions as are set forth in the Trust agreement to be entered into between the Company and the Trustee. The Trust is intended to be treated as a "grantor" trust under the Code, and the establishment of the Trust is not intended to cause Participants to realize current income on amounts contributed thereto, and the Trust shall be so interpreted. Such trust shall substantially conform to the terms of the model trust as described in Revenue Procedure 92-64 1992-2 C.B. 422. 10.2 Investment Funds. Solely for purposes of valuing a Participant's Account, one or more investment funds may be selected by the Committee, and the Participant may designate that a percentage of all or a portion of his Account be valued in accordance with the investment performance of such investment fund(s). An amount equal to the investment return attributable to such investment(s) as selected by the Participant shall be allocated to his account. This Section 10.2 is for Account valuation purposes only and does not confer upon the Participant or his Beneficiary the right to direct the investment of the assets of the trust referred to in Article X. -9- ARTICLE XI -- ADMINISTRATION 11.1 Administrator. The Committee shall administer, construe, and interpret this Plan and shall determine, subject to the provisions of this Plan, the Eligible Employees who become Participants in the Plan from time to time and the amount, if any, due a Participant (or his Beneficiary) under this Plan. To the extent permitted by law, no member of the Committee shall be liable to any person for any action taken or omitted in connection with the interpretation and administration of this Plan unless attributable to his own bad faith or willful misconduct. No member of the Committee who is a Participant in this Plan may vote on matters affecting his personal benefit under this Plan, but any such member shall otherwise be fully entitled to act in matters arising out of or affecting this Plan notwithstanding his participation herein. In carrying out its duties herein, the Committee shall have discretionary authority to exercise all powers and to make all determinations, consistent with the terms of the Plan, in all matters entrusted to it, and its determinations shall be given deference and shall be final and binding on all interested parties. 11.2 Administrative Authority. Except as otherwise specifically provided herein, the Committee shall have the sole responsibility for and the sole control of the operation and administration of the Plan, and shall have the power and authority to take all actions and to make all decisions and interpretations which may be necessary or appropriate in order to administer and operate the Plan, including, without limiting the generality of the foregoing, the power, duty, and responsibility to: (a) Resolve and determine all disputes or questions arising under the Plan, including the power to determine the rights of Eligible Employees, Participants, and Beneficiaries, and their respective benefits, and to remedy any ambiguities, inconsistencies, or omissions in the Plan. (b) Adopt such rules of procedure and regulations as in its opinion may be necessary for the proper and efficient administration of the Plan and as are consistent with the Plan. (c) Implement the Plan in accordance with its terms and the rules and regulations adopted as above. (d) Make determinations with respect to the eligibility of any Eligible Employee as a Participant and make determinations concerning the crediting and distribution of Plan Accounts. (e) Appoint any persons or firms, or otherwise act to secure specialized advice or assistance, as it deems necessary or desirable in connection with the administration and operation of the Plan, and the Committee shall be entitled to rely conclusively upon, and shall be fully protected in any action or omission -10- taken by it in good faith reliance upon the advice or opinion of such firms or persons. The Committee shall have the power and authority to delegate from time to time by written instrument all or any part of its duties, powers, or responsibilities under the Plan, both ministerial and discretionary, as it deems appropriate, to any person or committee, and in the same manner to revoke any such delegation of duties, powers, or responsibilities. Any action of such person or committee in the exercise of such delegated duties, powers, or responsibilities shall have the same force and effect for all purposes hereunder as if the Committee had taken such action. Further, the Committee may authorize one or more persons to execute any certificate or document on behalf of the Committee, in which event any person notified by the Committee of such authorization shall be entitled to accept and; conclusively rely upon any such certificate or document executed by such person as representing action by the Committee until such third person shall have been notified of the revocation of such authority. 11.3 Mutual Exclusion of Responsibility. Neither the Trustee nor the Committee shall be obliged to inquire into or be responsible for any act or failure to act, or the authority therefor, on the part of the other. 11.4 Uniformity of Discretionary Acts. Whenever in the administration or operation of the Plan discretionary actions by the Committee are required or permitted, such actions shall be consistently and uniformly applied to all persons similarly situated, and no such action shall be taken which shall discriminate in favor of any particular person or group of persons. 11.5 Litigation. Except as may be otherwise required by law, in any action or judicial proceeding affecting the Plan, no Participant or Beneficiary shall be entitled to any notice or service of process, and any final judgment entered in such action shall be binding on all persons interested in, or claiming under, the Plan. 11.6 Payment of Expenses. The cost of the establishment of the Plan and the adoption of the Plan by Company, including but not limited to legal and accounting fees, shall be borne by Company. All expenses incurred in the administration and operation of the Plan and the Trust shall be paid by the Plan, excluding any taxes payable by the Company in respect of the Plan or Trust or payable by or from the Trust pursuant to its terms. 11.7 Claims Procedure. (a) Notice of Claim. Any Eligible Employee or Beneficiary, or the duly authorized representative of an Eligible Employee or Beneficiary, may file with the Committee a claim for a Plan benefit. Such a claim must be in writing on a form provided by the Committee and must be delivered in person or by mail, postage prepaid, to the Committee c/o Per-Se's General Counsel and Corporate Secretary, as agent for the Committee. Within ninety (90) days after the receipt of such a -11- claim, the Committee shall send to the claimant, by mail, postage prepaid, a notice of the granting or the denying, in whole or in part, of such claim, unless special circumstances require an extension of time for processing the claim. In no event may the extension exceed ninety (90) days from the end of the initial period. If such an extension is necessary, the claimant will be given a written notice to this effect prior to the expiration of the initial ninety (90) day period. The Committee shall have full discretion to deny or grant a claim in whole or in part in accordance with the terms of the plan. If notice of the denial of a claim is not furnished in accordance with this Section, the claim shall be denied and the claimant shall be permitted to exercise his right to review pursuant to Sections 11.7(c) and 11.7(d) of the Plan, as applicable. (b) Action on Claim. The Committee shall provide to every claimant who is denied a claim for benefits a written notice setting forth, in a manner calculated to be understood by the claimant: (i) The specific reason or reasons for the denial; (ii) A specific reference to the pertinent Plan provisions on which the denial is based; (iii) A description of any additional material or information necessary of the claimant to perfect the claim and an explanation of why such material or information is necessary; and (iv) An explanation of the Plan's claim review procedure. (c) Review of Denial. Within sixty (60) days after the receipt by a claimant of written notification of the denial (in whole or in part) of a claim, the claimant or the claimant's duly authorized representative, upon written application to the Committee, delivered in person or by certified mail, postage prepaid, may review pertinent documents and may submit to the Committee, in writing, issues and comments concerning the claim. (d) Decision on Review. Upon the Committee's receipt of a notice of a request for review, the Committee shall make a prompt decision on the review and shall communicate the decision on review in writing to the claimant. The decision on review shall be written in a manner calculated to be understood by the claimant and shall include specific reasons for the decision and specific references to the pertinent Plan provisions on which the decision is based. The decision on review shall be made not later than sixty (60) days after the Committee's receipt of a request for a review, unless special circumstances require an extension of time for processing, in which case a decision shall be rendered not later than one hundred twenty (120) days after receipt of the request for review. If an extension is -12- necessary, the claimant shall be given written notice of the extension by the Committee prior to the expiration of the initial sixty (60) day period. If notice of the decision on review is not furnished in accordance with this Section, the claim shall be denied on review. 11.8 Taxes. All amounts payable hereunder shall be reduced by any and all Federal, state, and local taxes imposed upon a Participant or his Beneficiary, which are required to be paid or withheld by the Company. The determination of the Company regarding applicable income and employment tax withholding requirements shall be final and binding on the Participant and his Beneficiary. 11.9 Attorney's Fees. The Company shall pay the reasonable attorney's fees incurred by any Eligible Employee in an action brought against the Company to enforce Eligible Employee's rights under the Plan, provided that such fees shall only be payable in the event that the Eligible Employee prevails in such action. 11.10 No Guarantee of Employment. Nothing contained in this Plan shall be construed as a contract of employment between the Company and any Employee, or as a right of any Employee to be continued in the employment of the Company or as a limitation of the right of the Company to discharge any of its Employees, with or without Cause. 11.11 Alienation of Benefits. No Participant shall have the right to assign, transfer, hypothecate, encumber or anticipate his interest in any benefits under the Plan, nor shall the benefits under the Plan be subject to any legal process to levy upon or attach the benefits for payment for any claim against the Participant or his spouse or Beneficiary. If, notwithstanding the foregoing provision, any Participant's benefits are garnished or attached by the order of any court, the Company may bring an action for declaratory judgment in a court of competent jurisdiction to determine the proper recipient of the benefits to be distributed pursuant to the Plan. During the pendency of the action, any benefits that become distributable shall be paid into the court, as they become distributable, to be distributed by the court to the recipient it deems proper at the conclusion of the action. 11.12 General Creditor Status. Benefits shall be distributed by the Company out of its general assets and no separate fund shall be established to secure payment, other than the Trust referred to in Article X. Nothing contained in the Plan shall be deemed to create any fiduciary relationship between the Company and the Participants. Notwithstanding anything herein to the contrary, to the extent that any person acquires a right to receive benefits under the Plan, such right shall be no greater than the right of any unsecured general creditor of the Company. Notwithstanding the foregoing, the Company may establish a grantor trust for the purpose of helping to defray the obligations under the Plan and to the extent that any payment is made from any such trust to a Participant or Beneficiary, such payment will be in satisfaction of the Company's obligations hereunder. -13- ARTICLE XII--AMENDMENT, TERMINATION OR MERGER OF THE PLAN 12.1 Amendment. The Company reserves the right at any time and from time to time to modify or amend, in whole or in part, any or all of the provisions of the Plan, provided that no modification or amendment shall be made which shall affect adversely any right or obligation of any Participant with respect to a Participant's accrued interest or to contributions theretofore made, without the consent of the affected Participant(s). Notwithstanding the foregoing, any modification or amendment of the Plan may be made, retroactively, if necessary, which the Company deems necessary or proper to bring the Plan into conformity with any law or governmental regulation relating to the Plan. No amendment to this Plan shall decrease a Participant's account balance. 12.2 Termination. The Company may terminate the Plan in whole or in part for any reason at any time. In the case of such termination or partial termination, distributions shall be made pursuant to the provisions of Article IX. The Company has established the Plan with the bona fide intention and expectation that the Plan will continue indefinitely, but the Company shall be under no obligation to maintain the Plan for any given length of time and may, in its sole discretion, terminate the Plan at any time without any liability whatsoever. 12.3 Notice of Amendment or Termination. Notice of every such amendment or termination shall be given in writing to each Participant and Beneficiary of a deceased Participant. ARTICLE XIII--MISCELLANEOUS 13.1 Use and Form of Words. Wherever appropriate, words used herein in the singular may include the plural or the plural may be read as the singular, the masculine may include the feminine, and the neuter may include both the masculine and the feminine. 13.2 Headings. Headings of Articles and Sections are inserted solely for convenience and reference, and constitute no part of the Plan. 13.3 References to Laws, Regulations and Findings. All references herein to sections of the Code, ERISA, or other laws, or any regulations or filings thereunder, shall be deemed to refer to such sections as they may subsequently be modified, amended, replaced or amplified by any federal statutes, regulations or rulings of similar application and import. 13.4 Severability. If any provisions of the Plan shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions of the Plan shall continue to be fully effective. 13.5 Governing Law. The Plan and all Election Form s shall be construed in accordance with the Code and, to the extent applicable, the laws of the State of Georgia excluding any -14- conflicts-of-law provisions. The foregoing is hereby acknowledged as being the Per-Se Technologies, Inc. Executive Deferred Compensation Plan, as adopted by the Board of Directors of Per-Se on December 6, 2001, to be effective as of January 1, 2002. ATTEST: PER-SE TECHNOLOGIES, INC. /s/ PAUL J. QUINER By: /s/ PHILIP M. PEAD - ---------------------------- -------------------------------- Paul J. Quiner Philip M. Pead Corporate Secretary President and Chief Executive Officer -15- EX-10.41 5 g74880ex10-41.txt NON-EMPLOYEE DIRECTOR COMPENSATION PLAN EXHIBIT 10.41 PER-SE TECHNOLOGIES, INC. BOARD OF DIRECTORS COMPENSATION PROGRAM NON-EMPLOYEE DIRECTOR COMPENSATION PLAN [effective 01-01-02] The following outlines the terms of the compensation plan for all non-employees serving on the Board of Directors (the "Board") of Per-Se Technologies, Inc. ("Per-Se"). The intent of this plan is to compensate such individuals fairly for their talents and time spent on behalf of Per-Se. COMPENSATION: CASH COMPENSATION Board Fees Annual Retainer: $16,000.00 Board Meeting Fee: $1,000.00 (per meeting attended) Committee Fees (a) Committee Chair Annual Retainer Audit Committee Chair: $4,000.00 Other Committees Chairs: $2,000.00 (b) Committee Meeting Fees (per meeting attended) Audit Committee: $2,000.00 Other Committees: $1,000.00 EQUITY COMPENSATION Stock Options Initial Grant: 10,000 Shares (upon first election or appointment) Annual Grant: 10,000 Shares ADMINISTRATION: General. The Company is the administrator of the plan. The Company is responsible for ensuring timely payment of both the cash and equity elements of the plan according to the guidelines set forth below, and for monitoring and controlling deferred compensation under the plan pursuant to the Per-Se Technologies, Inc. Non-Employee Director Deferred Stock Credit Plan (the "Deferred Stock Credit Plan"), and the Per-Se Technologies, Inc. Deferred Stock Unit Plan (the "Deferred Stock Unit Plan") (effective as of October 1, 2001, subject to stockholder approval). For purposes of annual retainers, annual stock option grants, and deferral elections, a "Board Year" begins with the Annual Meeting of the Board held each year immediately following the Annual Meeting of Stockholders (generally during the month of May), and ends on the day before the next Annual Meeting of the Board. Meeting Attendance. Meeting attendance is required for payment of the associated fee. Attendance is determined by the official minutes of the meeting of the Board or committee, as recorded by the Secretary of the meeting (typically, the Secretary of Per-Se). A valid meeting for purposes of compensation can be held in person or by means of conference telephone or similar communications equipment as long as the necessary quorum is present; provided, however, that telephone meetings of committee members held to conclude business of previously adjourned meetings and of less than 30 minutes in duration are considered to be normal contacts in the performance of duties as a Board member and are not compensable as committee meetings. No fee is payable in connection with Board or committee action taken by unanimous written consent in lieu of a meeting. Cash Compensation. Cash compensation is paid by check or direct deposit, as requested by the Director, on a quarterly basis, no later than the 15th of the month following the end of the quarter in which the fees are earned. No taxes are withheld. Each Director will receive a Form 1099 at the end of the calendar year with respect to any cash compensation paid during that year. Equity Compensation. Equity compensation is in the form of stock options granted from the Per-Se Technologies, Inc. Non-Employee Director Stock Option Plan, as amended. Initial Grants are made as of the date of first election or appointment to the Board. Annual Grants are made as of the date of the Annual Meeting of the Board and are for services rendered during the previous Board Year. Any person elected to the Board during a Board Year [may] receive a prorated portion of the Annual Grant based on the number of months served in that Board Year. Deferral of Compensation. The terms and conditions upon which cash compensation may be deferred under the plan are set forth in the Deferred Stock Credit Plan and the Deferred Stock Unit Plan. Initial deferred compensation elections for new Directors must be made within 30 days of election or appointment to the Board. Deferred compensation elections thereafter will be accepted once per year during the 30 days prior to the Annual Board Meeting and will be effective for compensation paid with respect to the following Board Year. 3 EX-10.43 6 g74880ex10-43.txt AMENDED NON-EMPLOYEE DIRECTOR DEFERRED STOCK EXHIBIT 10.43 FIRST AMENDMENT TO MEDAPHIS CORPORATION NON-EMPLOYEE DIRECTOR DEFERRED STOCK CREDIT PLAN THIS FIRST AMENDMENT ("First Amendment") to the Medaphis Corporation Non-Employee Director Deferred Stock Credit Plan (the "Stock Credit Plan") is made and executed this 6th day of December, 2001, to be effective as of May 2, 2002. WHEREAS, Per-Se Technologies, Inc., a Delaware corporation formerly known as Medaphis Corporation (the "Company"), has previously adopted the Stock Credit Plan; and WHEREAS, the Board of Directors of the Company has duly authorized an amendment of the Stock Credit Plan to change the name to the Per-Se Technologies, Inc. Non-Employee Director Stock Credit Plan and to permit the rollover of plan account balances to the newly-adopted Per-Se Technologies, Inc. Deferred Stock Unit Plan. NOW, THEREFORE, pursuant to a resolution of the Board of Directors of the Company dated December 6, 2001, in accordance with Section X of the Stock Credit Plan, the Stock Credit Plan is hereby amended as follows. 1. CHANGE OF PLAN NAME. Section I. M. of the Stock Credit Plan is hereby deleted in its entirety and replaced by the following: "M. "Plan" means the Per-Se Technologies, Inc. Non-Employee Director Deferred Stock Credit Plan." 2. ROLLOVER OF ACCOUNT BALANCES. A new Section 6.4 is hereby added to the Stock Credit Plan to read as follows: "6.4 Effective as of October 1, 2001, and subject to the approval of the stockholders of the Company at the 2002 Annual Meeting of Stockholders, the Board of Directors of the Company adopted the Per-Se Technologies, Inc. Deferred Stock Unit Plan (the "Stock Unit Plan"), in which non-employee directors of the Company and certain selected key employees are permitted to defer compensation in the form of deferred "stock units" each of which is deemed to be equivalent to one share of Common Stock. At a designated future date selected by the participant, the stock units accumulated in the participant's account under the Stock Unit Plan will be distributed in the form of Company Stock and will be taxable to the participant at that time based on the fair market value of the Common Stock. Notwithstanding anything to the contrary herein, if a Member elects to participate in the Stock Unit Plan, his entire Account balance under this Stock Credit Plan as of that date will automatically rollover to an account for such Member under the Stock Unit Plan (the "Rollover Account"). In that case, the hypothetical number of shares of Common Stock credited to his account under this Stock Credit Plan as of that date will be converted to stock units on a one-for-one basis and credited to his Rollover Account under the Stock Unit Plan. The Member's most recent election under this Stock Credit Plan as to the date for payment and method of payment (single distribution or installments) shall continue to apply with respect to his Rollover Account under the Stock Unit Plan unless changed by the Member in accordance with the Stock Unit Plan. From and after such rollover event, the Member shall cease to be eligible to participate in this Stock Credit Plan." 3. EFFECT OF AMENDMENT. Except as specifically amended by this First Amendment, the Stock Credit Plan shall remain in full force and effect as prior to this First Amendment. IN WITNESS WHEREOF, the Company has caused this First Amendment to be duly executed as of the date first above written. ATTEST: PER-SE TECHNOLOGIES, INC. /s/ PAUL J. QUINER By: /s/ PHILIP M. PEAD - --------------------------- -------------------------------------- Paul J. Quiner Philip M. Pead Secretary President and Chief Executive Officer 2 EX-10.44 7 g74880ex10-44.txt DEFERRED STOCK UNIT PLAN EXHIBIT 10.44 PER-SE TECHNOLOGIES, INC. DEFERRED STOCK UNIT PLAN Effective as of October 1, 2001 PER-SE TECHNOLOGIES, INC. DEFERRED STOCK UNIT PLAN Per-Se Technologies, Inc. ("Per-Se") hereby establishes the Per-Se Technologies, Inc. Deferred Stock Unit Plan (the "Plan") effective as of October 1, 2001, subject to approval of the Plan by the stockholders of Per-Se at the 2002 Annual Meeting of Stockholders. Per-Se intends for this Plan to provide its Non-Employee Directors (as that term is defined in Article I) and a select group of key employees of the Company (as that term is defined in Article I) with an opportunity to defer income in consideration of the valuable services provided by such persons to the Company and to further align the interests of such persons with those of the Company's stockholders by encouraging ownership of Per-Se's common stock. The Company intends that the Plan shall not be treated as a "funded" plan for purposes of either the Code or the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). ARTICLE I DEFINITIONS Defined terms used in this Plan shall have the meanings set forth below: 1.01 Account "Account" means the memorandum account maintained for each Participant to which shall be credited all Deferred Amounts elected by a Participant, all Enhancement Bonus made on behalf of a Participant, and all dividend credits with respect to Stock Units in the Account, and other adjustments thereto. 1.02 Affiliated Entity "Affiliated Entity" means any legal entity that is treated as a single employer with Per-Se pursuant to Code sections 414(b), 414(c), 414(m) or 414(o). 1.03 Board "Board" means the Board of Directors of Per-Se. 1.03 Cause "Cause" as a reason for an employee Participant's termination of employment shall have the meaning assigned such term in the employment agreement, if any, between such Participant and the Company or an affiliated company, provided, however that if there is no such employment agreement in which such term is defined, "Cause" shall mean any of the following acts by the Participant, as determined by the Committee: (i) the Participant materially breaches any of the terms or conditions set forth in an agreement between the Company and the Participant, (ii) the Participant commits an act materially 1 of 17 detrimental to the business or reputation of the Company; or (iii) the Participant commits or is convicted of any crime involving fraud, deceit or moral turpitude. 1.04 Change in Control "Change in Control" means and includes the occurrence of any one or more of the following events: (i) a consolidation or merger of Per-Se with or into any other corporation, or any other entity or person, other than a wholly-owned subsidiary of Per-Se, excluding any transaction in which the shares of Per-Se's common stock outstanding immediately prior to any such consolidation or merger represents immediately thereafter more than 50% of the combined voting power of the resulting entity after the transaction; (ii) any corporate reorganization, including an exchange offer, in which Per-Se shall not be the continuing or surviving entity resulting from such reorganization, excluding any transaction in which the shares of Per-Se's common stock outstanding immediately prior to any such reorganization represents immediately thereafter more than 50% of the combined voting power of the resulting entity after the transaction; or (iii) the sale of a substantial portion of Per-Se's assets, which shall be deemed to occur on the date that any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from Per-Se that (a) have a total fair market value equal to more than 50% of the total fair market value of all the assets of Per-Se immediately prior to such acquisition or acquisitions, or (b) represents a majority of the common stock of any (1) subsidiary of Per-Se, the revenues of which, in the most recent fiscal year, represent more than 75% of the consolidated gross revenues of Per-Se and its subsidiaries. Notwithstanding the foregoing, a transfer of assets or common stock in a subsidiary by Per-Se will not be treated as a sale of a substantial portion of Per-Se's assets if the assets are transferred to an entity, 50% or more of the total value or voting power of which is owned, directly or indirectly, by Per-Se. 1.05 Code "Code" means the Internal Revenue Code of 1986, as amended. 1.06 Committee "Committee" means the Compensation Committee of the Board. 1.07 Company "Company" means (i) Per-Se, and (ii) any Affiliated Entity that, with approval of the Board, has adopted the Plan. 2 of 17 1.08 Compensation "Compensation" in the case of a Non-Employee Director means the director's committee, meeting and annual retainer fees otherwise payable to such director during his current term as a director. "Compensation" in the case of an employee Participant means incentive compensation payable under the Per-Se Technologies 2001 Incentive Plan or any successor annual incentive compensation plan or plans. The Committee may from time to time designate other forms of remuneration that are available for deferral into the Plan. 1.09 Deferred Amounts "Deferred Amounts" means the amount of a Participant's Compensation that he elects to defer and have allocated to his Account pursuant to Section 3.01. 1.10 Deferred Amount Stock Units "Deferred Amount Stock Units" means Stock Units credited to a Participant's Account that result from (i) the conversion to Stock Units of any Deferred Amounts in accordance with Section 4.01, or (ii) the conversion to additional Stock Units of dividend equivalents payable with respect to such Deferred Amount Stock Units pursuant to Section 4.02. 1.11 Disability "Disability" means the mental or physical incapacity or disability of a Participant that renders him unable to perform his duties to the Company, as reasonably determined by the Committee. The Committee may require such medical or other evidence as it deems necessary to judge the nature and permanency of the Participant's condition. A Participant's inability adequately to perform such services for a period of 60 consecutive days will be conclusive evidence of such mental or physical incapacity or disability, unless such inability adequately to perform such services is pursuant to a mental or physical incapacity or disability covered by the Family Medical Leave Act, in which case such 60-day period shall be extended to a one hundred and 120-day period. 1.12 Election Agreement "Election Agreement" means an application for participation in the Plan, execution of which by a Participant is required under Article III for the Participant to elect Deferred Amounts. 1.13 Enhancement Bonus "Enhancement Bonus" means the allocations to an employee Participant's Account made pursuant to Sections 3.02 and 4.01. 3 of 17 1.14 Enhancement Bonus Stock Units "Enhancement Bonus Stock Units" means Stock Units credited to an employee Participant's Account that result from (i) the conversion to Stock Units of any Enhancement Bonus in accordance with Section 4.01, or (ii) the conversion to additional Stock Units of dividend equivalents payable with respect to such Enhancement Bonus Stock Units pursuant to Section 4.02. 1.15 Fair Market Value "Fair Market Value", on any date, means the average closing price, for the five business days prior to the date for which the determination is being made, of a share of Stock on the Nasdaq Stock Market, or on the principal national securities exchange on which such shares are listed, or in the event such shares are not listed, the value established by the Committee in good faith. 1.16 Good Reason "Good Reason" for a Participant's termination of employment shall have the meaning assigned such term in the employment agreement, if any, between such Participant and the Company or an affiliated company, provided, however that if there is no such employment agreement in which such term is defined, "Good Reason" shall mean any of the following acts by the Company without the consent of the Participant: (i) a reduction of greater than 10% in the Participant's annual base salary; (ii) a change in the Participant's work location to a work location more than 50 miles from his existing work location, except for required travel on the Company's business to an extent consistent with the Participant's then current business travel obligations; (iii) an assignment to any duties inconsistent in any material adverse respect with the Participant's current position, duties or responsibilities, other than an insubstantial and inadvertent act that is remedied by the Company promptly after receipt of notice thereof given by the Participant; or (iv) the failure by the Company to continue any material benefit or compensation plan in which the Participant is participating unless the Participant is provided with comparable benefits. 1.17 Non-Employee Director "Non-Employee Director" means any member of the Board who is not a common law employee of the Company or any other affiliated entity of Per-Se. 1.18 Non-Employee Director Deferred Stock Credit Plan "Non-Employee Director Deferred Stock Credit Plan" means the Non-Employee Director Deferred Stock Credit Plan maintained by Per-Se, effective as of November 19, 1997, as amended. 4 of 17 1.19 Participant "Participant" means any Non-Employee Director who has elected to participate in the Plan and any eligible employee selected to participate in the Plan pursuant to Section 2.01 and who has elected to participate in the Plan. 1.20 Plan "Plan" means this Per-Se Technologies, Inc. Deferred Stock Unit Plan, as amended from time to time. 1.21 Plan Year "Plan Year" means each annual period with respect to which Compensation may be earned. The Plan Year shall be the calendar year with respect to employee Participants, and shall be the approximate twelve-month periods between annual meetings of the stockholders of Per-Se with respect to Participants who are Non-Employee Directors. 1.22 Retirement "Retirement" of an employee Participant means his termination of employment with the Company or an Affiliated Entity after attaining any normal or early retirement age specified in any pension, profit sharing or other retirement program sponsored by the Company or such Affiliated Entity, or, in the event of the inapplicability thereof with respect to the person in question, as determined by the Committee in its reasonable judgment. "Retirement" of a Non-Employee Director means his retirement from the Board after having attained the mandatory retirement age for directors, as may be applicable from time to time, or, if there is no such mandatory retirement age, as determined by the Committee in its reasonable judgment. 1.23 Stock "Stock" means the $0.01 par value common stock of Per-Se. 1.24 Stock Units "Stock Units" means investment units, each of which is deemed to be equivalent to one share of Stock. Stock Units shall include the "Deferred Amount Stock Units" and the "Enhancement Bonus Stock Units." 5 of 17 ARTICLE II ELIGIBILITY AND PARTICIPATION 2.01 Eligibility and Participation Non-Employee Directors are automatically eligible to participate in the Plan. The Committee shall from time to time in its sole discretion select those employees of the Company who are eligible to participate in the Plan from those employees who are among a select group of key employees. 2.02 Election to Participate In order to participate in the Plan, Participants shall complete the election procedure specified by the Committee. The election procedure may include form(s) for the Participant to (a) designate his Beneficiary (pursuant to Article V), (b) designate Deferred Amounts by entering into an Election Agreement with the Company (pursuant to Article III), (c) select a payment option and date for the eventual distribution of his Account (pursuant to Article III), and (d) provide such other information as the Committee may reasonably require. 2.03 Failure of Eligibility The Committee shall have the authority to determine that an employee Participant is no longer eligible to participate in the Plan. No Enhancement Bonus shall be made, no Deferred Amounts shall be withheld from a Participant's Compensation, and no dividend amounts shall be credited to a Participant's Account after he ceases to be eligible to participate in the Plan. The determination of the Committee with respect to the termination of participation in the Plan shall be final and binding on all parties affected thereby. Any benefits accrued hereunder, however, at the time the Participant becomes ineligible to continue participation, shall be distributable in accordance with the provisions of the Plan. ARTICLE III CONTRIBUTION DEFERRALS 3.01 Participant Deferrals (a) Elections to Defer. A Participant may elect to defer Compensation by filing the appropriate Election Agreement with the Committee's designee. A Non-Employee Director may elect to defer up to 100% of his Compensation, in 25% increments. An employee Participant may elect to defer up to 50% of his eligible Compensation, in 1% increments. Deferred Amounts shall be deducted through payroll withholding from the Participant's cash Compensation payable by the Company. Deferred Amounts shall be credited to the Participant's Account in accordance with Article IV. 6 of 17 (b) Initial Enrollment. When a person first becomes eligible to participate in the Plan, pursuant to Section 2.01, the Committee's designee shall provide him with an election form, which, when properly completed and timely returned to the Committee's designee shall constitute an Election Agreement. The Election Agreement shall be effective immediately upon receipt by the Committee's designee; provided, however, that (i) in the case of Non-Employee Directors, the Election Agreements relating to any Compensation must be completed and returned prior to first day of the Plan Year with respect to which such Compensation will be earned (or in the case of a Non-Employee Director's initial term of office, no later than 30 days after such initial term has begun), and (ii) in the case of employee Participants, Election Agreements must be completed and returned not less than 30 days in advance of the end of the Plan Year for which such Compensation will be earned. The Committee from time to time may impose any earlier deadlines for the submission of Election Agreements as it deems appropriate or advisable. In the Election Agreement, the Participant shall indicate the beginning date for distribution of his Account for such Plan Year. The selected date may be either the date of the Participant's termination of service or an anniversary of the date of deferral, which shall be at least the second anniversary in the case of Deferred Amount Stock Units and at least the fifth anniversary in the case of Enhancement Bonus Stock Units. The Election Agreement shall also indicate one of the following methods of distribution: (i) one installment of the full vested balance of Stock Units in the Account as of the distribution date, or (ii) five or ten annual installments beginning on the distribution date. (c) Continuing Elections. A Participant may enter into a separate Election Agreement for each Plan Year. An Election Agreement filed with respect to one Plan Year shall remain effective for all following Plan Years during the term of the Plan, unless (i) a new Election Agreement with respect to a subsequent Plan Year is timely filed with the Committee's designee, (ii) the Committee's designee is notified in writing that the Participant does not which participate in the Plan for a subsequent Plan Year, or (iii) the Participant becomes ineligible to participate in the Plan. (d) Rollover Deferrals from the Non-Employee Director Deferred Stock Credit Plan. If a Non-Employee Director elects to participate in this Plan, the balance, if any, in such Non-Employee Director's account under the Non-Employee Director Deferred Stock Credit Plan will be automatically rolled over to his Account under this Plan (the "Rollover Account"). In that case, the hypothetical number of shares of Stock credited to his account under the Non-Employee Director Deferred Stock Credit Plan as of that date will be converted to Stock Units on a one-for-one basis and credited to his Rollover Account under this Plan. The 7 of 17 Non-Employee Director's most recent election under the Non-Employee Director Deferred Stock Credit Plan as to the date for payment and method of payment (single distribution or installments) shall continue to apply with respect to such Rollover Account unless changed by the Non-Employee Director in accordance with Section 3.01(e) below. (e) Changing a Prior Election. A Participant may, by filing a new Election Agreement with the Committee's designee, change his election as to distribution date and/or method of distribution for the Account with respect to a Plan Year. Such new Election Agreement shall not be effective until one year after it is properly filed with the Committee's designee. Participants are limited to one changed Election Agreement for each separate Plan Year and one changed Election Agreement for the Participant's Rollover Account. (f) Participant Becomes Ineligible. A Participant's Election Agreement shall be canceled immediately when he becomes ineligible to participate in the Plan. 3.02 Enhancement Bonus The Company shall grant to an employee Participant (but not to a participant who is a Non-Employee Director) an Enhancement Bonus equal to 25% of the Participant's Deferred Amount for a Plan Year. The Committee may from time to time in its sole discretion designate such other Enhancement Bonus contributions as the Committee deems appropriate. The Enhancement Bonus shall be converted to Stock Units and credited to the Participant's Account as specified in Article IV. ARTICLE IV STOCK UNITS 4.01 Conversion of Deferred Amounts and Enhancement Bonus to Stock Units All Deferred Amounts and Enhancement Bonus shall be converted to Stock Units and credited to Participants' Accounts on the later of (i) the date that the Deferred Amounts are deducted, through payroll withholding, from the Participant's cash Compensation payable by the Company, or (ii) the date of the annual meeting of stockholders of Per-Se at which the Plan is approved by the stockholders. The number of Stock Units to be credited shall be determined by dividing the Deferred Amount and Enhancement Bonus by the Fair Market Value of one share of Stock as of the date on which the amount is credited to the Participant's Account. 4.02 Conversion of Dividend Equivalents to Stock Units Participants' Accounts will be credited with additional Stock Units as of the payment date of any cash dividends declared on the Stock. The number of additional Stock Units 8 of 17 credited to an Account shall be determined by dividing (i) the product of the per-share dividend amount times the number of Stock Units credited to the Account as of the record date for such dividend, by (ii) the Fair Market Value of one share of Stock as of the dividend payment date. Non-cash dividends shall not be converted to Stock Units or credited to Accounts, except as provided in Section 8.08 hereof. For purposes of the Plan, the deferral date and the vesting date of Stock Units converted from dividend equivalents shall be deemed to the same as the applicable deferral date and vesting date of the underlying Stock Units with respect to which such dividend equivalents were credited. 4.03 Voting Participants shall have no right to vote any Stock Units prior to the date on which such Stock Units are subject to distribution and shares of Stock are distributed therefor. 4.04 No Other Investment Alternatives Nothing contained in this Plan shall be construed to give any Participant any power or control to make investment decisions with respect to Deferred Amounts other than the conversion to Stock Units as provided in this Article IV. Nothing contained in the Plan shall be construed to require the Company or the Committee to fund any Participant's Account. ARTICLE V DISTRIBUTIONS 5.01 Vesting (a) A Participant shall be fully vested at all times in the Deferred Amount Stock Units credited to his Account. (b) Except as provided below in this Article V, an employee Participant shall vest in the Enhancement Bonus Stock Units credited to his Account as follows: 20% on each of the first five anniversaries of the date on which such Enhancement Bonus Stock Units were credited to his Account, except that Stock Units converted from dividend equivalents shall vest at the same time as the corresponding Enhancement Bonus Stock Units vest. (c) If an employee Participant is terminated without Cause or if his employment is terminated due to his death, Disability, Retirement or resignation for Good Reason, then any unvested portion of his Account shall be immediately vested. (d) If an employee Participant is terminated for Cause or resigns without Good Reason, then no further vesting of unvested portions of his Account shall occur 9 of 17 and unvested portions of his Account shall be forfeited immediately. (e) The effect of this Section 5.01 shall be limited to determining the consequences of a termination of service and nothing herein shall restrict or otherwise interfere with Company's discretion with respect to termination of any employee or director. (f) Change in Control. If the Plan is terminated after a Change in Control, all Participants shall thereupon become 100% vested in their Accounts. 5.02 Distributions During Service (a) Timing. The timing of the distribution shall be pursuant to the terms of the Participant's applicable Election Agreement(s). Except as otherwise provided in Section 5.03, distributions shall begin at a date designated by the Participant in the Election Agreement. (b) Form of Distribution. The Participant's entire vested Account shall be paid in whole shares of Stock, with any fractional shares paid in cash, delivered in the number of installments designated pursuant to the Election Agreement(s), except as otherwise provided in Section 5.03. 5.03 Distributions After Service (a) Death, Resignation without Good Reason or Termination for Cause. Regardless of the distribution election in the Participant's Election Agreement(s), the Participant's entire vested Account shall be distributed as soon as administratively feasible after the Participant's death, resignation without Good Reason or termination for Cause. The Account shall be paid in whole shares of Stock, with any fractional shares paid in cash, delivered in one installment. (b) Termination for Any Other Reason. In the case of the Participant's termination as a director or employee for any other reason (including, for example, Retirement, Disability, termination without Cause, resignation for Good Reason, or expiration of term in office as a director), the timing of the distribution shall be pursuant to the terms of the Participant's applicable Election Agreement(s). The Account shall be paid in whole shares of Stock, with any fractional shares paid in cash, delivered in the number of installments designated in the applicable Election Agreement(s). (c) Change in Control. Upon the termination of a Participant for any reason after a Change in Control, the Participant's entire vested Account shall be distributed within three months after the Participant terminates service with the Company. The Account shall be paid in whole shares of Stock, with any fractional shares paid in cash, delivered in one installment. 10 of 17 5.04 Distributions After Participant's Death (a) Each Participant shall designate one or more persons, trusts or other entities as his beneficiary (the "Beneficiary") to receive any amounts distributable under the Plan at the time of the Participant's death. In the absence of an effective beneficiary designation as to part or all of a Participant's interest in the Plan, such amount shall be distributed to the Participant's surviving spouse, if any, otherwise to the personal representative of the Participant's estate. (b) A beneficiary designation may be changed by the Participant at any time and without the consent of any previously designated Beneficiary. If a Participant has designated his spouse as a Beneficiary or as a contingent Beneficiary, and the Participant and that spouse subsequently divorce, then such beneficiary designation shall be void and of no effect with respect to such spouse on the day such divorce is final. (c) When a Participant dies, his remaining Account balance shall be distributed to his Beneficiary as soon as administratively possible after his death, regardless of the payment schedule the Participant elected, and regardless of whether installment payments had begun. Such distribution shall be paid in whole shares of Stock, with any fractional shares paid in cash. 5.05 Financial Hardship The Committee may, in its sole discretion, accelerate the distribution to a Participant of an amount reasonably necessary to handle a severe financial hardship of a sudden and unexpected nature due to causes not within the control of the Participant. The determination of whether an unforeseeable hardship has occurred, as well as the application of the facts making such determination, shall be made by the Committee in its sole and absolute discretion and shall not be overturned unless such decision is arbitrary and capricious. All financial hardship distributions shall be made in cash in a lump sum, by the conversion of Stock Units to cash based on the Fair Market Value of the Stock on the business day immediately preceding the date of the distribution. 5.06 Withholding At the time of deferral or distribution, the Company shall withhold any taxes or other amounts that are required to be withheld pursuant to any applicable law. The Committee may direct the Company to withhold additional amounts from any payment under the Plan, either because the Participant so requested or to repay the Participant's debt or obligation to the Company. 11 of 17 ARTICLE VI ADMINISTRATION 6.01 The Committee - Plan Administrator The Plan shall be administered by the Committee or, at the discretion of the Board from time to time, the Plan may be administered by the Board. During any time that the Board is acting as administrator of the Plan, it shall have all the powers of the Committee hereunder, and any reference herein to the Committee (other than in this Section 6.01) shall include the Board. 6.02 Committee Powers The Committee shall have all discretion and powers necessary to administer the Plan, including, but not by way of limitation, full discretion and power to interpret the Plan, to determine the eligibility, status and rights of all persons under the Plan and, in general, to decide any dispute. The Committee shall direct the Company concerning distributions in accordance with the provisions of the Plan. The Committee's designee shall maintain all Plan records. 6.03 Organization of Committee The Committee shall adopt such rules as it deems desirable for the conduct of its affairs and for the administration of the Plan. It may appoint designees and/or agents (who need not be members of the Committee) to whom it may delegate such powers as it deems appropriate, except that the Committee shall determine any dispute. The Committee may make its determinations with or without meetings. The Committee may authorize one or more of its members, designees or agents to sign instructions, notices and determinations on its behalf. The action of a majority of the Committee's members shall constitute the action of the Committee. 6.04 Agent for Process Per-Se's General Counsel and Corporate Secretary shall be the agent of the Plan for service of all process. 6.05 Determination of Committee Final The decisions made by the Committee shall be final and conclusive on all persons. 12 of 17 ARTICLE VII AMENDMENT AND TERMINATION 7.01 Amendment The Board or the Committee may, at any time and from time to time, amend, modify or terminate the Plan without stockholder approval; provided, however, that the Board or Committee may condition any amendment or modification on the approval of stockholders of the Company if such approval is necessary or deemed advisable with respect to tax, securities or other applicable laws, policies or regulations. No amendment to the Plan shall adversely affect any benefit that has accrued on the effective date of such amendment, without the consent of the affected Participant(s). Each amendment of the Plan shall be in writing and shall be approved by the Committee and/or the Board. An officer of Per-Se to whom the Committee and/or the Board has delegated the authority to execute Plan amendments shall execute each such amendment. 7.02 Successors and Assigns; Termination of Plan The Plan is binding upon Per-Se and its successors and assigns. The Plan shall continue in effect from year to year unless and until terminated by the Board or the Committee. Any such termination shall operate only prospectively and shall not reduce any vested benefit that has accrued on the effective date of such termination. 7.03 Change in Control The Plan shall not be automatically terminated by a Change in Control, but the Plan shall be continued thereafter by such successor organization. All rights to amend, modify, suspend or terminate the Plan shall be transferred to the successor organization, effective as of the date of the Change in Control. ARTICLE VIII MISCELLANEOUS 8.01 Stock Subject to the Plan All benefits payable under the Plan shall be distributed in whole shares of Stock, with any fractional shares paid in cash. The shares of Stock to be distributed pursuant to the Plan shall be shares that have been previously issued and reacquired by the Company in public or private transactions. Subject to adjustment in accordance with the provisions of Section 8.08, the maximum number of shares of Stock that may be distributed pursuant to the Plan shall be 600,000 shares. In the event that any Stock Units granted under the Plan are forfeited by a Participant, the shares of Stock represented thereby shall not count against such maximum number of shares of Stock that may be distributed under the Plan. 13 of 17 8.02 Funding of Benefits -- No Fiduciary Relationship Benefits shall be distributed by the Company out of its general assets and no separate fund shall be established to secure payment. Nothing contained in the Plan shall be deemed to create any fiduciary relationship between the Company and the Participants. Notwithstanding anything herein to the contrary, to the extent that any person acquires a right to receive benefits under the Plan, such right shall be no greater than the right of any unsecured general creditor of the Company. Notwithstanding the foregoing, the Company may establish a grantor trust for the purpose of helping to defray the obligations under the Plan and to the extent that any payment is made from any such trust to a Participant or Beneficiary, such payment will be in satisfaction of the Company's obligations hereunder. 8.03 Right to Terminate Employment or Service as a Director The Company may terminate the employment or directorship of any Participant as freely and with the same effect as if the Plan were not in existence. 8.04 Inalienability of Benefits No Participant shall have the right to assign, transfer, hypothecate, encumber or anticipate his interest in any benefits under the Plan, nor shall the benefits under the Plan be subject to any legal process to levy upon or attach the benefits for payment for any claim against the Participant or his spouse or Beneficiary. If, notwithstanding the foregoing provision, any Participant's benefits are garnished or attached by the order of any court, the Company may bring an action for declaratory judgment in a court of competent jurisdiction to determine the proper recipient of the benefits to be distributed pursuant to the Plan. During the pendency of the action, any benefits that become distributable shall be paid into the court, as they become distributable, to be distributed by the court to the recipient it deems proper at the conclusion of the action. 8.05 Claims Procedure (a) Notice of Claim. Any Participant or Beneficiary, or the duly authorized representative of a Participant or Beneficiary, may file with the Committee a claim for a Plan benefit. Such a claim must be in writing on a form provided by the Committee and must be delivered in person or by mail, postage prepaid, to the Committee c/o Per-Se's General Counsel and Corporate Secretary, as agent for the Committee. Within 90 days after the receipt of such a claim, the Committee shall send to the claimant, by mail, postage prepaid, a notice of the granting or the denying, in whole or in part, of such claim, unless special circumstances require an extension of time for processing the claim. In no event may the extension exceed 90 days from the end of the initial period. If such an extension is 14 of 17 necessary, the claimant will be given a written notice to this effect prior to the expiration of the initial 90 day period. The Committee shall have full discretion to deny or grant a claim in whole or in part in accordance with the terms of the plan. If notice of the denial of a claim is not furnished in accordance with this Section, the claim shall be denied and the claimant shall be permitted to exercise his or her right to review pursuant to Sections 8.05(c) and 8.05(d) of the Plan, as applicable. (b) Action on Claim. The Committee shall provide to every claimant who is denied a claim for benefits a written notice setting forth, in a manner calculated to be understood by the claimant: (i) The specific reason or reasons for the denial; (ii) A specific reference to the pertinent Plan provisions on which the denial is based; (iii) A description of any additional material or information necessary of the claimant to perfect the claim and an explanation of why such material or information is necessary; and (iv) An explanation of the Plan's claim review procedure. (c) Review of Denial. Within 60 days after the receipt by a claimant of written notification of the denial (in whole or in part) of a claim, the claimant or the claimant's duly authorized representative, upon written application to the Committee, delivered in person or by certified mail, postage prepaid, may review pertinent documents and may submit to the Committee, in writing, issues and comments concerning the claim. (d) Decision on Review. Upon the Committee's receipt of a notice of a request for review, the Committee shall make a prompt decision on the review and shall communicate the decision on review in writing to the claimant. The decision on review shall be written in a manner calculated to be understood by the claimant and shall include specific reasons for the decision and specific references to the pertinent Plan provisions on which the decision is based. The decision on review shall be made not later than 60 days after the Committee's receipt of a request for a review, unless special circumstances require an extension of time for processing, in which case a decision shall be rendered not later than 120 days after receipt of the request for review. If an extension is necessary, the claimant shall be given written notice of the extension by the Committee prior to the expiration of the initial 60-day period. If notice of the decision on review is not furnished in accordance with this Section, the claim shall be denied on review. 15 of 17 8.06 Disposition of Unclaimed Distributions Each Participant must file with the Company from time to time in writing his post office address and each change of post office address. Any communication, statement or notice addressed to a Participant at his last post office address on file with the Company, or if no address is filed with the Company, then at his last post office address as shown on the Company's records, will be binding on the Participant and his Beneficiary for all purposes of the Plan. The Company shall not be required to search for or locate a Participant or his Beneficiary. Whenever the Committee cannot, within a reasonable time after payments are to commence, locate any person to or for the benefit of whom such payments are to be made, after making a reasonable effort to locate such person, the Committee may direct that the payment and any remaining payments otherwise due to the Participant be cancelled on the records of the Plan, except that in the event the Participant later notifies the Committee of his whereabouts and requests the payments due to him under the Plan, the Company shall re-credit the Participant's account and provide for payment of the re-credited amount to the Participant as soon as administratively feasible. 8.07 Distributions Due Infants or Incompetents If any person entitled to a distribution under the Plan is an infant, or if the Committee determines that any such person is incompetent by reason of physical or mental disability, whether or not legally adjudicated an incompetent, the Committee shall have the power to cause the distributions becoming due to such person to be made to another for his benefit, without responsibility of the Committee to see to the application of such distributions. Distributions made pursuant to such power shall operate as a complete discharge of the Company and the Committee. 8.08 Equitable Adjustments In the event of an increase or reduction in the number of shares of Stock, or any change (including, but not limited to, a change in value) in the shares of Stock or exchange of shares of Stock for a different number or kind of shares or other securities of Per-Se, by reason of a stock dividend, stock split, combination or exchange of shares, reclassification, recapitalization, merger, consolidation, reorganization, or the distribution of property of Per-Se (including interests in subsidiaries) to stockholders of record pursuant to spin-offs, split-ups, the issuance of warrants or other rights or debentures, or extraordinary dividends, or otherwise, the Committee will adjust the number of Stock Units credited to a Participant's Account under the Plan in the same manner as a share of Stock is adjusted. In the event that the change of capitalization involves the issuance of cash, securities or property to the holders of Stock of record, an amount equivalent to the cash and the fair market value of the property and securities distributed with respect to a share of Stock will be credited to each Participant's Account for each Stock Unit held in the Account as of the record date for 16 of 17 such distribution. All such amounts shall be converted to additional Stock Units as of the date of such distribution. The Committee may make such other equitable adjustments to outstanding Accounts, whether or not in pay status, as it shall determines to be equitable. 8.09 Use and Form of Words When any words are used herein in the masculine gender, they shall be construed as though they were also used in the feminine gender in all cases where they would so apply, and vice versa. Whenever any words are used herein in the singular form, they shall be construed as though they were also used in the plural form in all cases where they would so apply, and vice versa. 8.10 Headings Headings of Articles and Sections are inserted solely for convenience and reference, and constitute no part of the Plan. 8.11 Governing Law The Plan and all Election Agreements shall be construed in accordance with the Code and, to the extent applicable, the laws of the State of Georgia excluding any conflicts-of-law provisions. The foregoing is hereby acknowledged as being the Per-Se Technologies, Inc. Deferred Stock Unit Plan, as adopted by the Board of Directors of Per-Se on December 6, 2001, to be effective as of October 1, 2001, subject to approval by the stockholders of Per-Se at the 2002 Annual Meeting of Stockholders. ATTEST: PER-SE TECHNOLOGIES, INC. /s/ PAUL J. QUINER /s/ PHILIP M. PEAD - --------------------------- ----------------------------------------- Paul J. Quiner Philip M. Pead Corporate Secretary President and Chief Executive Officer 17 of 17 EX-21 8 g74880ex21.txt SUBSIDIARIES OF REGISTRANT EXHIBIT 21 SUBSIDIARIES OF REGISTRANT
STATE OF INCORPORATION SUBSIDIARY OR ORGANIZATION - ---------- ---------------------- Health Data Services, Inc.* Ohio IIH, LLC Delaware Imonics Corporation Georgia Knowledgeable Healthcare Solutions, Inc.* Alabama Patient Account Management Services, Inc.* Ohio Per-Se Transaction Services, Inc.* Indiana PST Products, Inc.* California PST Services, Inc.* Georgia
- --------------- * Each of these subsidiaries also does business under the name "Per-Se Technologies." EX-23.1 9 g74880ex23-1.txt CONSENT OF ERNST & YOUNG LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the registration statements and related prospectuses listed below of Per-Se Technologies, Inc. of our reports dated February 4, 2002, with respect to the consolidated financial statements and schedule of Per-Se Technologies, Inc. included in the Annual Report (Form 10-K) for the year ended December 31, 2001: 1. Registration Statement Number 33-46847 on Form S-8 2. Registration Statement Number 33-64952 on Form S-8 3. Registration Statement Number 33-67752 on Form S-8 4. Registration Statement Number 33-71556 on Form S-8 5. Registration Statement Number 33-88442 on Form S-8 6. Registration Statement Number 33-88444 on Form S-8 7. Registration Statement Number 33-90874 on Form S-8 8. Registration Statement Number 33-90876 on Form S-8 9. Registration Statement Number 33-95742 on Form S-8 10. Registration Statement Number 33-95746 on Form S-8 11. Registration Statement Number 33-95748 on Form S-8 12. Registration Statement Number 333-03213 on Form S-8 13. Registration Statement Number 333-07201 on Form S-8 14. Registration Statement Number 333-07203 on Form S-8 15. Registration Statement Number 333-07627 on Form S-8 16. Registration Statement Number 333-26113 on Form S-8 17. Registration Statement Number 333-26289 on Form S-8 18. Registration Statement Number 333-26291 on Form S-8 19. Registration Statement Number 333-37150 on Form S-8 20. Registration Statement Number 333-37152 on Form S-8 21. Registration Statement Number 333-46489 on Form S-8 22. Registration Statement Number 333-60729 on Form S-8 23. Registration Statement Number 333-65016 on Form S-8 24. Registration Statement Number 333-78167 on Form S-8 25. Registration Statement Number 333-78775 on Form S-3 26. Registration Statement Number 333-94151 on Form S-3 /s/ Ernst & Young LLP Atlanta, Georgia March 26, 2002 EX-23.2 10 g74880ex23-2.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 33326289, 33326291, 33326113, 3307627, 33307201, 33307203, 33303213, 3395742, 3395746, 3395748, 3390874, 3390876, 3388444, 3388442, 3371556, 3367752, 3364952, 3346847, 33346489, 33360729, 33394151, 3378167, 33378775, 33337150, 33337152, 33365016) of Per-Se Technologies, Inc. of our report dated February 5, 2001 relating to the financial statements, which appears in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated February 5, 2001 relating to the financial statement schedule, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLP Atlanta, Georgia March 25, 2002 -----END PRIVACY-ENHANCED MESSAGE-----