-----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, SPOUAYn+MXOrOnnBS3/6bBGJS5/+B/PtlT9eUdRoFgsL2zDT+R9upE8Gc3SWEG13 90aYoSf4wpQkqEMrmhUrDw== 0000950144-97-005939.txt : 19970520 0000950144-97-005939.hdr.sgml : 19970520 ACCESSION NUMBER: 0000950144-97-005939 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PHYCOR INC/TN CENTRAL INDEX KEY: 0000881400 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-OFFICES & CLINICS OF DOCTORS OF MEDICINE [8011] IRS NUMBER: 621344801 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19786 FILM NUMBER: 97607580 BUSINESS ADDRESS: STREET 1: 30 BURTON HILLS BLVD STREET 2: STE 400 CITY: NASHVILLE STATE: TN ZIP: 37215 BUSINESS PHONE: 6156659066 MAIL ADDRESS: STREET 1: 30 BURTON HILLS BLVD STREET 2: STE 400 CITY: NASHVILLE STATE: TN ZIP: 37215 10-Q 1 PHYCOR, INC. 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) [X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ending March 31, 1997. [ ] Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _____________ to _______________. COMMISSION FILE NO.: 0-19786 PHYCOR, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) TENNESSEE 62-1344801 - --------------------------------- --------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 30 BURTON HILLS BLVD., SUITE 400 NASHVILLE, TENNESSEE 37215 - --------------------------------- --------------------- (Address of principal executive (Zip Code) offices) Registrant's telephone number, including area code: (615) 665-9066 --------------------- NOT APPLICABLE ---------------------------------------------------- (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 X NO --- --- As of May 13, 1997, 63,494,635 shares of the Registrant's Common Stock were outstanding. 2 PHYCOR, INC. AND SUBSIDIARIES Consolidated Balance Sheets March 31, 1997 (unaudited) and December 31, 1996 (All dollar amounts are expressed in thousands)
ASSETS 1997 1996 ------ ---- ---- (Unaudited) Current assets: Cash and cash equivalents $ 32,556 30,530 Accounts receivable, net 349,854 295,437 Inventories 16,138 15,185 Prepaid expenses and other assets 47,257 42,275 ---------- ---------- Total current assets 445,805 383,427 Property and equipment, net 193,319 160,228 Intangible assets 722,277 559,705 Other assets 31,538 15,221 ---------- ---------- Total assets $1,392,939 1,118,581 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current liabilities: Current installments of long-term debt $ 441 424 Current installments of obligations under capital leases 2,048 1,237 Accounts payable 22,955 24,103 Due to physician groups 105,542 75,340 Salaries and benefits payable 33,186 23,120 Other accrued expenses and liabilities 58,562 46,257 ---------- ---------- Total current liabilities 222,734 170,481 Long-term debt, excluding current installments 72,035 123,112 Obligations under capital leases, excluding current installments 2,854 1,467 Purchase price payable 67,822 66,103 Deferred tax credits and other liabilities 50,151 21,797 Convertible subordinated notes payable to physician groups 84,920 83,918 Convertible subordinated debentures 200,000 200,000 ---------- ---------- Total liabilities 700,516 666,878 ---------- ---------- Shareholders' equity : Preferred stock, no par value; 10,000,000 shares authorized: -- -- Common stock, no par value; 250,000,000 shares authorized; issued and outstanding, 63,273,000 in 1997 and 53,901,000 shares in 1996 618,125 389,712 Retained earnings 74,298 61,991 ---------- ---------- Total shareholders' equity 692,423 451,703 ---------- ---------- Total liabilities and shareholders' equity $1,392,939 1,118,581 ========== ==========
See accompanying notes to consolidated financial statements. 2 3 PHYCOR, INC. AND SUBSIDIARIES Consolidated Statements of Earnings Three months ended March 31, 1997 and 1996 (All amounts are expressed in thousands, except for earnings per share) (Unaudited)
THREE MONTHS ENDED MARCH 31, ------------------ 1997 1996 ---- ---- Net revenue $ 250,652 162,501 Operating expenses: Clinic salaries, wages and benefits 94,864 62,615 Clinic supplies 39,264 23,878 Purchased medical services 7,028 5,028 Other clinic expenses 39,023 27,144 General corporate expenses 6,487 4,986 Rents and lease expense 22,243 13,178 Depreciation and amortization 13,722 8,441 --------- --------- Net operating expenses 222,631 145,270 --------- --------- Earnings from operations 28,021 17,231 Interest income (1,053) (714) Interest expense 6,159 2,778 Minority interest in earnings of consolidated partnerships 2,904 2,663 --------- --------- Earnings before income taxes 20,011 12,504 Income tax expense 7,704 4,814 --------- --------- Net earnings $ 12,307 7,690 ========= ========= Earnings per common share $ .19 .13 ========= ========= Weighted average number of shares and share equivalents outstanding 65,142 60,306 ========= =========
See accompanying notes to consolidated financial statements. 3 4 PHYCOR, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Three months ended March 31, 1997 and 1996 (All dollar amounts are expressed in thousands) (Unaudited)
THREE MONTHS ENDED MARCH 31, ------------------ 1997 1996 ---- ---- Cash flows from operating activities: Net earnings $ 12,307 7,690 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 13,722 8,441 Minority interests 2,228 2,092 Increase (decrease) in cash, net of effects of acquisitions, due to changes in: Accounts receivable (15,416) (12,542) Inventories 118 (342) Prepaid expenses and other assets 3,325 (5,250) Accounts payable (5,485) (3,511) Due to physician groups 7,686 3,082 Other accrued expenses and liabilities (1,275) 10,169 --------- --------- Net adjustments 4,903 2,139 --------- --------- Net cash provided by operating activities 17,210 9,829 --------- --------- Cash flows from investing activities: Payments for acquisitions, net (150,959) (79,431) Purchase of property and equipment (17,922) (13,161) Payments to acquire other assets (1,798) 303 --------- --------- Net cash used by investing activities (170,679) (92,289) --------- --------- Cash flows from financing activities: Proceeds from long-term borrowings 155,000 42,000 Repayment of long-term borrowings (210,098) (104,081) Repayment of obligations under capital leases (1,972) (583) Net proceeds from issuance of stock 212,565 1,101 Net proceeds from issuance of convertible debentures -- 194,458 --------- --------- Net cash provided by financing activities 155,495 132,895 --------- --------- Net increase in cash and cash equivalents 2,026 50,435 Cash and cash equivalents - beginning of period 30,530 18,827 --------- --------- Cash and cash equivalents - end of period $ 32,556 69,262 ========= =========
See accompanying notes to consolidated financial statements. 4 5 PHYCOR, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows, Continued Three months ended March 31, 1997 and 1996 (All dollar amounts are expressed in thousands) (Unaudited)
THREE MONTHS ENDED MARCH 31, ------------------ 1997 1996 ---- ---- SUPPLEMENTAL SCHEDULE OF INVESTING ACTIVITIES: Effects of acquisitions: Assets acquired, net of cash $ 257,568 121,420 Liabilities assumed, net of deferred purchase price payments (89,759) (39,125) Issuance of convertible subordinated notes payable (8,672) (2,864) Issuance of common stock (8,178) -- --------- --------- Payments for acquisitions $ 150,959 79,431 ========= ========= SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Capital lease obligations incurred to acquire equipment $ 172 186 ========= ========= Conversion of subordinated notes payable to common stock $ 7,670 3,158 ========= =========
See accompanying notes to consolidated financial statements. 5 6 PHYCOR, INC. AND SUBSIDIARIES Notes to Unaudited Consolidated Financial Statements Three months ended March 31, 1997 and 1996 (1) BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial reporting and in accordance with Rule 10-01 of Regulation S-X. In the opinion of management, the unaudited interim financial statements contained in this report reflect all adjustments, consisting of only normal recurring accruals which are necessary for a fair presentation of the financial position and the results of operations for the interim periods presented. The results of operations for any interim period are not necessarily indicative of results for the full year. These financial statements, footnote disclosures and other information should be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996. (2) ACQUISITIONS (A) MULTI-SPECIALTY MEDICAL CLINICS Through March 31, 1997 and during 1996, the Company, through wholly-owned subsidiaries, acquired certain operating assets of the following clinics:
CLINIC EFFECTIVE DATE LOCATION ------ -------------- -------- 1997: Vancouver Clinic January 1, 1997 Vancouver, Washington First Physicians Medical Group February 1, 1997 Palm Springs, California St. Petersburg-Suncoast Medical Group February 28, 1997 St. Petersburg, Florida 1996: Arizona Physicians Center January 1, 1996 Phoenix, Arizona Clinics of North Texas March 1, 1996 Wichita Falls, Texas Carolina Primary Care May 1, 1996 Columbia, South Carolina Harbin Clinic May 1, 1996 Rome, Georgia Focus Health Services July 1, 1996 Denver, Colorado Clark-Holder Clinic July 1, 1996 LaGrange, Georgia Medical Arts Clinic August 1, 1996 Minot, North Dakota Wilmington Health Associates August 1, 1996 Wilmington, North Carolina Gulf Coast Medical Group August 1, 1996 Galveston, Texas Hattiesburg Clinic October 1, 1996 Hattiesburg, Mississippi Straub Clinic & Hospital (A) October 1, 1996 Honolulu, Hawaii Toledo Clinic November 1, 1996 Toledo, Ohio Lewis-Gale Clinic November 1, 1996 Roanoke, Virginia
(A) Straub Clinic & Hospital (Straub) was operated under an administrative services agreement effective October 1, 1996. The Company completed its merger and entered into a long-term service agreement with Straub effective January 17, 1997. (Continued) 6 7 PHYCOR, INC. AND SUBSIDIARIES Notes to Unaudited Consolidated Financial Statements The acquisitions were accounted for as purchases, and the accompanying consolidated financial statements include the results of their operations from the dates of their respective acquisitions. Simultaneous with each acquisition, the Company entered into a long-term service agreement with the related clinic physician group. The service agreements are 40 years in length. In conjunction with certain acquisitions, the Company is obligated to make deferred payments to physician groups. Such payments are included in amounts due to physician groups in the accompanying balance sheets. (B) NORTH AMERICAN MEDICAL MANAGEMENT, INC. (NORTH AMERICAN) Effective January 1, 1995, the Company completed its merger with North American, an operator and manager of independent practice associations (IPAs). The Company may make future payments for the North American acquisition pursuant to an earn-out formula during 1996, 1997, and 1998 of up to an aggregate of $70 million, subject to adjustment to a maximum of $130 million in the event of future acquisitions by North American of additional interests in IPA management entities. The first of such payments was made in the first quarter of 1996 and totaled approximately $13.9 million in cash. The second cash payment totaling approximately $21.1 million was made in the first quarter of 1997. Of the future payments to be made, a portion may be payable in shares of the CompanyGs common stock. (C) PRO FORMA INFORMATION AND SUBSEQUENT EVENTS The unaudited consolidated pro forma results of all current, continuing operations assuming all 1997 and 1996 acquisitions, had been consummated on January 1, 1996 are as follows (in thousands, except for earnings per share):
THREE MONTHS ENDED MARCH 31, ----------------------- 1997 1996 ---- ---- Net revenue $257,876 230,651 Earnings before income taxes 20,416 17,172 Net earnings 12,556 10,542 Earnings per common share .19 .17 Weighted average number of shares and share equivalents outstanding 65,223 62,140
Since March 31, 1997, the Company has acquired the assets of a 28-physician multi-specialty clinic based in Annapolis, Maryland and has entered into a long-term agreement with the affiliated physician group. The physician group is a new group formation that developed through an affiliate's IPA in the Annapolis area. The Company also entered into an agreement with Florida Independent Physician Association (FIPA) whereby the Company assumed management responsibilities for FIPA under an agreement with Florida Physician Services, the IPA management company associated with FIPA. FIPA is a network of 12 regionally based, physician-directed IPAs covering the state of Florida, currently contracting with approximately 6,000 physicians who deliver services to approximately 57,000 patients under capitated contracts. (Continued) 7 8 PHYCOR, INC. AND SUBSIDIARIES Notes to Unaudited Consolidated Financial Statements (3) NET REVENUE Clinic service agreement revenue is equal to the net revenue of the clinics, less amounts retained by physician groups. Net clinic revenue is recorded by the physician groups at established rates reduced by provisions for doubtful accounts and contractual adjustments. Contractual adjustments arise due to the terms of certain reimbursement and managed care contracts. Such adjustments represent the difference between charges at established rates and estimated recoverable amounts and are recognized in the period the services are rendered. Any differences between estimated contractual adjustments and actual final settlements under reimbursement contracts are recognized as contractual adjustments in the year final settlements are determined. IPA management revenue is equal to the difference between the amount of capitation and risk pool payments due to the IPAs managed by the Company less amounts retained by the IPA. The following represent amounts included in the determination of net revenue (in thousands):
THREE MONTHS ENDED ----------------------- MARCH 31, 1997 1996 ---- ---- Gross physician group revenues $643,157 405,110 Less: Provisions for doubtful accounts and contractual adjustments 242,833 142,348 -------- ------- Net physician group revenue 400,324 262,762 IPA revenue 86,990 52,886 -------- ------- Net physician group and IPA revenue 487,314 315,648 Less amounts retained by physician groups and IPAs: Physician group 147,775 99,922 Clinic technical employee compensation 17,295 10,636 IPAs 71,592 42,589 -------- ------- Net revenue $250,652 162,501 ======== =======
(4) CAPITALIZATION In the first quarter of 1997, the Company completed a public offering of 7,295,000 shares of its common stock at a price of $30.00 per share. Net proceeds from the offering of approximately $210.5 million were used to repay bank debt and accrued interest. 8 9 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW PhyCor is a physician practice management company that operates multi-specialty medical clinics and independent practice associations (IPAs). The Company currently operates 48 clinics with approximately 3,280 physicians in 28 states and manages IPAs with over 15,800 physicians in 23 markets. The Company's affiliated physicians provide capitated medical services to approximately one million patients, including approximately 135,000 Medicare-eligible patients. The Company's strategy is to position its affiliated primary care anchored multi-specialty clinics and IPAs as the physician component of competitive networks that are developing as the health care system reforms. PhyCor believes physician organizations create the value in these networks as the decisions of physicians drive the cost and quality of health care. Most of the Company's revenue in 1997 and 1996 was earned under clinic service agreements. Revenue earned under the service agreements is equal to the net revenue of the clinics, less amounts retained by physician groups. The service agreements contain financial incentives for the Company to assist the physician groups in increasing clinic revenues and controlling expenses. To increase clinic revenue, the Company works with the affiliated physician groups to recruit additional physicians, merge other physicians practicing in the area into the affiliated physician groups, negotiate contracts with managed care organizations and provide additional ancillary services. To reduce or control expenses, among other things, PhyCor utilizes national purchasing contracts for key items, reviews staffing levels to make sure they are appropriate and assists the physicians in developing more cost-effective clinical practice patterns. The Company has increased its focus on the development of IPAs to enable the Company to provide services to a broader range of physician organizations, to enhance the operating performance of existing clinics and to further develop physician relationships. The Company develops IPAs that include affiliated clinic physicians to enhance the clinics' attractiveness as providers to managed care organizations. During the first quarter of 1997, PhyCor affiliated with three multi-specialty clinics and numerous smaller medical practices and completed its previously announced merger with Straub Clinic & Hospital, Incorporated located in Honolulu, Hawaii, adding a total of $238.0 million in assets. The principal assets acquired were accounts receivable, property and equipment and service agreement costs, an intangible asset. The consideration for the acquisitions consisted of approximately 55% cash, 38% liabilities assumed and 7% stock and convertible notes. The cash portion of the purchase price was funded by a combination of operating cash flow, the proceeds from the sale of common stock and borrowings under the Company's bank credit facility. Property and equipment acquired consisted mostly of clinic and hospital operating equipment, although the Company purchased certain land and buildings. Service agreement costs are amortized over the life of the related service agreement, with recoverability assessed periodically. 9 10 Since March 31, 1997, the Company has acquired the assets of a 28-physician multi-specialty clinic based in Annapolis, Maryland and has entered into a long-term agreement with the affiliated physician group. The physician group is a new group formation developed through PhyCor Management Corporation's (PMC) IPA in the Annapolis area. The Company also entered into an agreement with Florida Independent Physician Association (FIPA) whereby the Company assumed management responsibilities for FIPA under an agreement with Florida Physician Services, the IPA management company associated with FIPA. FIPA is a network of 12 regionally based, physician-directed IPAs covering the state of Florida, currently contracting with approximately 6,000 physicians who deliver services to approximately 57,000 patients under capitated contracts. RESULTS OF OPERATIONS The following table shows the percentage of net revenue represented by various expense and other income items reflected in the Company's Consolidated Statements of Earnings.
THREE MONTHS ENDED MARCH 31, ------------------ 1997 1996 ---- ---- Net revenue ........................................ 100.0% 100.0% Operating expenses: Clinic salaries, wages and benefits .............. 37.8 38.5 Clinic supplies .................................. 15.6 14.7 Purchased medical services ....................... 2.8 3.1 Other clinic expenses ............................ 15.6 16.7 General corporate expenses ....................... 2.6 3.1 Rents and lease expense .......................... 8.9 8.1 Depreciation and amortization .................... 5.5 5 .2 ----- ----- Net operating expenses ......................... 88.8 89.4 ----- ----- Earnings from operations ....................... 11.2 10.6 Interest income .................................. (0.4) (0.4) Interest expense ................................. 2.4 1.7 Minority interest in earnings of consolidated partnerships ...................... 1.2 1.6 ----- ----- Earnings before income taxes ................... 8.0 7.7 Income tax expense ................................. 3.1 3.0 ----- ----- Net earnings ................................... 4.9% 4.7% ===== =====
1997 Compared to 1996 Net revenue increased from $162.5 million for the first quarter of 1996 to $250.7 million for the first quarter of 1997, an increase of $88.2 million, or 54.3%. On a base of 31 clinics and 13 IPA markets, net revenue increased by 13.2% for the quarter ended March 31, 1997, compared with the 10 11 same period in 1996. Same clinic growth resulted from the addition of new physicians, the expansion of ancillary services, increases in patient volume and increases in fees. During the first quarter of 1997, several categories of operating expenses were relatively stable as a percentage of net revenue when compared to the same period in 1996, despite the large increase in the dollar amounts resulting from acquisitions and clinic growth. The decrease in clinic salaries, wages and benefits and other clinic expenses resulted from the acquisition of clinics with lower levels of these expenses compared to the existing base of clinics. The increase in clinic supplies and rents and lease expenses as a percentage of net revenue resulted from the acquisition of clinics with higher levels of these expenses compared to the existing base of clinics. While general corporate expenses decreased as a percentage of net revenue, the dollar amount of general corporate expenses increased as a result of the addition of corporate personnel to accommodate increased acquisition activity and to respond to increasing physician group needs for support in managed care negotiations, information systems implementation and clinic outcomes management programs. Income tax expense increased from the prior year as a result of the Company's increased profitability. The Company's expects an effective tax rate of approximately 38.5% in 1997. LIQUIDITY AND CAPITAL RESOURCES At March 31, 1997, the Company had $223.1 million in working capital, up from $212.9 million as of December 31, 1996. Also, the Company generated $17.2 million of cash flow from operations in the first quarter of 1997 compared to $9.8 million in the first quarter of 1996. At March 31, 1997, net accounts receivable of $349.9 million amounted to 74 days of net clinic revenue compared to $295.4 million and 73 days at the end of 1996. The increase is attributable to seasonal factors affecting payments from some payors and patients' responsibility for beginning of year deductible requirements. In the first quarter of 1997, the Company completed a public offering of 7,295,000 shares of its common stock at a price of $30.00 per share. Net proceeds from the offering of approximately $210.5 million were used to repay bank debt and accrued interest. As a result of the issuance of common stock during the first quarter of 1997, debt was 38.2% of total capitalization at March 31, 1997, compared to 51.2% at the end of 1996. In the first quarter of 1997, $7.7 million of convertible subordinated notes issued in connection with physician group asset acquisitions were converted into common stock. These conversions, the issuance of common stock, option exercises and net earnings for the first quarter of 1997 resulted in an increase of $240.7 million in shareholders' equity compared to December 31, 1996. Capital expenditures during the first quarter of 1997 totaled $17.9 million. The Company is responsible for capital expenditures at its affiliated clinics under its service agreements. The Company expects to make approximately $42 million in capital expenditures during the remainder of 1997. 11 12 Effective January 1, 1995, the Company completed its acquisition of North American Medical Management, Inc. (North American). The Company paid $20.0 million at closing and may make additional future payments pursuant to an earn- out formula during 1996, 1997, and 1998 of up to an aggregate of $70.0 million. The total acquisition consideration may increase to a maximum of $130.0 million in the event of future acquisitions by North American of additional interests in IPA management entities. The first of such payments was made in the first quarter of 1996 and totaled approximately $13.9 million in cash. The second cash payment totaling approximately $21.1 million was made in the first quarter of 1997. Of the future payments to be made, a portion may be payable in shares of the Company's common stock. In addition, deferred acquisition payments are payable to physician groups in the event such physician groups attain predetermined financial targets during established periods of time following the acquisitions. If each group satisfied their applicable financial targets for the periods covered, the Company would be required to pay an aggregate of approximately $69.0 million of additional consideration over the next five years, of which $22.6 million would be payable during 1997. The Company may exercise its option to acquire the outstanding Class B Common Stock of PMC before the end of 1997. In accordance with the terms of the options, the aggregate purchase price for these shares at that time would be approximately $18 to $19 million. PhyCor has been the subject of an audit by the IRS since 1991. The IRS has proposed adjustments relating to the timing of recognition for tax purposes of certain revenue and deductions relating to uncollectible accounts. PhyCor disagrees with the positions asserted by the IRS and is vigorously contesting these proposed adjustments. The Company believes that any adjustments resulting from resolution of this disagreement would not affect reported net earnings of PhyCor but would defer tax benefits and change the levels of current and deferred tax assets and liabilities. For the years under audit, and potentially, for subsequent years, any such adjustments could result in material cash payments by the Company. PhyCor does not believe the resolution of this matter will have a material adverse effect on its financial condition, although there can be no assurance as to the outcome of this matter. In July 1996, the Company completed modifications to its bank credit facility which included the revision of certain terms and conditions and the addition of six participating financial institutions. The Company's bank credit facility provides for a five-year, $200.0 million revolving line of credit and a $100 million 364-day facility for use by the Company prior to July 2001 for acquisitions, working capital, capital expenditures and general corporate purposes. The Company's bank credit facility provides that borrowings under the facility bear interest at either the agent's base rate or between .25% to .55% above the applicable eurodollar rate. The Company is required to pay a facility fee of between .10% to .25% per annum on the commitments, payable quarterly in arrears, until the commitments are terminated. The total drawn cost under the facility ranges from .375% to .75% above the applicable eurodollar rate. The Company's bank credit facility contains covenants which, among other things, require the Company to maintain certain financial ratios and impose certain limitations or prohibitions on the Company with respect to (i) the incurring of certain indebtedness, (ii) the creation of security 12 13 interests on the assets of the Company, (iii) the payment of cash dividends on, and the redemption or repurchase of, securities of the Company, (iv) investments and (v) acquisitions. The Company is required to obtain bank consent for an acquisition with an aggregate purchase price of $50.0 million or more. The Company was in compliance with such covenants at March 31, 1997. At March 31, 1997, the Company had cash and cash equivalents of approximately $32.6 million and, as of May 12, 1997, $212.7 million available under its bank credit facility. The Company believes that the combination of funds available under the Company's bank credit facility, together with cash reserves and cash flow from operations, should be sufficient to meet the Company's current planned acquisition, expansion, capital expenditures and working capital needs through 1997. In addition, in order to provide the funds necessary for the continued pursuit of the Company's long-term expansion strategy, the Company expects to continue to incur, from time to time, additional short-term and long-term indebtedness and to issue equity and debt securities, the availability and terms of which will depend upon market and other conditions. There can be no assurance that such additional financing will be available on terms acceptable to the Company. This discussion contains forward looking statements relating to completion of pending acquisitions and other matters. Certain of these statements are accompanied by important cautionary factors that could cause different results than expected by the Company. In addition to those factors, other factors such as shareholder, regulatory and third party consents with respect to acquisitions, among other events outside the Company's control could also cause future results to differ from expectations. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. No disclosure required. 13 14 PART II OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. EXHIBIT NUMBER DESCRIPTION OF EXHIBITS 3.1 -- Restated Charter of the Registrant (1) 3.2 -- Amendment to Restated Charter of the Registrant (2) 3.3 -- Amendment to Restated Charter of the Registrant (3) 3.4 -- Amended Bylaws of the Registrant (1) 4.1 -- Specimen of Common Stock Certificate (4) 4.2 -- Shareholder Rights Agreement, dated February 18, 1994, between the Registrant and First Union National Bank of North Carolina (5) 11 -- Statement re: Computation of Per Share Earnings 27.1 -- Financial Data Schedule (For SEC use only) - ------------- (1) Incorporated by reference to Exhibits 3.2 filed with the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994, Commission No. 0-19786. (2) Incorporated by reference to Exhibit 4.2 filed with the Registrant's Registration Statement on Form S-3, Registration No. 33-93018. (3) Incorporated by reference to Exhibit 4.3 filed with the Registrant's Registration Statement on Form S-3, Registration No. 33-98528. (4) Incorporated by reference to Exhibit 4.2 filed with the Registrant's Registration Statement on Form S-1, Registration No. 33-44123. (5) Incorporated by reference to exhibits filed with the Registrant's Annual Report on Form 8-K dated February 18, 1994, Commission No. 0-19786. (b) Reports on Form 8-K. The Company filed a Current Report on Form 8-K on February 3, 1997 describing the acquisition of Straub Clinic & Hospital, Incorporated pursuant to Item 2 of Form 8-K. The Company filed a Current Report on Form 8-K/A on February 26, 1997 containing the financial statements required by Item 7 of Form 8-K. 14 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PHYCOR, INC. By: /s/ John K. Crawford ----------------------------------------- John K. Crawford Chief Financial Officer Date: May 13, 1997 15 EX-11 2 COMPUTATION OF EARNINGS 1 EXHIBIT 11 PHYCOR, INC. AND SUBSIDIARIES STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (ALL AMOUNTS ARE EXPRESSED IN THOUSANDS, EXCEPT FOR EARNINGS PER SHARE)
THREE MONTHS ENDED MARCH 31, ------------------- 1997 1996 ---- ---- Earnings per common share: Net income $12,307 7,690 ======= ===== Earnings per share $ .19 .13 ======= ===== Weighted average common shares outstanding 65,142 60,306 ======= ===== Earnings per common share, assuming full dilution: Net income $12,307 7,690 ======= ===== Earnings per share $ .19 .13 ======= ===== Weighted average common shares outstanding 70,734 63,744 ======= =====
Note: The convertible debentures were not included in the fully diluted earnings per share calculation since the effect of inclusion would be antidilutive. EX-27.1 3 FINANICAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 32,556 0 349,854 0 16,138 445,805 257,804 64,485 1,392,939 222,734 272,035 0 0 618,125 74,298 1,392,939 0 250,652 0 222,631 2,904 0 6,159 20,011 7,704 12,307 0 0 0 12,307 .19 .19
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