-----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, Raqt38UOzRkowDnvg2kW5BlvAXvOA4PQniCxiVgNY/L+fn+HL06EX9WegBUk1vun YPgYbioRo0FP4tezpUW4Vg== 0000899078-02-000735.txt : 20021125 0000899078-02-000735.hdr.sgml : 20021125 20021125165936 ACCESSION NUMBER: 0000899078-02-000735 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20021125 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INSPIRE INSURANCE SOLUTIONS INC CENTRAL INDEX KEY: 0001042051 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [6411] IRS NUMBER: 752595937 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-23005 FILM NUMBER: 02839649 BUSINESS ADDRESS: STREET 1: 300 BURNETT ST CITY: FORT WORTH STATE: TX ZIP: 76102 BUSINESS PHONE: 8173327761 MAIL ADDRESS: STREET 1: 300 BURNETT ST CITY: FORT WORTH STATE: TX ZIP: 76102 10-Q/A 1 amendtosecondqtr.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Amendment No. 1 to FORM 10-Q/A (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended.....................................June 30, 2002 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.................................................000-23005 INSPIRE INSURANCE SOLUTIONS, INC. (Exact name of registrant as specified in its charter) TEXAS 75-2595937 (State or other jurisdiction of incorporation (I.R.S. Employer or organization) Identification No.) 300 BURNETT STREET, FORT WORTH, TX 76102-2799 (Address of principal executive offices) (Zip Code) 817-348-3900 (Registrant's telephone number, including area code) N/A (Former name, former address and former fiscal year, if changed since last report) 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 [ ] No [X] APPLICABLE ONLY TO CORPORATE ISSUERS: Number of shares outstanding of each of the issuer's classes of common stock as of August 31, 2002: 19,153,708 INSPIRE INSURANCE SOLUTIONS, INC. INDEX
Page ----- Facing Sheet 1 Part I - Financial Statements Note 2. Proceedings Under Chapter 11 of the U.S. Bankruptcy Code 1 Signatures 5 Certifications 6
EXPLANATORY NOTE The Registrant is filing this Form 10-Q/A solely to amend the total number of claims that have been filed with the United Bankruptcy Court for the Northern District of Texas (Ft. Worth Division) and the amount of claims that have been renegotiated or rejected through November 13, 2002, which numbers appear on under "Part I, Item 1. Financial Statements, Note 2-Proceedings under Chapter 11 of the U.S. Bankruptcy Code." The numbers were stated incorrectly in the Registrant's filing of the Form 10-Q on November 21, 2002. PART I - FINANCIAL STATEMENTS 2. PROCEEDINGS UNDER CHAPTER 11 OF THE U.S. BANKRUPTCY CODE On February 15, 2002, the Company filed petitions for relief under Chapter 11 of the U.S. Bankruptcy Code with the United States Bankruptcy Court for the Northern District of Texas (Case Nos. 02-41228-DML-11 and 02-41231-DML-11). The Company is currently operating as a debtor-in-possession pursuant to the bankruptcy code. As a debtor-in-possession, the Company is authorized to continue operating as an ongoing business, but may not engage in transactions outside the ordinary course of business without the prior approval of the court, following notice and opportunity for a hearing. The Company decided to file for relief due primarily to the erosion of cash reserves brought about by the serious decline in the Company's revenues without a proportionate decline in expenses related to infrastructure. During 1998 and 1999 the Company acquired several large outsourcing contracts and grew annual revenues to approximately $140 million. The Company developed the associated fixed infrastructure to support these contracts. During 2000 and 2001, those contracts were either cancelled or greatly reduced in scope resulting in a significant decline in revenue, but leaving the associated infrastructure in place. The Company has also seen revenues decline due to the continuing economic recession and the current environment in the property and casualty insurance industry. Under the Bankruptcy Code, actions to collect pre-petition indebtedness, most pending litigation and most other contractual obligations against the Company are stayed. Absent an order of the court, substantially all pre-petition liabilities are subject to settlement under a plan of reorganization to be voted upon by the creditors and equity holders and approved by the Court. Under the Bankruptcy Code, the Company may assume or reject executory contracts, including lease obligations, subject to approval of the Court and certain other conditions. Parties affected by the rejection of these contracts may file claims with the Court in accordance with the reorganization process. Therefore, we expect that liabilities subject to the proceedings will arise as a result of the rejection of certain executory contracts, including leases, and from the determination of the Court, or agreement by parties in interest, of allowed claims for contingencies and other disputed amounts. The assumption of an executory contract will require the Company to cure all prior defaults under the related contract, including all pre-petition liabilities, absent agreement to the contrary. Therefore, the assumption of additional executory contracts and unexpired leases may convert liabilities shown on the Company's condensed 1 consolidated financial statements as prepetition liabilities subject to compromise to current liabilities. Due to the uncertain nature of these potential claims, the Company is unable to project, with any degree of certainty, the scope and magnitude of such claims. INSpire has incurred, and will continue to incur, significant costs associated with the reorganization. On March 18, 2002, the Company filed with the Court schedules and statements of financial affairs setting forth, among other things, the assets and liabilities of the Company as shown by the books and records, subject to the assumptions contained in certain notes filed in connection therewith. All of these schedules are subject to further amendment or modification. The Company has mailed notices to all known creditors that the deadline for filing proofs of claim with the court was June 25, 2002. Differences between amounts included on the Debtors' schedules (currently approximately $2.0 million) and claims by creditors (approximately $25.5 million) will be investigated and resolved in connection with the claims resolution process. To date $7.8 million of claims by creditors have been renegotiated or rejected. The Company is in the process of analyzing all claims and, at this time, is not able to determine the claims that will be allowed; however, the Company believes that a substantial portion of these claims will be disallowed. Some of the claims appear to be duplicates and some claims are for legal actions in which the company ultimately expects to prevail. The ultimate number and amount of allowed claims can not presently be estimated and, because the settlement terms of such allowed claims are subject to a confirmed plan of reorganization, the ultimate distribution with respect to allowed claims is not presently ascertainable. The Company has filed motions during the bankruptcy proceedings whereby the Court has granted authority or approval with respect to various items required by the Bankruptcy Code and/or necessary to the reorganization efforts. The Company has obtained orders for, among other things: (i) implementation of a key employee retention and incentive program, (ii) authorization of payment in the ordinary course of business of pre-petition wages, salaries, employee benefits, and reimbursable business expenses, (iii) the settlement for the cancellation of the Company's contract with Lockheed Martin, and (iv) approval for the rejection and acceptance of various leases and business contracts. The United States Trustee has appointed an unsecured creditors committee. This committee and its legal representative have a right to be heard on all matters that come before the Court and is the primary entity with which the Company will negotiate the terms of a plan of reorganization. There can be no assurance that this committee will support the Company's positions in the bankruptcy proceedings or the plan of reorganization as described below, and disagreements with this committee could lengthen the bankruptcy proceedings and negatively impact the Company's ability to operate during bankruptcy. The original goal of the reorganization was to enable the Company to emerge as a stronger entity, of an efficient size with appropriate expense levels. The Company has since determined that reorganization as an independent entity is neither feasible nor in the best interests of the Company's estate, creditors or shareholders. After careful deliberation and in consultation with the creditors committee, the Company determined that the only viable course of action, consistent with their fiduciary duties, is to seek to maximize the value of the Company's estates, through a sale of all or substantially all of their respective assets. 2 On November 13, 2002, the Bankruptcy Court entered an order confirming the First Amended Plan of Reorganization of INSpire Insurance Solutions, Inc. and INSpire Claims Management, Inc., dated September 24, 2002 (the "Plan"). The Plan anticipates the sale of substantially all of the Company's assets including real property, intellectual property, cash, receivables, other current and long term assets, contractual rights, and other assets to CGI Group, Inc. ("CGI"), as set forth in an asset purchase agreement that the Company and CGI executed on or about October 22, 2002 (the "Asset Purchase Agreement"). In exchange for such assets, CGI agreed to pay the Company $8.2 million in cash (the "Cash Purchase Price") and assume certain liabilities, not to exceed $14 million, including pre and post petition obligations incurred in the ordinary course of business, contractual obligations, unearned revenue and tax liabilities. The Cash Purchase Price was based on the assumption that the "Net Asset Value" (as defined in the Asset Purchase Agreement) of the assets and liabilities acquired would be $7 million (the "Assumed Net Asset Value"). The closing is currently scheduled to occur on November 29, 2002. The Company has delivered to CGI a revised estimate of the Net Asset Value (the "Estimated Net Asset Value"). The revised Estimated Net Asset Value is approximately $3.9 million. According to the terms of the Asset Purchase Agreement, the Cash Purchase Price will be adjusted by the amount that the Estimated Net Asset Value differs from the Assumed Net Asset Value. Based on the Estimated Net Asset Value of $3.9 million, the Company estimates the Cash Purchase Price will be approximately $5.1 million. Upon closing of the transaction, 25% of the Cash Purchase Price will be deposited by CGI into an account (the "Escrow Account"). Within 35 days following the closing of the transaction, CGI will audit the books and records of the Company to determine the actual amount of the Net Asset Value as of the closing date (the "Actual Net Asset Value"). CGI will pay to the Company the amount, if any, by which the Actual Net Asset Value exceeds the Estimated Net Asset Value. CGI will be entitled to withdraw from the Escrow Account the amount, if any, by which the Estimated Net Asset Value exceeds the Actual Net Asset Value. For nine months after the closing of the transaction, CGI will be entitled to draw upon the Escrow Account to satisfy any post-closing adjustments to the Net Asset Value, as described above, or any damages suffered by CGI in connection with the transaction. Any claims against the Escrow Account are subject to review by Michael G. Lawrence of NACM SW (the "Trustee"). The remaining cash proceeds from the sale and any remaining assets of the Company, if any (collectively, the "Trust Assets") will be transferred to a liquidating trust (the "Trust"). Michael G. Lawrence of NACM SW will be the initial trustee for the Trust and will liquidate the Trust Assets and distribute the proceeds to the creditors of the Company. The Trust Assets will be used to pay claims of creditors until such claims (and allowable expenses incurred by the Trust) are paid in full or the assets of the trust are exhausted. A total of $25.5 million of claims have been filed in the Bankruptcy Court. Through November 13, 2002, $7.8 million of claims have been renegotiated or rejected. The Company is in the process of analyzing the remaining claims and, at this time, cannot estimate the amount of claims that will ultimately be allowed. Should the amount of claims allowed by the 3 Bankruptcy Court exceed the proceeds available from the Trust Assets to satisfy those claims, distributions will be made from the Trust according to the priorities established in the Plan. Should assets remain in the Trust after the allowed claims and administrative costs are satisfied in full, each equity security holder will receive a pro rata portion of such remaining assets, if any, based on the number of shares held as of the record date. The record date for such distributions will be December 2, 2002. The Plan will become effective on a date, as determined by the Company, on or after the date in which (i) the sale has been completed, (ii) the Trust has been formed, (iii) and the Trustee has been appointed. At such time as the Plan is effective, trading of the shares of the equity security interests of the Company will cease and the shares will be cancelled. The Plan could result in shareholders receiving no value for their interests. The Company is presently operating at a substantial net cash loss without any realistic prospect of reducing the rate at which the value of the estates is eroding. It is important to the Company, the creditors and other interested constituencies the Plan be finalized as expeditiously as possible. Under the priority scheme established by the bankruptcy code, certain post-petition liabilities and pre-petition liabilities will be satisfied before shareholders are entitled to receive any distribution. The ultimate recovery to creditors and shareholders, if any, will not be determined until confirmation of the Plan. No assurance can be given as to what values, if any will be assigned in the bankruptcy proceedings to each of these constituencies. The Plan of reorganization could also result in shareholders receiving no value for their interests. On April 30, 2002, INSpire terminated its IT outsourcing contract with Lockheed Martin. Lockheed Martin had been providing data center, networking, server support, desktop support and help desk services to INSpire under the terms of a ten-year contract established in 2001. On May 1, 2002, responsibility for running all IT functions transitioned from Lockheed Martin to INSpire. In June 2002, the Company received Court approval for a settlement on the IT outsourcing contract with Lockheed Martin. The Company cancelled this contract effective May 1, 2002. The settlement amount of $1.5 million included payment of $827,757 for all prepetition liabilities due Lockheed Martin and $729,243 for damages from the contract's cancellation. At this time, it is not possible to predict the effects of the Plan on the Company's business, creditors, and security holders. Nor can the Company predict, with any degree of certainty, the effects and details of any potential sale of the Company's business or the final details of a plan of reorganization for the Company's estate. Additionally, the Plan could materially change the amounts reported in the financial statements, which do not give treatment to all adjustments to the carrying value of assets or liabilities that might be necessary as a consequence of the Plan. 4 SIGNATURE In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INSPIRE INSURANCE SOLUTIONS, INC. /s/ Richard Marxen ---------------------------------------- Richard Marxen Chief Executive Officer (principal executive officer) /s/ Andrea Goodrich ---------------------------------------- Andrea Goodrich Chief Financial Officer (principal financial officer) Date: November 25, 2002 5 CERTIFICATIONS I, Richard Marxen, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Inspire Insurance Solutions, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report. Date: November 25, 2002 /s/ Richard Marxen ------------------------------------ Richard Marxen Chief Executive Officer I, Andrea Goodrich, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Inspire Insurance Solutions, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report. Date: November 25, 2002 /s/ Andrea Goodrich ------------------------------------ Andrea Goodrich Chief Financial Officer 6 -----END PRIVACY-ENHANCED MESSAGE-----