-----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, QfzGSKKOyME8qHNRCgbAHU4No8HSa0pesL7vK2+if2qZmxk9TBWrrg2Vuh35Dpxw KGrYl3wj8CxeUFfpoZWzMA== 0000950130-97-003028.txt : 19970701 0000950130-97-003028.hdr.sgml : 19970701 ACCESSION NUMBER: 0000950130-97-003028 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970630 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PHYSICIANS HEALTH SERVICES INC CENTRAL INDEX KEY: 0000867098 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HEALTH SERVICES [8000] IRS NUMBER: 061116976 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 11-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-21098 FILM NUMBER: 97633008 BUSINESS ADDRESS: STREET 1: 120 HAWLEY LANE STREET 2: 1243 BROADRICK DRIVE CITY: TRUMBULL STATE: CT ZIP: 06611 BUSINESS PHONE: 2033816400 11-K 1 FORM 11-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 11-K (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE ACT OF - 1934 [FEE REQUIRED]. For the FISCAL YEAR ENDED December 31, 1996 ------------------ OR ___ TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]. For the transition period from ______________to_______________ Commission file number 0-21098 -------- A. Full title of the plan and the address of the plan, if different from that of the issuer named below: Physicians Health Services, Inc. 401(k) Profit Sharing Plan B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: Physicians Health Services, Inc. One Far Mill Crossing Shelton, CT 06484-0944 -2- REQUIRED INFORMATION Financial Statements and Exhibits Index Financial Statements: Page No. -------- 1. Financial Statements of the Physicians Health Services, Inc. 401(k) Profit Sharing Plan: Independent Auditors' Report F-1 Statements of Net Assets Available for Plan Benefits F-2 Statements of Changes in Net Assets Available for Plan Benefits F-4 Notes to Financial Statements F-7 2. Schedules: Schedule I: Assets Held for Investment Purposes S-1 Schedule II: Schedule of Reportable Transactions S-2 Exhibit 1: Auditors' Consent Pursuant to the requirements of the Securities Exchange Act of 1934, the Trustees (or other persons who administer the Employee Benefit Plan) have duly caused this annual report to be signed on its behalf by the undersigned thereunto duly authorized. Physicians Health Services, Inc. 401(k) Profit Sharing Plan By:__________________________________ Craig S. Dupont Vice President, Finance Date: June 13, 1997 REPORT OF INDEPENDENT AUDITORS Physicians Health Services, Inc. Pension Committee We have audited the accompanying statements of net assets available for plan benefits of Physicians Health Services, Inc. 401(k) Profit Sharing Plan (the "Plan") as of December 31, 1996 and 1995, and the related statements of changes in net assets available for plan benefits for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for plan benefits of the Plan at December 31, 1996 and 1995, and the changes in its net assets available for plan benefits for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedules of assets held for investment purposes as of December 31, 1996, and reportable transactions for the year then ended, are presented for purposes of complying with the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974, and are not a required part of the financial statements. The Fund Information in the statement of net assets available for plan benefits and the statement of changes in net assets available for plan benefits is presented for purposes of additional analysis rather than to present the net assets available for plan benefits and changes in net assets available for plan benefits of each fund. The supplemental schedules and Fund Information have been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, are fairly stated in all material respects in relation to the financial statements taken as a whole. June 13, 1997 ERNST & YOUNG LLP F-1 PHYSICIANS HEALTH SERVICES, INC. 401(k) PROFIT SHARING PLAN STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION DECEMBER 31, 1996
PHS INT'L AGGRESSIVE STOCK EQUITY GROWTH TOTAL FUND FUND FUND Investments: Common Stock of Physicians Health Services, Inc. at fair value: 74,836 shares (cost $1,806,572) $1,103,831 $1,103,831 International Equity Fund 624,695 $ 624,695 Aggressive Growth Equity Fund 3,715,397 $3,715,397 SBS Balanced Fund 2,810,903 Government Income Fund 453,166 Guaranteed Investment Contract Fund 802,853 -------------------------------------------------------------- Total investments 9,510,845 1,103,831 624,695 3,715,397 Cash and cash equivalents 413 413 -- -- Employer contributions and interfund transfers receivable (payable) 59,493 87,761 (4,570) 81,042 Loans to participants 406,758 -------------------------------------------------------------- Net assets available for plan benefits $9,977,509 $1,192,005 $ 620,125 $3,796,439 ============================================================== SBS GOVERNMENT GUARANTEED BALANCED INCOME INV. CONTRACT LOAN FUND FUND FUND ACCT Investments Common Stock of Physicians Health Services, Inc. at fair value: 74,836 shares (cost $1,806,572) International equity fund Aggressive growth equity fund SBS balanced fund $2,810,903 Government income fund $ 453,166 Guaranteed investment contract fund $ 802,853 -------------------------------------------------------------------- Total Investments 2,810,903 453,166 802,853 -- Cash and cash equivalents -- -- -- Employer contributions and interfund transfers receivable (payable) 48,452 17,416 (170,608) Loans to participants $ 406,758 Net assets available for plan benefits -------------------------------------------------------------------- $2,859,355 $ 470,582 $ 632,245 $ 406,758 ===================================================================
See accompanying notes to financial statements. F-2 PHYSICIANS HEALTH SERVICES, INC. 401(k) PROFIT SHARING PLAN STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION DECEMBER 31, 1995
PHS INT'L AGGRESSIVE STOCK EQUITY GROWTH TOTAL FUND FUND FUND Investments: Common Stock of Physicians Health Services, Inc. at fair value: 44,304 shares (cost $1,164,165) $ 1,639,248 $ 1,639,248 International Equity Fund 503,978 $ 503,978 Aggressive Growth Equity Fund 2,715,208 $ 2,715,208 SBS Balanced Fund 1,948,932 Government Income Fund 433,467 Guaranteed Investment Contract Fund 681,436 ----------------------------------------------------- Total investments 7,922,269 1,639,248 503,978 2,715,208 Cash and cash equivalents 17,777 17,777 -- -- Employer contributions and interfund transfers receivable (payable) 43,058 (362,774) 27,988 315,015 Loans to participants 284,479 Net assets available for ------------------------------------------------------ plan benefits $ 8,267,583 $ 1,294,251 $ 531,966 $ 3,030,223 ====================================================== SBS GOVERNMENT GUARANTEED BALANCED INCOME INV. CONTRACT LOAN FUND FUND FUND ACCT Investments: Common Stock of Physicians Health Services, Inc. at fair value: 44,304 shares (cost $1,164,165) International equity fund Aggressive growth equity fund SBS balanced fund $ 1,948,932 Government income fund $ 433,467 Guaranteed investment contract fund 681,436 ------------------------------------------------------- Total Investments 1,948,932 433,467 681,436 -- Cash and cash equivalents -- -- -- -- Employer contributions and interfund transfers receivable (payable) 227,034 (22,911) (141,294) Loans to participants $ 284,479 Net assets available for ------------------------------------------------------- plan benefits $ 2,175,966 $ 410,556 $ 540,142 $ 284,479 =======================================================
See accompanying notes to financial statements. F-3 PHYSICIANS HEALTH SERVICES, INC. 401(k) PROFIT SHARING PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION YEAR ENDED DECEMBER 31, 1996
PHS INT'L AGGRESSIVE STOCK EQUITY GROWTH TOTAL FUND FUND FUND Contributions: Rollovers $ 140,473 Participants 1,397,587 $ 296,806 $ 106,286 $ 486,813 Employer 904,906 180,269 68,008 323,051 -------------------------------------------------------- 2,442,966 477,075 174,294 809,864 Investment income: Interest 1,309 1,098 18 84 Dividends -- -------------------------------------------------------- 1,309 1,098 18 84 Loan interest repaid 32,637 -------------------------------------------------------- Total additions 2,476,912 478,173 174,312 809,948 Withdrawals and distributions to participants (471,789) (53,798) (45,519) (155,105) Investment expenses (61,380) (4,086) (4,786) (27,723) -------------------------------------------------------- Total deductions (533,169) (57,884) (50,305) (182,828) Interfund transfers -- 599,528 (75,146) (294,888) Net realized gain on securities sold or distributed 277,031 55,761 6,139 125,045 Changes in unrealized appreciation (depreciation) of investments (510,848) (1,177,824) 33,159 308,939 -------------------------------------------------------- Net increase (decrease) in net assets available for plan benefits 1,709,926 (102,246) 88,159 766,216 Net assets available for plan benefits, December 31, 1995 8,267,583 1,294,251 531,966 3,030,223 -------------------------------------------------------- Net assets available for plan benefits, December 31, 1996 $ 9,977,509 $ 1,192,005 $ 620,125 $ 3,796,439 ======================================================== SBS GOVERNMENT GUARANTEED BALANCED INCOME INV. CONTRACT LOAN ROLLOVER FUND FUND FUND ACCT ACCT Contributions: Rollovers $ 140,473 Participants $ 344,804 $ 79,818 $ 83,060 Employer 227,044 49,195 57,339 ---------------------------------------------------------------------- 571,848 129,013 140,399 -- 140,473 Investment income: Interest 61 14 34 Dividends ----------------------------------------------------------------------- 61 14 34 -- -- Loan interest repaid $ 32,637 ----------------------------------------------------------------------- Total additions 571,909 129,027 140,433 32,637 140,473 Withdrawals and distributions to participants (175,086) (15,220) (27,061) Investment expenses (20,097) (2,846) (1,842) ----------------------------------------------------------------------- Total deductions (195,183) (18,066) (28,903) -- -- Interfund transfers (51,303) (67,545) (59,815) 89,642 (140,473) Net realized gain on securities sold or distributed 61,734 10,278 18,074 Changes in unrealized appreciation (depreciation) of investments 296,232 6,332 22,314 ----------------------------------------------------------------------- Net increase (decrease) in net assets available for plan benefits 683,389 60,026 92,103 122,279 -- Net assets available for plan benefits, December 31, 1995 2,175,966 410,556 540,142 284,479 -- Net assets available for plan ---------------------------------------------------------------------- benefits, December 31, 1996 $ 2,859,355 $ 470,582 $ 632,245 $ 406,758 $ -- ======================================================================
See accompanying notes to financial statements. F-4 PHYSICIANS HEALTH SERVICES, INC. 401(k) PROFIT SHARING PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION YEAR ENDED DECEMBER 31, 1995
PHS INT'L AGGRESSIVE STOCK EQUITY GROWTH TOTAL FUND FUND FUND Contributions: Rollovers $ 372,812 Participants 966,338 $ 167,204 $ 90,957 $ 345,275 Employer 652,504 115,675 57,271 236,358 -------------------------------------------------------- 1,991,654 282,879 148,228 581,633 Investment income: Interest 849 701 16 57 Dividends -- -------------------------------------------------------- 849 701 16 57 Loan interest repaid 21,938 -------------------------------------------------------- Total additions 2,014,441 283,580 148,244 581,690 Withdrawals and distributions to participants (323,612) (16,291) (19,654) (65,903) Investment expenses (42,559) (2,654) (4,608) (17,983) -------------------------------------------------------- Total deductions (366,171) (18,945) (24,262) (83,886) Interfund transfers -- 129,628 (145,110) 169,196 Net realized gain (loss) on securities sold or distributed 83,901 5,080 (10,952) 41,660 Changes in unrealized appreciation (depreciation) of investments 1,282,770 392,721 26,530 463,540 -------------------------------------------------------- Net increase (decrease) in net assets available for plan benefits 3,014,941 792,064 (5,550) 1,172,200 Net assets available for plan benefits, December 31, 1994 5,252,642 502,187 537,516 1,858,023 -------------------------------------------------------- Net assets available for plan benefits, December 31, 1995 $ 8,267,583 $ 1,294,251 $ 531,966 $ 3,030,223 ======================================================== SBS GOVERNMENT GUARANTEED BALANCED INCOME INV. CONTRACT LOAN ROLLOVER FUND FUND FUND ACCT ACCT Contributions: Rollovers $ 372,812 Participants $ 233,071 $ 65,738 $ 64,093 Employer 160,635 41,871 40,694 ---------------------------------------------------------------------- 393,706 107,609 104,787 -- 372,812 Investment income: Interest 39 10 26 Dividends ---------------------------------------------------------------------- 39 10 26 -- -- Loan interest repaid $ 21,938 ---------------------------------------------------------------------- Total additions 393,745 107,619 104,813 21,938 372,812 Withdrawals and distributions to participants (102,302) (89,777) (29,685) Investment expenses (12,652) (2,820) (1,842) ---------------------------------------------------------------------- Total deductions (114,954) (92,597) (31,527) -- -- Interfund transfers 187,248 (77,986) 23,016 86,820 (372,812) Net realized gain (loss) on securities sold or distributed 28,613 10,099 9,401 Changes in unrealized appreciation (depreciation) of investments 331,071 42,280 26,628 ---------------------------------------------------------------------- Net increase (decrease) in net assets available for plan benefits 825,723 (10,585) 132,331 108,758 -- Net assets available for plan benefits, December 31, 1994 1,350,243 421,141 407,811 175,721 -- ---------------------------------------------------------------------- Net assets available for plan benefits, December 31, 1995 $ 2,175,966 $ 410,556 $ 540,142 $ 284,479 $ -- ======================================================================
See accompanying notes to financial statements. F-5 PHYSICIANS HEALTH SERVICES, INC. 401(k) PROFIT SHARING PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION YEAR ENDED DECEMBER 31, 1994
PHS INT'L AGGRESSIVE SBS GOVERNMENT STOCK EQUITY GROWTH BALANCED INCOME TOTAL FUND FUND FUND FUND FUND Contributions: Rollovers $ 134,831 Participants 746,186 $ 48,682 $ 52,569 $ 143,468 $ 90,129 $ 27,548 Employer 519,746 43,726 44,997 126,799 79,983 26,503 -------------------------------------------------------------------------------------- 1,400,763 92,408 97,566 270,267 170,112 54,051 Investment income: Interest 18,459 403 313 963 649 222 Dividends 27,805 -------------------------------------------------------------------------------------- 46,264 403 313 963 649 222 Loan interest repaid 13,068 -------------------------------------------------------------------------------------- Total additions 1,460,095 92,811 97,879 271,230 170,761 54,273 Withdrawals and distributions to participants (181,102) (15,761) (6,457) (23,028) (13,470) (18,012) Investment expenses (22,125) (815) (1,992) (6,260) (4,326) (1,136) -------------------------------------------------------------------------------------- Total deductions (203,227) (16,576) (8,449) (29,288) (17,796) (19,148) Interfund transfers -- 342,315 463,134 1,501,488 1,152,893 384,643 Net realized gain (loss) on securities sold or distributed (244,288) 1,275 163 1,582 1,051 92 Changes in unrealized appreciation (depreciation) of investments 321,832 82,362 (15,211) 113,011 43,334 1,281 ------------------------------------------------------------------------------------- Net increase (decrease) in net assets available for plan benefits 1,334,412 502,187 537,516 1,858,023 1,350,243 421,141 Net assets available for plan benefits, December 31, 1993 3,918,230 -- -- -- -- -- ------------------------------------------------------------------------------------ Net assets available for plan benefits, December 31, 1994 $ 5,252,642 $ 502,187 $ 537,516 $ 1,858,023 $ 1,350,243 $ 421,141 -------------------------------------------------------------------------------------- GUARANTEED MONEY WRIGHT GROWTH INV. CONTRACT MARKET BALANCED EQUITY LOAN ROLLOVER FUND FUND FUND FUND FUND FUND Contributions: Rollovers $ 134,831 Participants $ 22,823 $ 60,200 $ 134,520 $ 166,247 Employer 13,844 33,846 69,346 80,702 -------------------------------------------------------------------------------------- 36,667 94,046 203,866 246,949 -- 134,831 Investment income: Interest 433 11,702 3,223 551 Dividends 21,120 6,685 -------------------------------------------------------------------------------------- 433 11,702 24,343 7,236 -- -- Loan interest repaid $ 13,068 -------------------------------------------------------------------------------------- Total additions 37,100 105,748 228,209 254,185 13,068 134,831 Withdrawals and distributions to participants (26,934) (14,619) (21,209) (41,612) Investment expenses (810) (1,662) (2,553) (2,571) -------------------------------------------------------------------------------------- Total deductions (27,744) (16,281) (23,762) (44,813) -- -- Interfund transfers 381,551 (835,511) (1,597,336) (1,637,568) (20,778) (134,831) Net realized gain (loss) on securities sold or distributed 2,895 (73,016) (178,330) Changes in unrealized appreciation (depreciation) of investments 14,009 (6,534) 89,580 -------------------------------------------------------------------------------------- Net increase (decrease) in net assets available for plan benefits 407,811 (746,044) (1,472,439) (1,516,316) (7,710) -- Net assets available for plan benefits, December 31, 1993 -- 746,044 1,472,439 1,516,316 183,431 -- -------------------------------------------------------------------------------------- Net assets available for plan benefits, December 31, 1994 $ 407,811 $ -- $ -- $ -- $ 175,721 $ -- ======================================================================================
See accompanying notes to financial statements. F-6 PHYSICIANS HEALTH SERVICES, INC. 401(k) PROFIT SHARING PLAN NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 1. DESCRIPTION OF PLAN The following description of the Physicians Health Services, Inc. 401(k) Profit Sharing Plan (the "Plan") provides general information. Participants should refer to their Summary Plan Description for a more complete description of the Plan's provisions. General: The Plan is a defined contribution plan which covers substantially all employees of Physicians Health Services, Inc. and its wholly owned subsidiaries (the "Employer") who have completed one year of service and have attained 21 years of age. The Plan provides for retirement, death and disability benefits. Contributions: Employees who participate in the Plan may elect to defer up to 10%, on a pre-tax and after-tax basis of their compensation. The Plan also allows transfers into the Plan from other plans which satisfy the applicable requirements of the Internal Revenue Code. The Employer's contributions consist of the following: (a) a matching contribution equal to 75% of each participant's elective deferrals for the Plan year, up to 4% of the participant's compensation, and (b) at the discretion of the Employer, an additional amount equal to 1% of each participant's compensation, provided such participant has completed 1,000 hours of service during the Plan year and is still actively employed on the last day of the Plan year. Any employee or employer matching contribution in excess of the IRS maximum is treated as an after tax contribution. It is the Employer's policy to fund amounts as accrued. Forfeitures are used to reduce the contributions of the Employer for the Plan year in which such forfeitures occur. Vesting: Each participant's account is credited with the participant's contributions, an allocation of the Employer's contributions and Plan earnings allocated to their account. Participants are immediately vested in their contributions plus actual earnings thereon. Participants are also 100% vested with regard to the Employer's contributions; however, a participant must be employed on the last day of the Plan year in order to be credited with an allocation of the Employer's contribution for that year. Investments: Upon enrollment, each participant directs that their contributions be invested in one or more of the investment programs set forth below in 5% increments. The current investment programs of the Plan are as follows: The Physicians Health Services, Inc. Stock Fund is invested in the Class A Common Stock of Physicians Health Services, Inc. F-7 PHYSICIANS HEALTH SERVICES, INC. 401(k) PROFIT SHARING PLAN NOTES TO FINANCIAL STATEMENTS (CONTINUED) 1. DESCRIPTION OF PLAN (CONTINUED) The International Equity Fund is invested in a diversified portfolio of international equities as evidenced by American Depository Receipts, which are traded as U.S. share equivalents backed by specific shares of the underlying foreign currencies. The Aggressive Growth Fund is invested in a portfolio of high quality, smaller sized growth companies that are widely diversified as to industry and number of securities held. The SBS Balanced Fund is invested in a combination of high quality equity and near term bonds with a conservative mix range of 40% to 60% equities and 60% to 40% bonds of the total fund. The Government Income Fund is invested in U.S. Treasury Securities with a maximum average maturity of five years and none longer than 10 years. The Guaranteed Investment Contract ("GIC") Fund is invested in insurance investment contracts, alternative synthetic GICs, and bank investment contracts issued by highly rated companies and banks, and in cash equivalents designed to provide stable investment returns with a high degree of capital protection. Prior to July 1, 1994, participants in the Plan could elect to invest their contributions in 10% increments into the following funds: The Money Market Fund that invested in short-term liquid investments such as short-term money market instruments, certificates of deposit and Treasury Bills. The Wright Balanced Fund that invested in mutual funds including common and preferred stocks and bonds. The Growth Equity Fund that invested in a mutual fund of selected Blue Chip equity securities. At December 31, 1996, there was a total of 641 participants in the Plan. The number of participants in each fund was as follows: Physicians Health Services, Inc. Stock Fund 381 International Equity Fund 246 Aggressive Growth Fund 540 SBS Balanced Investment Fund 457 Government Income Fund 165 Guaranteed Investment Contract Fund 166 The total number of participants in the Plan was less than the sum of the number of participants shown above because many were participating in more than one fund. F-8 PHYSICIANS HEALTH SERVICES, INC. 401(k) PROFIT SHARING PLAN NOTES TO FINANCIAL STATEMENTS (CONTINUED) 1. DESCRIPTION OF PLAN (CONTINUED) Participant Loans: Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum of $50,000 or 50% of their account balances. Loan transactions are treated as transfers from (to) the investment funds to (from) the loan fund. Loan terms range from 1-5 years or up to 10 years for the purchase of a primary residence. The loans are secured by the balance in the participants' accounts and bear interest at a rate of 1 1/2% above the regional prime. Withdrawals: Withdrawals can only be made under certain circumstances, including early or normal retirement, death, disability, termination of employment, hardship (as defined under the Internal Revenue Code) and the attainment of 59 1/2 years of age. Amounts allocated to the accounts of such participants which have not yet been paid at December 31, 1996 and 1995 amounted to $68,665 and $69,873 respectively. The Employer intends to continue the Plan indefinitely, but reserves the right to terminate the Plan or permanently discontinue contributions for any reason at any time. In the event of such termination or permanent discontinuance of contributions, participants shall be fully vested in their accounts. (Refer to Note 6.) 2. SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting: The accompanying financial statements have been prepared on the accrual basis of accounting and present the net assets available for plan benefits and the changes in net assets available for plan benefits of the Plan. Investment Valuation: The investment in the Physicians Health Services, Inc. Stock Fund is stated at fair value based upon the closing sales price on the National Association of Securities Dealers Automated Quotation National Market System. The closing price of Physicians Health Services, Inc. Class A Common Stock was $14.75 and $37.00 per share at December 31, 1996 and 1995, respectively. The investments in the International Equity Fund, the Aggressive Growth Fund, the SBS Balanced Fund and the Government Income Fund are stated at fair values based on the market value of the underlying securities in the respective portfolios plus investment income credited to the account. F-9 PHYSICIANS HEALTH SERVICES, INC. 401(k) PROFIT SHARING PLAN NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) For the Guaranteed Investment Contract Fund, the fair value represents cost plus accrued interest income on the underlying contracts. Such accrued interest income is treated as unrealized until such time as units of the fund are sold or disposed of at which time the unrealized amounts are reported as realized. The change in the difference between fair value and the cost of investments is reported in the statement of changes in net assets available for plan benefits as unrealized appreciation (depreciation) of investments. Realized gains (losses) from the sale or distribution of investments represents the difference between the proceeds received and the cost of investments sold determined by the average cost method for the six month period ended December 31, 1994 and for the years ended December 31, 1995 and 1996. For the six month period ended June 30, 1994 the cost of investments sold was determined by the specific identification method. Interfund Transfers: Interfund transfers for 1994 include the transfer of funds from the Money Market, Wright Balanced and Growth Equity funds into the new investment programs established effective July 1, 1994. Expenses of the Plan: All administrative expenses incurred by the Plan are paid by the Employer. Use of Estimates: The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Certain reclassifications were made to conform the 1994 and 1995 amounts to the 1996 presentation. F-10 PHYSICIANS HEALTH SERVICES, INC. 401(k) PROFIT SHARING PLAN NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. INVESTMENTS The unrealized appreciation (depreciation) of investments included in Plan net assets is as follows:
Balance at 1994 Balance at 1995 Balance at 1996 Balance at Dec 31, 1993 Change Dec 31, 1994 Change Dec 31, 1995 Change Dec 31, 1996 -------------------------------------------------------------------------------------------------------- PHS Stock Fund $ -- $ 82,362 $ 82,362 $ 392,721 $ 475,083 $(1,177,824) $ (702,741) International Equity Fund -- (15,211) (15,211) 26,530 11,319 33,159 44,478 Aggressive Growth Fund -- 113,011 113,011 463,540 576,551 308,939 885,490 SBS Balanced Fund -- 43,334 43,334 331,071 374,405 296,232 670,637 Government Income Fund -- 1,281 1,281 42,280 43,561 6,332 49,893 Guaranteed Investment Contract Fund -- 14,009 14,009 26,628 40,637 22,314 62,951 Wright Balanced Fund 6,534 (6,534) -- -- -- -- -- Growth Equity Fund (89,580) 89,580 -- -- -- -- -- -------------------------------------------------------------------------------------------------------- Total $ (83,046) $ 321,832 $ 238,786 $ 1,282,770 $ 1,521,556 $ (510,848) $ 1,010,708 ========================================================================================================
The net realized gain (loss) on securities sold or distributed was as follows: 1994 ---------------------------------------- Net Amount Realized Realized Cost Gain(Loss) ---------------------------------------- PHS Stock Fund $ 14,275 $ 13,000 $ 1,275 International Equity Fund 7,166 7,003 163 Aggressive Growth Fund 29,688 28,106 1,582 SBS Balanced Fund 18,078 17,027 1,051 Government Income Fund 23,894 23,802 92 Guaranteed Investment Contract Fund 237,772 234,877 2,895 Wright Balanced Fund 1,554,719 1,627,735 (73,016) Growth Equity Fund 1,585,560 1,763,890 (178,330) --------------------------------------- Total $ 3,471,152 $ 3,715,440 $ (244,288) ======================================= 1995 ---------------------------------------- Net Amount Realized Realized Cost Gain(Loss) ---------------------------------------- PHS Stock Fund $ 23,746 $ 18,666 $ 5,080 International Equity Fund 271,492 282,444 (10,952) Aggressive Growth Fund 244,416 202,756 41,660 SBS Balanced Fund 223,925 195,312 28,613 Government Income Fund 164,497 154,398 10,099 Guaranteed Investment Contract Fund 229,594 220,193 9,401 Wright Balanced Fund -- -- -- Growth Equity Fund -- -- -- --------------------------------------- Total $ 1,157,670 $ 1,073,769 $ 83,901 ======================================= 1996 ---------------------------------------- Net Amount Realized Realized Cost Gain(Loss) ---------------------------------------- PHS Stock Fund $ 364,164 $ 308,403 $ 55,761 International Equity Fund 137,068 130,929 6,139 Aggressive Growth Fund 554,457 429,412 125,045 SBS Balanced Fund 291,598 229,864 61,734 Government Income Fund 109,689 99,411 10,278 Guaranteed Investment Contract Fund 255,775 237,701 18,074 Wright Balanced Fund -- -- -- Growth Equity Fund -- -- -- ---------------------------------------- Total $ 1,712,751 $ 1,435,720 $ 277,031 ======================================== F-11 PHYSICIANS HEALTH SERVICES, INC. 401(k) PROFIT SHARING PLAN NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. INVESTMENTS The fair value of investments held which exceeded 5% of net assets available for plan benefits at December 31 was as follows:
AT DECEMBER 31, ISSUER DESCRIPTION 1996 1995 --------------- -------------- Physicians Health Services, Physicians Health Services, Inc. Inc. Stock Fund $1,103,831 $1,639,248 Smith Barney Corporate Trust International Equity Fund 1 International Equity Fund $624,695 $503,978 Smith Barney Corporate Trust Small-Cap Equity Fund 5 Aggressive Growth Equity Fund $3,715,397 $2,715,208 Smith Barney Corporate Trust Flexible Growth Balanced Fund 2 SBS Balanced Fund $2,810,903 $1,948,932 Smith Barney Corporate Trust Intermediate Government Income Fund 2 Government Income Fund $453,166 $433,467 Smith Barney Corporate Trust Guaranteed Investment Guaranteed Investment Contract Income Fund 4 Contract Fund $802,853 $681,436
F-12 PHYSICIANS HEALTH SERVICES, INC. 401(k) PROFIT SHARING PLAN NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. INCOME TAX STATUS The Internal Revenue Service ruled that the Plan qualifies under Section 401(k) of the Internal Revenue Code ("IRC") and, therefore, the related trust is not subject to tax under present income tax law. Once qualified, the Plan is required to operate in conformity with the IRC to maintain its qualification. The Pension Plan Committee of Physicians Health Services, Inc. is not aware of any course of action or series of events that have occurred that would adversely affect the Plan's qualified status. 5. PARTY IN INTEREST TRANSACTIONS Transactions with parties in interest during 1996 were as follows: SALES NET REALIZED DESCRIPTION OF TRANSACTION COST PROCEEDS GAIN -------------------------- ---- -------- ---- Purchased 42,066 shares of Physicians Health Services, Inc. Class A Common Stock $950,810 $ - $ - Disposed of 11,534 shares of Physicians Health Services, Inc. Class A Common Stock $308,403 $364,164 $55,761 6. SUBSEQUENT EVENT (UNAUDITED) On May 8, 1997, Physicians Health Services, Inc. ("Parent Company") and Foundation Health Systems, Inc. ("FHS") executed a merger agreement pursuant to which FHS would acquire all of the shares of common stock of the Parent Company for $29.25 per share in cash, or a total consideration to the Parent Company's stockholders of approximately $280 million. FHS announced that it intends to finance the purchase with a combination of cash and bank debt. As a part of the transaction, the Parent Company has entered into a voting trust agreement with the Greater Bridgeport Individual Practice Association ("GBIPA"), which owned at April 30, 1997 shares constituting approximately 61% of the voting power of the Parent Company. The agreement stipulates that such shares will be voted in favor of the transaction by GBIPA. The transaction is subject to certain closing conditions, including receipt of regulatory approvals and entering into certain agreements with Guardian Life Insurance Company of America. This transaction is expected to close by the end of 1997. F-13 PHYSICIANS HEALTH SERVICES, INC. 401(k) PROFIT SHARING PLAN Assets Held for Investment Purposes December 31, 1996
NUMBER FAIR DESCRIPTION OF INVESTMENT OF UNITS COST VALUE - ------------------------- -------- ---- ----- PHS STOCK FUND - -------------- Physicians Health Services, Inc. Class A Common Stock 74,836 $1,806,572 $1,103,831 INTERNATIONAL EQUITY FUND - ------------------------- Diversified portfolio of equity investments Smith Barney Corporate Trust International Equity Fund 1 56,029 580,217 624,695 AGGRESSIVE GROWTH FUND - ---------------------- Diversified portfolio of equity investments Smith Barney Corporate Trust Small Cap Equity Fund 5 43,486 2,829,907 3,715,397 SBS BALANCED FUND - ----------------- Portfolio of equity investments and near term bonds Smith Barney Corporate Trust Flexible Growth Balanced Fund 2 46,364 2,140,266 2,810,903 GOVERNMENT INCOME FUND - ---------------------- Portfolio of U.S. Treasury Securities Smith Barney Corporate Trust Intermediate Government Income Fund 2 19,690 403,273 453,166 GUARANTEED INVESTMENT CONTRACT FUND - ----------------------------------- Portfolio of fixed interest rate contracts Smith Barney Corporate Trust Guaranteed Investment Contract Income Fund 4 61,256 739,902 802,853 LOANS to PARTICIPANTS - --------------------- 406,758 406,758 ---------- ---------- $8,906,895 $9,917,603 ========== ==========
S-1 PHYSICIANS HEALTH SERVICES, Inc. 401(k) PROFIT SHARING PLAN Schedule of Reportable Transactions Year Ended December 31, 1996
Number Purchase Selling Cost of Net Realized Total Number of Units Price Price Asset Gain ----------------- Description of Assets Purchases Sales - ---------------------------------------------------------------------------------------------------------------------------------- Category (iii) - A Series of Transactions In Excess of 5% of Plan Assets PHS Stock Fund * 42,066 $ 950,810 $ 950,810 31 11,534 $ 364,164 308,403 $ 55,761 10 Aggressive Growth Fund ** 14,003 1,120,662 1,120,662 57 6,817 554,457 429,412 125,045 55 SBS Balanced Fund ** 14,224 795,603 795,603 56 5,130 291,598 229,864 61,734 45 Guaranteed Investment Contract Fund ** 26,363 336,804 336,804 48 20,264 255,775 237,701 18,074 38
* Transactions involved Physicians Health Services, Inc. Class A Common Stock. ** Transactions conducted with Smith Barney Corporate Trust. There were no category (i), (ii) or (iv) reportable transactions during 1996. S-2 PHYSICIANS HEALTH SERVICES, INC. Annual Report on Form 11-K for the Fiscal Year Ended December 31, 1996 Exhibit No. ----------- 1 Auditor's Consent EX-1 2 CONSENT OF ERNST & YOUNG LLP CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8, No. 33-81142) pertaining to the Physicians Health Services, Inc. 401(k) Profit Sharing Plan of our report dated June 13, 1997, with respect to the financial statements and schedules of the Physicians Health Services, Inc. 401(k) Profit Sharing Plan included in this Annual Report (Form 11-K) for the year ended December 31, 1996. Ernst & Young LLP Stamford, Connecticut June 27, 1997 -----END PRIVACY-ENHANCED MESSAGE-----