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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(AMENDMENT NO. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 20, 2001 (June 5, 2001)
AMERICAN HEALTHWAYS, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 000-19364 62-1117144
(State or other jurisdiction of (Commission (I.R.S. employer
incorporation or organization) File Number) identification no.)
3841 GREEN HILLS VILLAGE DRIVE
NASHVILLE, TENNESSEE 37215
(Address of principal executive offices) (Zip code)
(615) 665-1122
(Registrant's Telephone Number, Including Area Code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
This Form 8-K/A includes the following financial information required
to be filed pursuant to Item 7 (Financial Statements, Pro Forma Information and
Exhibits) of the Registrant's Current Report on Form 8-K dated June 15, 2001.
(a) Financial Statements of Businesses Acquired:
1. Independent Auditors' Report.
2. Balance Sheets of Empower Health, Inc. as of August 31, 2000
and May 31, 2001 (unaudited).
3. Statements of Operations of Empower Health, Inc. for the
period from March 21, 2000 (date of incorporation) to August
31, 2000, and for the nine months ended May 31, 2001
(unaudited).
4. Statement of Changes in Stockholders' Equity of Empower
Health, Inc. for the period from March 21, 2000 (date of
incorporation) to August 31, 2000, and for the nine months
ended May 31, 2001 (unaudited).
5. Statements of Cash Flows of Empower Health, Inc. for the
period from March 21, 2000 (date of incorporation) to August
31, 2000, and for the nine months ended May 31, 2001
(unaudited).
6. Notes to Financial Statements.
(b) Pro Forma Information:
1. Unaudited pro forma combined balance sheet of American
Healthways, Inc. as of May 31, 2001 and statements of
operations for the year ended August 31, 2000 and the nine
months ended May 31, 2001.
2. Notes to unaudited pro forma combined balance sheet and
statements of earnings.
(c) Exhibits:
23.1 Consent of Deloitte & Touche LLP
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Empower Health, Inc.
Nashville, Tennessee
We have audited the accompanying balance sheet of Empower Health, Inc. (the
"Company"), as of August 31, 2000 and the related statements of operations,
changes in stockholders' equity and cash flows for the period from March 21,
2000 (date of incorporation) to August 31, 2000. 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 of America. 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 accompanying financial statements present fairly, in all
material respects, the financial position of Empower Health, Inc. as of August
31, 2000, and the results of its operations and its cash flows for the period
from March 21, 2000 (date of incorporation) to August 31, 2000 in conformity
with accounting principles generally accepted in the United States of America.
/s/ DELOITTE & TOUCHE LLP
Nashville, Tennessee
August 1, 2001
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EMPOWER HEALTH, INC.
BALANCE SHEETS
AUGUST 31, MAY 31,
2000 2001
---------- -----------
(UNAUDITED)
ASSETS
Property and equipment, net (note 2) .................................. $ 3,808 $ 3,322
--------- -----------
Total assets ............................................ $ 3,808 $ 3,322
========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued liabilities .............................................. $ 272,426 $ 90,118
--------- -----------
Total current liabilities ............................... 272,426 90,118
--------- -----------
Commitments and contingencies
Stockholders' equity (note 4):
Common stock, $.01 par value, 1,000 shares authorized; 0 and
999 (unaudited) shares issued and outstanding, respectively ... -- 10
Additional paid-in capital ....................................... 498,315 2,111,887
Retained earnings (deficit) ...................................... (766,933) (2,198,693)
--------- -----------
Total stockholders' equity (deficit) .................... (268,618) (86,796)
--------- -----------
Total liabilities and stockholders' equity (deficit) .... $ 3,808 $ 3,322
========= ===========
See accompanying notes to the financial statements.
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EMPOWER HEALTH, INC.
STATEMENTS OF OPERATIONS
PERIOD FROM
MARCH 21, 2000 NINE MONTHS
(DATE OF INCORPORATION) ENDED
TO AUGUST 31, MAY 31,
2000 2001
----------------------- -----------
(UNAUDITED)
Revenues ............................. $ -- $ --
Operating expenses:
Contract labor .................. 51,852 94,972
Consulting fees ................. 647,064 1,134,546
Travel and entertainment ........ 63,491 67,625
Legal ........................... 654 104,720
Other operating expenses ........ 3,754 30,391
Depreciation and amortization ... 118 589
--------- -----------
Total operating expenses .... 766,933 1,432,843
--------- -----------
Loss from operations ........ (766,933) (1,432,843)
Interest income ...................... -- 1,083
--------- -----------
Net loss ............................. $(766,933) $(1,431,760)
========= ===========
See accompanying notes to the financial statements.
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EMPOWER HEALTH, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
ADDITIONAL RETAINED
COMMON PAID-IN EARNINGS
STOCK CAPITAL (DEFICIT) TOTAL
------ ---------- ----------- -----------
Balance, March 21, 2000
(date of incorporation) ........... $-- $ -- $ -- $ --
Capital contribution ................ -- 498,315 -- 498,315
Net loss ............................ -- -- (766,933) (766,933)
--- ---------- ----------- -----------
Balance, August 31, 2000 ............ -- 498,315 (766,933) (268,618)
Issuance of common stock ............ 10 -- -- 10
Capital contribution ................ -- 1,613,572 -- 1,613,572
Net loss ............................ -- -- (1,431,760) (1,431,760)
--- ---------- ----------- -----------
Balance, May 31, 2001 (unaudited) ... $10 $2,111,887 $(2,198,693) $ (86,796)
=== ========== =========== ===========
See accompanying notes to the financial statements.
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EMPOWER HEALTH, INC.
STATEMENTS OF CASH FLOWS
PERIOD FROM
MARCH 21, 2000 NINE MONTHS
(DATE OF INCORPORATION) ENDED
TO AUGUST 31, MAY 31,
2000 2001
----------------------- -----------
(UNAUDITED)
Cash flows from operating activities:
Net loss ............................................. $(766,933) $(1,431,760)
Depreciation and amortization ....................... 118 589
Increase (decrease) in accrued liabilities .......... 272,426 (182,308)
--------- -----------
Net cash flows used in operating activities ....... (494,389) (1,613,479)
--------- -----------
Cash flows from investing activities:
Purchase of property and equipment .................. (3,926) (103)
--------- -----------
Net cash flows used in investing activities ....... (3,926) (103)
--------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock .............. -- 10
Capital contributions ............................... 498,315 1,613,572
--------- -----------
Net cash flows provided by financing activities ... 498,315 1,613,582
--------- -----------
Net increase (decrease) in cash and cash equivalents .... -- --
Cash and cash equivalents, beginning of period .......... -- --
--------- -----------
Cash and cash equivalents, end of period ................ $ -- $ --
========= ===========
See accompanying notes to the financial statements.
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EMPOWER HEALTH, INC.
NOTES TO FINANCIAL STATEMENTS
PERIOD FROM MARCH 21, 2000 (DATE OF INCORPORATION) TO AUGUST 31, 2000
AND NINE MONTHS ENDED MAY 31, 2001 (UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION AND NATURE OF OPERATIONS
Empower Health, Inc. (the "Company") was incorporated on March 21, 2000
for the purpose of creating a care management company through strategy
development, market research, and establishing key relationships with health
plans and providers of health care services. The Company's operations were
totally funded by its majority stockholders. These amounts have been reflected
as capital contributions in the accompanying financial statements. The Company
elected to be taxed as a subchapter S corporation under the provisions of the
Internal Revenue Code.
B. BASIS OF PRESENTATION
The accompanying financial statements have been prepared under the
accrual basis of accounting.
C. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation for equipment
and furniture and fixtures is recognized over useful lives of five years.
D. MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
E. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board Issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The Company adopted this pronouncement on
September 1, 2000, which had no impact on the Company's financial statements.
F. UNAUDITED INTERIM INFORMATION
The unaudited interim financial statements include all adjustments,
consisting only of normal recurring adjustments, which management considers
necessary for a fair presentation of the financial position and results of
operations of the Company. The results of operations the nine months ended May
31, 2001 are not necessarily indicative of the results that may be expected for
a full year.
(2) PROPERTY AND EQUIPMENT
Property and equipment at August 31, 2000 and May 31, 2001 are as
follows:
AUGUST 31, MAY 31,
2000 2001
---------- -----------
(UNAUDITED)
Office equipment ................... $ 3,926 $ 4,029
------- -------
Total cost .................... 3,926 4,029
Accumulated depreciation ........... (118) (707)
------- -------
Property and equipment, net ... $ 3,808 $ 3,322
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(3) RELATED PARTY TRANSACTIONS
The chief executive officer, who is a minority stockholder of the
Company, is also a majority stockholder in, and chief executive officer of, New
Paradigm Ventures ("NPV"), an entity which performed consulting services for the
Company. The Company's transactions with this entity amounted to $647,064 and
$664,923, consisting of fees paid for services, for the period from March 21,
2000 to August 31, 2000 and for the nine months ended May 31, 2001,
respectively. At August 31, 2000 and May 31, 2001, amounts due to this entity
totaled $270,411 and $-0-, respectively.
The Company also reimbursed certain stockholders for certain expenses
incurred related to the development of the Company which amounted to $31,720 and
$36,595 for the period from March 21, 2000 to August 31, 2000 and for the nine
months ended May 31, 2001, respectively.
(4) STOCKHOLDERS' EQUITY
During fiscal 2001, the Company issued 999 shares of Common Stock, $.01
par value at par, which were outstanding as of May 31, 2001.
(5) SUBSEQUENT EVENT (UNAUDITED)
On June 5, 2001, the Company and American Healthways, Inc. announced
the merger of the Company with and into American Healthways, Inc. Under the
terms of the agreement, the Company's stockholders exchanged 999 issued and
outstanding shares of its common stock for 115,000 shares of $.001 par value
common stock of American Healthways, Inc. valued at approximately $3,032,000.
The terms of the definitive merger agreement provide for contingent
consideration up to an additional 355,000 shares to be issued if American
Healthways, Inc.'s average closing stock price exceeds certain targeted levels
from October 1, 2001 to September 30, 2006.
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AMERICAN HEALTHWAYS, INC.
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION BASIS OF PRESENTATION
The unaudited pro forma combined statements of operations of American
Healthways, Inc. for the year ended August 31, 2000 and nine months ended May
31, 2001, are presented to show the effects of the acquisition of Empower
Health, Inc. as if it had occurred on September 1, 1999. The unaudited pro forma
combined balance sheet reflects the pro forma balance sheet of American
Healthways, Inc. as if the acquisition had occurred as of May 31, 2001. The pro
forma information is based on the historical financial statements of American
Healthways, Inc. and Empower Health, Inc., giving effect to the acquisition
under the purchase method of accounting and the assumptions and adjustments in
the accompanying notes to the pro forma combined financial information. The
allocation of the purchase price is preliminary, but management does not believe
it will change materially.
The unaudited pro forma financial information does not purport to
represent what American Healthways, Inc. results of operations would actually
have been had the transactions and probable transactions in fact occurred on the
dates indicated above, nor to project American Healthways, Inc. financial
position or results of operations for any future date or period. In the opinion
of American Healthways, Inc. management, all adjustments necessary for a fair
presentation have been made. This unaudited pro forma financial information
should be read in conjunction with the accompanying notes and the consolidated
financial statements of American Healthways, Inc. and the related notes included
in American Healthways, Inc. 2000 Annual Report on Form 10-K and Quarterly
Report on Form 10-Q for the quarter ended May 31, 2001.
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AMERICAN HEALTHWAYS, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
MAY 31, 2001
(All amounts expressed in thousands)
PRO-FORMA
EMPOWER PRO-FORMA COMBINED
HISTORICAL HEALTH, INC. ADJUSTMENTS TOTALS
---------- ------------ ----------- ---------
Current Assets:
Cash and cash equivalents ...................... $ 9,064 $ -- $ (846)(1) $ 8,218
Accounts receivable, net ....................... 5,162 -- -- 5,162
Other current assets ........................... 2,016 -- -- 2,016
Deferred tax assets ............................ 724 -- -- 724
------- ------- ------- --------
Total current assets .......................... 16,966 -- (846) 16,120
Property and equipment, net ....................... 13,582 3 -- 13,585
Long-term deferred tax assets ..................... 2,132 -- -- 2,132
Other assets ...................................... 1,500 -- -- 1,500
Intangible assets, net ............................ 10,414 -- 3,965 14,379
------- ------- ------- --------
Total assets .................................. $44,594 $ 3 $ 3,119 $ 47,716
======= ======= ======= ========
Current Liabilities:
Accounts payable ............................... $ 1,806 $ -- $ -- $ 1,806
Accrued salaries and benefits .................. 4,001 -- -- 4,001
Accrued liabilities ............................ 1,319 90 -- 1,409
Income taxes payable ........................... 1 -- -- 1
Current portion of other
long-term liabilities ......................... 380 -- -- 380
------- ------- ------- --------
Total current liabilities .................... 7,507 90 -- 7,597
Other long-term liabilities ....................... 3,253 -- -- 3,253
Stockholders' equity:
Preferred Stock ................................ -- -- -- --
Common Stock ................................... 9 -- 1 (1) 10
Additional paid-in capital ..................... 25,340 2,112 3,031 (1) 28,371
(2,112)(2)
Retained earnings .............................. 8,485 (2,199) 2,199 (2) 8,485
------- ------- ------- --------
Total stockholders' equity ................... 33,834 (87) 3,119 36,866
------- ------- ------- --------
Total liabilities and stockholders' equity ... $44,594 $ 3 $ 3,119 $ 47,716
======= ======= ======= ========
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AMERICAN HEALTHWAYS INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS
FOR THE YEAR ENDED AUGUST 31, 2000
(All amounts expressed in thousands, except per share data)
PRO-FORMA
EMPOWER PRO-FORMA COMBINED
HISTORICAL HEALTH, INC. ADJUSTMENTS TOTALS
---------- ------------ ----------- ---------
Revenues ............................ $53,030 $ -- $ -- $ 53,030
Expenses:
Salaries and benefits ............ 34,975 52 -- 35,027
Other operating expenses ......... 13,786 715 -- 14,501
Depreciation and amortization .... 3,621 -- 276 (3) 3,897
Interest ......................... 22 -- -- 22
------- ----- ----- --------
Total expenses ............... 52,404 767 276 53,447
------- ----- ----- --------
Income (loss) before income taxes ... 626 (767) (276) (417)
Income tax expense .................. 478 -- (342)(4) 136
------- ----- ----- --------
Net income (loss) ................... $ 148 $(767) $ 66 $ (553)
======= ===== ===== ========
Basic income (loss) per share ....... $ 0.02 $ (0.07)
Diluted income (loss) per share ..... $ 0.02 $ (0.07)
Weighted average common shares and
equivalents:
Basic .......................... 8,269 115 (5) 8,384
Diluted ........................ 8,635 115 (5) 8,750
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AMERICAN HEALTHWAYS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS
FOR THE NINE MONTHS ENDED MAY 31, 2001
(All amounts expressed in thousands, except per share data)
PRO-FORMA
EMPOWER PRO FORMA COMBINED
HISTORICAL HEALTH, INC. ADJUSTMENTS TOTALS
---------- ------------ ----------- ---------
Revenues ............................ $52,694 $ -- $ -- $52,694
Expenses:
Salaries and benefits ........... 31,420 95 -- 31,515
Other operating expenses ........ 13,533 1,337 -- 14,870
Depreciation and amortization ... 3,888 1 207 (3) 4,096
Interest expense (income) ....... 62 (1) -- 61
------- ------- ----- -------
Total expenses ............... 48,903 1,432 207 50,542
------- ------- ----- -------
Income (loss) before income taxes ... 3,791 (1,432) (207) 2,152
Income tax expense .................. 1,649 -- (582)(4) 1,067
------- ------- ----- -------
Net income (loss) ................... $ 2,142 $(1,432) $ 375 $ 1,085
======= ======= ===== =======
Basic income per share .............. $ 0.26 $ 0.13
Diluted income per share ............ $ 0.24 $ 0.12
Weighted average common shares and
equivalents:
Basic .......................... 8,368 115 (5) 8,483
Diluted ........................ 9,065 115 (5) 9,180
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AMERICAN HEALTHWAYS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
(All amounts expressed in thousands)
The accompanying pro forma combined balance sheet reflects the pro
forma balance sheet of American Healthways, Inc. as if the acquisition of
Empower Health, Inc. had occurred as of May 31, 2001. The accompanying pro forma
combined statements of operations reflect the pro forma results of American
Healthways, Inc. as if the acquisition of Empower Health Inc. had occurred on
September 1, 1999.
PRO FORMA ADJUSTMENTS
1. To reflect the allocation of the purchase price (consisting of common
stock valued at $3,032 and payment of acquisition related costs of
$846) as follows:
Fair value of liabilities assumed $ (87)
Intangible assets:
Non-compete agreements 400
Excess of cost over net assets of purchased companies 3,565
-------
Total purchase price $ 3,878
=======
2. To eliminate equity of purchased company.
3. To reflect additional amortization of identifiable intangible assets
and excess of cost over net assets of purchased companies using the
straight-line method of amortization and the following estimated useful
lives: non-compete agreements - three years; excess of cost over net
assets of purchased companies - twenty-five years.
In July 2001, the Financial Accounting Standards Board issued SFAS No.
141, Business Combinations, and No. 142, Goodwill and Other Intangible
Assets. SFAS No. 141 requires that the purchase method of accounting be
used for all business combinations initiated after June 30, 2001 and
that the pooling-of-interest method is not longer allowed. SFAS No. 142
requires that upon adoption, amortization of goodwill will cease and
instead, the carrying value of goodwill will be evaluated for
impairment on an annual basis. Identifiable intangible assets will
continue to be amortized over their useful lives. SFAS No. 142 is
effective for fiscal years beginning after December 15, 2001; however,
American Healthways, Inc. may elect early adoption of this statement on
September 1, 2001, the beginning of its 2002 fiscal year. American
Healthways, Inc. is evaluating the impact of the adoption of these
standards on previously existing intangible assets and on intangible
assets generated from the acquisition of Empower Health, Inc. and has
not yet determined the effect of adoption on its financial position and
results of operations.
4. To record estimated federal and state income tax benefit at a combined
rate of 38%, as a result of the decrease in pro forma combined earnings
before income taxes due to the operating losses before taxes of Empower
Health, Inc. and the amortization of non-compete agreements. The
remaining amortization expense of excess of cost over net assets of
purchased companies is not considered deductible for income tax
purposes.
5. To reflect weighted average shares for stock issued in acquisition.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN HEALTHWAYS, INC.
Date: August 20, 2001 By: /s/ Henry D. Herr
--------------------------------------
HENRY D. HERR
Executive Vice President and
Chief Financial Officer
(Principal Financial and Duly Authorized Officer)
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EXHIBIT INDEX
No. Exhibit
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23.1 Consent of Independent Auditors