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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED MARCH 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM_______________________________________________
COMMISSION FILE NO. 0-23311
AMERICAN PHYSICIAN PARTNERS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2648089
(State or other (I.R.S. Employer
jurisdiction of Identification)
incorporation or
organization)
3600 CHASE TOWER
2200 ROSS AVENUE
DALLAS, TEXAS 75201
(Address of principal executive offices, including zip code)
(214) 303-2776
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at May 11, 1999
----- ---------------------------
COMMON STOCK, $0.0001 PAR VALUE 17,297,213 SHARES
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AMERICAN PHYSICIAN PARTNERS, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
FORM 10-Q ITEM PAGE
----
<S> <C> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1999 (Unaudited) and December 31, 1998.......... 1
Consolidated Statements of Income (Unaudited) for the three months
ended March 31, 1999 and 1998............................................................... 2
Consolidated Statements of Cash Flows (Unaudited) for the three months
ended March 31, 1999 and 1998............................................................... 3
Notes to Consolidated Financial Statements.................................................. 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ...... 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk ................................. 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.......................................................................... 13
Item 2. Changes in Securities....................................................................... 13
Item 3. Defaults Upon Securities.................................................................... 13
Item 4. Submission of Matters to a Vote of Security Holders......................................... 13
Item 5. Other Information .......................................................................... 13
Item 6. Exhibits and Reports on Form 8-K............................................................ 13
SIGNATURES.................................................................................................... 14
</TABLE>
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AMERICAN PHYSICIAN PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
--------- -----------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents .............................................................. $ 4,419 $ 6,485
Accounts receivable, net of allowances ................................................. 40,636 36,789
Due from affiliated practices .......................................................... 905 1,412
Other current assets ................................................................... 3,536 2,835
--------- ---------
Total current assets ................................................................ 49,496 47,521
PROPERTY AND EQUIPMENT, net of accumulated depreciation ................................... 42,128 37,002
INVESTMENTS IN JOINT VENTURES ............................................................. 5,657 5,424
INTANGIBLE ASSETS, net .................................................................... 64,608 61,119
DEFERRED FINANCING COSTS, net ............................................................. 3,285 3,408
OTHER ASSETS .............................................................................. 2,382 2,165
--------- ---------
Total assets ........................................................................ $ 167,556 $ 156,639
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses .................................................. $ 12,800 $ 13,884
Accrued physician retention ............................................................ 7,313 6,319
Accrued salaries and benefits .......................................................... 4,631 3,893
Current portion of long-term debt ...................................................... 840 840
Current portion of capital lease obligations ........................................... 1,820 1,677
Deferred income taxes .................................................................. 617 636
Other current liabilities .............................................................. 1,566 894
--------- ---------
Total current liabilities ........................................................... 29,587 28,143
DEFERRED INCOME TAXES ..................................................................... 2,406 2,406
LONG-TERM DEBT, net of current portion .................................................... 118,334 113,807
CAPITAL LEASE OBLIGATIONS, net of current portion ......................................... 4,819 3,887
OTHER LIABILITIES ......................................................................... 226 243
--------- ---------
Total liabilities ................................................................... 155,372 148,486
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES ........................................... 949 1,107
STOCKHOLDERS' EQUITY:
Common stock ........................................................................... 2 2
Additional paid-in capital ............................................................. (605) (910)
Retained earnings ...................................................................... 11,838 7,954
--------- ---------
Total stockholders' equity .......................................................... 11,235 7,046
--------- ---------
Total liabilities and stockholders' equity .......................................... $ 167,556 $ 156,639
========= =========
</TABLE>
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AMERICAN PHYSICIAN PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
1999 1998
------------ ------------
(UNAUDITED)
<S> <C> <C>
SERVICE FEE REVENUES ................................................................ $ 39,195 $ 29,716
COSTS AND EXPENSES:
Salaries and benefits ............................................................. 11,843 9,368
Practice supplies ................................................................. 2,480 2,186
Practice rent and lease expense ................................................... 3,823 2,360
Other practice expenses ........................................................... 6,672 5,343
Corporate general and administrative .............................................. 2,629 2,010
Depreciation and amortization ..................................................... 3,612 2,472
------------ ------------
Total costs and expenses ..................................................... 31,059 23,739
------------ ------------
OPERATING INCOME .................................................................... 8,136 5,977
OTHER EXPENSES:
Interest expense, net ............................................................. 2,340 1,400
------------ ------------
Total other expenses ......................................................... 2,340 1,400
------------ ------------
INCOME BEFORE TAXES, MINORITY
INTERESTS IN CONSOLIDATED SUBSIDIARIES
AND EQUITY IN EARNINGS OF INVESTMENTS ............................................... 5,796 4,577
EQUITY IN EARNINGS OF INVESTMENTS ................................................... 673 651
MINORITY INTERESTS IN INCOME OF
CONSOLIDATED SUBSIDIARIES ........................................................... (204) (106)
------------ ------------
INCOME BEFORE TAXES ................................................................. 6,265 5,122
INCOME TAX EXPENSE .................................................................. (2,381) (2,049)
------------ ------------
NET INCOME .......................................................................... $ 3,884 $ 3,073
============ ============
NET INCOME PER COMMON SHARE
Basic ............................................................................. $ 0.20 $ 0.17
Diluted ........................................................................... $ 0.20 $ 0.16
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic ............................................................................. 19,294,638 18,054,221
Diluted ........................................................................... 19,730,139 18,843,878
</TABLE>
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AMERICAN PHYSICIAN PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
1999 1998
-------- --------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ......................................................................... $ 3,884 $ 3,073
Adjustments to reconcile net income to net cash
provided by operating activities --
Minority interests .............................................................. 204 106
Depreciation and amortization ................................................... 3,612 2,472
Equity in earnings of investments ............................................... (673) (651)
Changes in assets and liabilities
Accounts receivable, net .................................................... (3,534) (2,269)
Other receivables and other current assets .................................. (194) 2,138
Other assets ................................................................ (177) 302
Accounts payable and accrued expenses ....................................... (90) (6,603)
Accrued salaries and benefits ............................................... 738 297
Other liabilities ........................................................... 633 1,494
-------- --------
Net cash provided by operating activities ................................ 4,403 359
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ................................................ (6,061) (1,797)
Cash paid for acquisitions ......................................................... (4,461) (26,054)
Contributions to joint ventures .................................................... (50) (130)
Distributions from joint ventures .................................................. 91 88
-------- --------
Net cash used in investing activities .................................... (10,481) (27,893)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt ........................................... 4,477 30,594
Payments on capital leases ......................................................... (465) (699)
-------- --------
Net cash provided by financing activities ................................ 4,012 29,895
-------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS .................................................................. (2,066) 2,361
CASH AND CASH EQUIVALENTS, beginning of period ........................................ 6,485 4,572
-------- --------
CASH AND CASH EQUIVALENTS, end of period .............................................. $ 4,419 $ 6,933
======== ========
</TABLE>
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AMERICAN PHYSICIAN PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated unaudited financial statements have been
prepared by American Physician Partners, Inc., a Delaware corporation, (together
with its subsidiaries, "APPM" or the "Company") pursuant to the rules and
regulations of the Securities and Exchange Commission, and reflect all
adjustments (all of which are of a normal recurring nature) which, in the
opinion of management, are necessary for a fair statement of the results of the
interim periods presented. These financial statements do not include all
disclosures associated with the annual financial statements and, accordingly,
should be read in conjunction with the attached Management's Discussion and
Analysis of Financial Condition and Results of Operations and the consolidated
financial statements and footnotes for the year ended December 31, 1998,
included in APPM's Form 10-K filed with the Securities and Exchange Commission
on February 22, 1999.
1. DESCRIPTION OF BUSINESS:
APPM develops, consolidates and manages radiology and imaging networks.
The Company was incorporated in 1996, but conducted no significant operations
until November 26, 1997, when the Company consummated an initial public offering
("IPO") and simultaneously exchanged cash and shares of its common stock for
certain assets of and liabilities associated with seven radiology practices (the
"Reorganizations"). These exchanges were accounted for using the historical cost
basis with the stock being valued at the historical cost of the net assets
received by the Company. Cash consideration given in these exchanges was treated
for accounting purposes as a dividend from the Company.
At March 31, 1999, the Company owned, operated or maintained an
ownership interest in imaging equipment at 88 locations. The Company's radiology
facilities are concentrated in California, Florida, Kansas, Maryland, New York,
Texas, Virginia and Washington D.C. Physician services are provided at all of
APPM's 78 imaging centers under the terms of service agreements with ten
radiology practices, seven of which expire in November 2037, with the other
three expiring in 2038. Under the terms of the service agreements, the Company
provides management, administrative, technical and non-medical services to
radiology practices in return for service fees. The service agreements cannot be
terminated by either party without cause, consisting primarily of bankruptcy or
material default. However, under certain conditions, the Company can terminate
the service agreement if the number of physicians in a practice falls below a
certain percentage.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
The consolidated financial statements have been prepared on the accrual
basis of accounting and include the accounts of the Company and its
majority-owned subsidiaries. All intercompany accounts and transactions have
been eliminated in consolidation.
New Accounting Standard - Revenue Presentation
The Financial Accounting Standards Board's Emerging Issues Task Force
issued its abstract, Issue 97-2, "Application of FASB Statement No. 94 and
Accounting Principles Board ("APB") Opinion No. 16 to Physician Practice
Management Entities and Certain Other Entities with Contractual Arrangements"
("EITF 97-2"). EITF 97-2 addresses issues relating to (1) whether a "controlling
financial interest" can be established through a contractual management
agreement under FASB Statement No. 94, (2) whether a transaction between a
physician practice management entity ("PPM") and a physician practice in which
the PPM enters into a management agreement with the physician practice should be
considered a business combination and thus accounted for under APB No. 16, (3)
whether the pooling-of-interests method of accounting may be followed in certain
circumstances, (4) what are common types of intangibles that should be
considered in performing the purchase price allocation, and (5) whether an
employee of the physician practice should be considered an employee of the PPM
for purposes of accounting for
4
<PAGE> 7
that stock-based compensation.
In 1998, the Company displayed physician group revenue in its
consolidated statements of income. Since the Company has not established a
"controlling financial interest" under EITF 97-2, the 1998 display has been
restated to reflect the service fees earned as revenues. This change had no
effect on the Company's financial position, results of operations, or liquidity.
The following table sets forth the amounts of physician groups revenue
that would have been presented in the consolidated statements of income had the
Company met the provisions of EITF 97-2 (in thousands):
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
1999 1998
------------- -------------
<S> <C> <C>
Physician groups revenue, net.................... $ 58,500 $ 47,008
Less: amounts retained by physician groups....... (19,305) (17,292)
------------- -------------
Service fee revenue, as reported $ 39,195 $ 29,716
============= =============
</TABLE>
Service Fee Revenue
Service fee revenue represents radiology practices revenue less amounts
retained by radiology practices. The amounts retained by radiology practices
represents amounts paid to the physicians pursuant to the service agreements
between the Company and the radiology practices. Under the service agreements,
the Company provides each physician group with the facilities and equipment used
in its medical practice, assumes responsibility for the management of the
operations of the practice, and employs substantially all of the non-physician
personnel utilized by the group. Although the Company assists in negotiating
managed care contracts for the radiology practices, it assumes no risk under
these arrangements.
The Company's service fee revenue is dependent upon the operating
results of the radiology practices. Where state law allows, service fees due
under the service agreements are derived from two distinct revenue streams: (1)
a negotiated percentage (typically 20% to 30%) of the adjusted professional
revenues as defined in the service agreement; and (2) 100% of the adjusted
technical revenues as defined in the service agreements. In states where the
law requires a flat fee structure, the Company has negotiated a base service
fee, which is equal to the fair market value of the services provided under the
service agreement and which is renegotiated each year to equal the fair market
value of the services provided under the service agreement. The fixed fee
structure results in the Company receiving substantially the same amount of
service fee as it would have received under its negotiated percentage fee
structure. Adjusted professional revenues and adjusted technical revenues are
determined by deducting certain contractually agreed-upon expenses
(non-physician salaries and benefits, rent, depreciation, insurance, interest
and other physician costs) from the radiology practices' revenue.
Service fee revenue consists of the following (in thousands):
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
1999 1998
------------- -------------
<S> <C> <C>
Professional component .......................... $ 10,280 $ 7,722
Technical component ............................. 28,915 21,994
------------- -------------
$ 39,195 $ 29,716
============= =============
</TABLE>
5
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3. ACQUISITIONS AND PRACTICE AFFILIATIONS
On January 4, 1999, the Company acquired all of the outstanding stock
of Emporia Radiology, Inc. ("Emporia"), a radiology practice located in Emporia,
Kansas. In connection with the acquisition, Emporia's physicians joined
Radiology and Nuclear Medicine, L.L.C. ("RNM"), and became subject to the
service agreement between RNM and the Company. The total purchase price was
$1,190,000. This acquisition was accounted for using the purchase method.
On February 6, 1999, the Company acquired all of the outstanding stock
of Cape Fear Partners, Inc. f/k/a Steven P. Braff, M.D., P.C., a radiology
practice located in Rochester, New York. In connection with the acquisition, the
professional services will be provided by Ide Imaging Group, P.C. ("Ide"),
subject to the service agreement between Ide and the Company. The total purchase
price was $2,400,000. This acquisition was accounted for using the purchase
method.
On February 26, 1999, the Company acquired an imaging center located in
Columbia, Maryland. The total consideration for the transaction was
approximately $1,750,000, which included the assumption of approximately
$1,350,000 of outstanding debt. This transaction was accounted for using the
purchase method.
4. EARNINGS PER SHARE
The Company adopted Statement of Financial Accounting Standards No. 128
("SFAS 128"), "Earnings per Share," effective December 15, 1997. SFAS 128
requires that the calculation of basic earnings per share be calculated by
dividing net income by the weighted average number of shares of common stock
outstanding during the period and diluted earnings per common share be
calculated using the weighted average number of shares of common stock and
common stock equivalents. As required, the Company has reported earnings per
share in accordance with SFAS 128.
5. SEGMENT REPORTING
The Company has four reportable segments: Mid-Atlantic Region,
Northeastern Region, Central Region, and Western Region. The Company's
reportable segments are strategic business units defined by geography. Each owns
and operates imaging centers and provides management services to the radiology
practices within their respective regions.
The accounting policies of the segments are the same as those described
in the summary of significant accounting policies except that the Company does
not allocate taxes associated with income to any of the regions. They are
managed separately because each region operates under different contractual
arrangements, providing service to a diverse mix of patients and payors.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1999
Mid-Atlantic Northeastern Central Western
Region (1) Region (2) Region (3) Region (4) Total
------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Service fee revenue $ 16,214 $ 12,375 $ 4,986 $ 5,620 $ 39,195
Total operating expenses 10,520 7,855 2,782 3,662 24,819
----------- ----------- ----------- ----------- -----------
Segment contribution 5,694 4,720 2,204 1,958 14,376
Contribution margin 35% 38% 44% 35% 37%
Depreciation and
amortization expense 1,392 704 190 431 2,717
Interest expense 162 234 30 180 606
Segment profit 4,440 3,582 2,154 1,347 11,523
Segment assets 17,969 23,168 (2,290) (3,681) 35,166
Expenditures for
segment assets 3,077 1,052 819 766 5,714
</TABLE>
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(1) Includes the Mid-Atlantic Market.
(2) Includes the Finger Lakes and Hudson Valley Markets.
(3) Includes the South Texas, Treasure Coast and Northeast Kansas Markets.
(4) Includes the Bay Area Market.
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
Mid-Atlantic Northeastern Central Western
Region Region Region Region Total
------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Service fee revenue $ 13,834 $ 8,642 $ 2,825 $ 4,415 $ 29,716
Total operating expenses 8,898 6,092 1,616 2,650 19,256
----------- ----------- ----------- ----------- -----------
Segment contribution 4,936 2,550 1,209 1,765 10,460
Contribution margin 36% 30% 43% 40% 35%
Depreciation and
amortization expense 1,330 452 118 515 2,415
Interest expense 267 150 44 148 609
Segment profit 3,699 1,947 1,232 1,102 7,980
Segment assets 37,028 16,989 22,002 19,659 95,678
Expenditures for
segment assets 311 163 54 246 774
</TABLE>
<TABLE>
<CAPTION>
Reconciliation of profits 1998 1999
--------- ---------
<S> <C> <C>
Segment profit $ 7,980 $ 11,523
Unallocated amounts:
Corporate general and administrative (2,010) (2,629)
Corporate depreciation and amortization (57) (895)
Corporate interest expense (791) (1,734)
--------- ---------
Income before taxes $ 5,122 $ 6,265
========= =========
</TABLE>
<TABLE>
<CAPTION>
Reconciliation of assets and expenditures 1998 1999
--------- ---------
<S> <C> <C>
Assets:
Segment amounts $ 95,678 $ 35,166
Corporate assets (including intangible assets) 11,534 132,390
--------- ---------
Total assets $ 107,212 $ 167,556
========= =========
Expenditures:
Segment amounts $ 774 $ 5,714
Corporate expenditures 1,023 347
--------- ---------
Total expenditures $ 1,797 $ 6,061
========= =========
</TABLE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of the results of operations and financial
condition of the Company should be read in conjunction with the Company's
consolidated financial statements and notes thereto included in the Annual
Report on Form 10-K for the year ended December 31, 1998, and with the
consolidated financial statements included in this Form 10-Q.
OVERVIEW
American Physician Partners, Inc., a Delaware corporation, (together
with its subsidiaries, "APPM" or the "Company") develops, consolidates and
manages radiology and imaging networks. The Company was incorporated in 1996,
but conducted no significant operations until November 26, 1997, when the
Company consummated an initial public offering ("IPO") and simultaneously
exchanged cash and shares of its common stock for certain assets of and
liabilities associated with seven radiology practices. These exchanges were
accounted for using the historical cost basis with the stock being valued at the
historical cost of the net assets received by the Company. Cash consideration
given in these exchanges was treated for accounting purposes as a dividend from
the Company.
As of March 31, 1999, the Company owned, operated or maintained an
ownership interest in imaging equipment at 88 locations. The Company's radiology
facilities are concentrated in California, Florida, Kansas, Maryland, New York,
Texas, Virginia and Washington D.C. The Company's radiology facilities are
concentrated in California, Florida, Kansas, Maryland, New York, Texas, Virginia
and Washington D.C. Physician services are provided at all of APPM's 78 imaging
centers under the terms of service agreements with ten radiology practices,
seven of which expire in November 2037, with the other three expiring in 2038.
Under the terms of the service agreements, the Company provides management,
administrative, technical and non-medical services to radiology practices in
return for service fees. The service agreements cannot be terminated by either
party without cause, consisting primarily of bankruptcy or material default.
However, under certain conditions, the Company can terminate the service
agreement if the number of physicians in a practice falls below a certain
percentage.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1999
Service Fee Revenue
Service fee revenue increased $9,479,000 or 31.9% in the first quarter
of 1999 to $39,195,000 from $29,716,000 in the first quarter of 1998. Of the
increase from 1998 to 1999, $4,577,000 resulted from increased business within
existing facilities (15.4% same store increase), $3,175,000 resulted from
practices acquired and developed in 1998, and $1,727,000 resulted from "tuck-in"
acquisitions of imaging centers in 1998 and 1999.
Salaries and Benefits
Salaries and benefits increased $2,475,000 or 26.4% in the first
quarter of 1999 to $11,843,000 from $9,368,000 in the first quarter of 1998. Of
the increase from 1998 to 1999, $552,000 resulted from existing facilities,
$1,414,000 resulted from practices acquired and developed in 1998, and $509,000
resulted from "tuck-in" acquisitions of imaging centers in 1998 and 1999. As a
percentage of service fee revenue, these costs were 30.2% and 31.5% in 1999 and
1998, respectively.
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Practice Supplies
Practice supplies increased $294,000 or 13.4% in the first quarter of
1999 to $2,480,000 from $2,186,000 in the first quarter of 1998. Of the increase
from 1998 to 1999, $184,000 resulted from practices acquired and developed in
1998, and $157,000 resulted from "tuck-in" acquisitions of imaging centers in
1998 and 1999, offset by a $47,000 decrease in existing facilities. As a
percentage of service fee revenue, these costs were 6.3% and 7.4% in 1999 and
1998, respectively. The decrease as a percentage of service fee revenue from
1998 to 1999 is largely due to the Company's ability to negotiate and obtain
more favorably-priced radiology supplies.
Practice Rent and Lease Expense
Practice rent and lease expense increased $1,463,000 or 62.0% in the
first quarter of 1999 to $3,823,000 from $2,360,000 in the first quarter of
1998. Of the increase from 1998 to 1999, $966,000 resulted from existing
facilities, $330,000 resulted from practices acquired and developed in 1998, and
$167,000 resulted from "tuck-in" acquisitions of imaging centers in 1998 and
1999. As a percentage of service fee revenue, these costs were 9.8% and 7.9% in
1999 and 1998, respectively.
Other Practice Expenses
Other practice expenses increased $1,329,000 or 24.9% in the first
quarter of 1999 to $6,672,000 from $5,343,000 in the first quarter of 1998. Of
the increase from 1998 to 1999, $593,000 resulted from existing facilities,
$569,000 resulted from practices acquired and developed in 1998, and $167,000
resulted from "tuck-in" acquisitions of imaging centers in 1998 and 1999. As a
percentage of service fee revenue, these costs were 17.0% and 18.0% in 1999 and
1998, respectively.
Corporate General and Administrative
Corporate general and administrative increased $619,000 or 30.8% in the
first quarter of 1999 to $2,629,000 from $2,010,000 in the first quarter of
1998. This increase was principally due to the continue development of the
Company's infrastructure. As a percentage of service fee revenue, these costs
were 6.7% and 6.8% in 1999 and 1998, respectively.
Depreciation and Amortization
Depreciation and amortization increased $1,140,000 or 46.1% in the
first quarter of 1999 to $3,612,000 from $2,472,000 in the first quarter of
1998. This increase was principally due to amortization of goodwill resulting
from the Company's acquisition of additional practices and facilities. In
addition, the Company has continued to upgrade its radiology equipment resulting
in increased deprecation expense. As a percentage of service fee revenue, these
costs were 9.2% and 8.3% in 1999 and 1998, respectively.
Interest Expense, net
Interest expense, net increased $940,000 or 67.1% in the first quarter
of 1999 to $2,340,000 from $1,400,000 in the first quarter of 1998. As a
percentage of service fee revenue, these costs were 6.0% and 4.7% in 1998 and
1997, respectively. The increase as a percentage of service fee revenue is a
result of the Company's acquisitions throughout 1998, resulting in higher debt
levels.
Income Taxes
The Company's effective tax rate for the first quarter of 1999 was
38.0%, a decrease of 2% from the same period in 1998. The Company did not
recognize any income tax benefit for the operating losses incurred during 1997
and 1996. As a result, the Company reduced its effective tax rate in the current
year and will continue this practice until such time as the net operating loss
carryforward has been depleted.
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<PAGE> 12
Liquidity and Capital Resources
At March 31, 1999, the Company had $19,909,000 in working capital, an
increase of $531,000 from December 31, 1998. The Company's principal sources of
liquidity consist of (i) cash and cash equivalents aggregating $4,419,000, (ii)
net accounts receivable of $40,636,000, and (iii) approximately $17,920,000 in
borrowing capacity under the Company's bank credit facility (the "Credit
Facility").
For the three months ended March 31, 1999, $4,403,000 was provided by
operations. Cash of $10,481,000 was used in investing activities in the first
three months of 1999, $4,461,000 of which was related to certain acquisitions,
$6,601,000 related to the purchase of property and equipment and $41,000 net was
received from joint ventures. Cash of $4,012,000 was provided by financing
activities in first three months of 1999, substantially all of which was
provided under the Credit Facility.
For the three months ended March 31, 1998, $359,000 was provided by
operations. Cash of $27,893,000 was used in investing activities, primarily
related to certain acquisitions. Cash of $29,895,000 was provided by financing
activities, primarily through borrowings under the Company's Credit Facility.
On November 26, 1997, the Company entered into the Credit Facility. The
Credit Facility was amended May 19, 1998. The loan agreement provides for
revolving loans of up to $160,000,000 to be used by the Company for acquisitions
and general working capital needs. The Company may borrow, repay and reborrow
amounts during the first three years of the Credit Facility. Amounts outstanding
under the Credit Facility at the end of three years are required to be repaid in
quarterly installments of varying amounts commencing September 30, 2000. The
Credit Facility expires and all loans thereunder mature on the sixth anniversary
of the closing date of the Credit Facility. Borrowings under the Credit Facility
at any time may not exceed the lesser of $160,000,000 or 3.0 times the
consolidated EBITDA of the Company, giving pro forma effect to acquisitions made
with such borrowings. At March 31, 1999, the Company's debt could not exceed
$143,733,000 under the Credit Facility. As of March 31, 1999, the Company had
outstanding borrowings of $117,250,000 under the Credit Facility and an
additional $8,563,000 outstanding under other credit arrangements. At the
Company's option, the interest rate under the Credit Facility is (i) an adjusted
LIBOR rate, plus an applicable margin which can vary from 1.5% to 2.5% dependent
on certain financial ratios or (ii) the prime rate, plus an applicable margin
which can vary from 0.5% to 1.5%. In each case, the applicable margin varies
based on financial ratios maintained by the Company. The Credit Facility
includes certain restrictive covenants including prohibitions on the payment of
dividends and the maintenance of certain financial ratios (including minimum
debt-service coverage and maximum debt-to-EBITDA coverage, as defined).
Borrowings under the Credit Facility are secured by all service agreements,
which the Company is, or becomes a party to, and a pledge of the stock of the
Company's subsidiaries.
The Company may source other debt or equity financing to facilitate its
growth strategy in 1999. In the event the Company is unsuccessful in obtaining
additional financing, the Company anticipates that funds generated from
operations, cash and cash equivalents, and funds available under the Credit
Facility will be sufficient to meet the Company's working capital requirements
and debt obligations and to finance any necessary capital expenditures through
the end of 1999.
YEAR 2000 ISSUE
Impact of Year 2000
The Year 2000 Issue exists because many computer systems and
applications currently use two-digit date fields to designate a year. As the
century date occurs, computer programs, computers and embedded microprocessors
controlling equipment with date-sensitive systems may recognize Year 2000 as
1900 or not at all. This inability to recognize or properly treat Year 2000 may
result in computer system failures or miscalculations of critical financial and
operational information as well as failures of equipment controlling
date-sensitive microprocessors. In addition, there are two other related issues,
which could also lead to miscalculations or failures: (i) some older systems'
programming assigns special meaning to certain dates, such as 9/9/99 and (ii)
the Year 2000 is a leap year.
10
<PAGE> 13
State of Readiness
The Company started to formulate a plan to address the Year 2000 Issue
in the third quarter of 1998. To date, the Company's primary focus has been on
its own internal information technology systems, including all types of systems
in use by the Company in its operations, finance and human resources
departments, and to deal with the most critical systems first. The Company is in
the process of developing a Year 2000 Plan to address all of its Year 2000
Issues. The Year 2000 Plan being developed will involve generally the following
phases: awareness, assessment, renovation, testing and implementation. Although
the Company's assessment of the Year 2000 Issue is incomplete, the Company has
completed an assessment of approximately 75% of its internal information
technology systems. The Company estimates that it will complete the assessment
of its remaining internal information technology systems by May 31,1999 and will
establish a timetable for the renovation phase of the remaining technology
systems. The Company has already completed the renovation of approximately 60%
of its information technology systems, including modifying and upgrading
software and developing and purchasing new software, and continues to renovate
the portions of such systems for which assessment is complete. The Company has
not begun or established a timetable for the testing and implementation phases.
The Company's goal is to complete such phases by September 30, 1999, although
complications arising from unanticipated acquisitions might cause some delay.
The Company has recently begun to assess the potential for Year 2000
problems with the information systems of its customers, payors and vendors. The
Company prepared and sent questionnaires to its customers, vendors and other
third parties with which the Company has a material relationship. The Company
expects to complete the assessment with respect to such parties by May 31, 1999.
The Company does not have sufficient information to provide an estimated
timetable for completion of renovation and testing that such parties with which
the Company has a material relationship may undertake. The Company is unable to
estimate the costs that it may incur to remedy the Year 2000 issues relating to
such parties. The Company has received preliminary information concerning the
Year 2000 readiness of many of its customers, vendors and other third parties
with which the Company has a material relationship and expects to engage in
discussions with the remaining parties through May 31, 1999 in an attempt to
determine the extent to which the Company is vulnerable to those parties'
possible failure to become Year 2000 compliant. Most of the Company's diagnostic
imaging equipment used to provide imaging services have computer systems and
applications, and in some cases embedded microprocessors, that could be affected
by Year 2000 issues. The Company is assessing the impact on its diagnostic
imaging equipment by contacting the vendors of such equipment. The vendors with
respect to the majority of the MRI and CT equipment used by the Company have
informed the Company that (i) certain identified MRI and CT equipment is Year
2000 compliant, (ii) it has developed software for functional work arounds to
ensure Year 2000 compliance with respect to the balance of its noncompliant MRI
and CT equipment and (iii) remediation will be made during future regular
maintenance visits. The Company has contacted all ultrasound equipment vendors
with a list of systems now in use and requested their assessment of the impact
on the equipment and that they provided to the Company and the nature and
timetable of the remediation that such vendors may propose. The Company expects
to complete its assessment by May 31, 1999 and that renovation will be completed
by September 30, 1999. The Company is in the process of contacting the other
vendors of its diagnostic imaging equipment. The Company expects that its
equipment vendors will propose timely remediation and will bear the cost of
modifying or otherwise renovating the Company's diagnostic imaging equipment.
The Company has recently begun an assessment of the potential for Year 2000
problems with the embedded microprocessors in its other equipment, facilities
and corporate and regional offices, including telecommunications systems,
utilities, dictation systems, security systems and HVACS, and expects to
complete the assessment by May 31.
Costs to Address Year 2000 Issue
The Company estimates, on a preliminary basis, that the cost of
assessment, renovation, testing and implementation of its internal systems will
range from approximately $500,000 to $1,500,000. The major components of these
costs are: consultants, additional personnel costs, programming, new software
and hardware, software upgrades and travel expenses. The Company expects that
such costs will be funded through operating cash
11
<PAGE> 14
flows. This estimate, based on currently available information, will be updated
as the Company continues its assessment and proceeds with renovation, testing
and implementation, and may be adjusted upon receipt of more information from
the Company's vendors, customers and other third parties and upon the design and
implementation of the Company's contingency plan. In addition, the availability
and cost of consultants and other personnel trained in this area and
unanticipated acquisitions might materially affect the estimated costs. The
effects of the aforementioned costs have had no material impact on the Company's
progress as it relates to other information system projects and implementation.
Risks to the Company
The Company's Year 2000 Issue involves significant risks. There can be
no assurance that the Company will succeed in implementing the Year 2000 Plan it
is developing. The following describes the Company's most reasonably likely
worst-case scenario, given current uncertainties. If the Company's renovated or
replaced internal information technology systems fail the testing phase, or any
software application or embedded microprocessors central to the Company's
operations are overlooked in the assessment or implementation phases,
significant problems, including delays, may be incurred in billing the Company's
major customers (Medicare, HMOs or private insurance carriers) for services
performed. If its major customers' systems do not become Year 2000 compliant on
a timely basis, the Company will have problems and incur delays in receiving and
processing correct reimbursements. If the computer systems of third parties
(including hospitals) with which the Company's systems exchange data do not
become Year 2000 compliant both on a timely basis and in a manner compatible
with continued data exchange with the Company's information technology systems,
significant problems may be incurred in billing and reimbursement. If the
systems on the diagnostic imaging equipment utilized by the Company are not Year
2000 compliant, the Company may not be able to provide imaging services to
patients. If the Company's vendors or suppliers of the Company's necessary
power, telecommunications, transportation and financial services fail to provide
the Company with equipment and services, the Company will be unable to provide
services to its customers. If any of these uncertainties were to occur, the
Company's business, financial condition and results of operations would be
adversely affected. The Company is unable to assess the likelihood of such
events occurring or the extent of the effect on the Company.
Contingency Plan
The Company has not yet established a contingency plan to address
unavoided or unavoidable Year 2000 risks with internal information technology
systems and with customers, vendors and other third parties, but expects to
create such a plan by June 30, 1999.
Forward-Looking Statements
This report contains or may contain forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934 including
statements of the Company's and management's expectations, intentions, plans and
beliefs, including those contained in or implied by "Management's Discussion and
Analysis of Financial Condition and Results of Operations." These
forward-looking statements, as defined in Section 21E of the Securities Exchange
Act of 1934, are dependent on certain events, risks and uncertainties that may
be outside of the Company's control. These forward-looking statements may
include statements of management's plans and objectives for the Company's future
operations and statements of future economic performance; the Company's capital
budget and future capital requirements, and the Company's meeting its future
capital needs; and the assumptions described in this report underlying such
forward-looking statements. Actual results and developments could differ
materially from those expressed in or implied by such statements due to a number
of factors, including, without limitation, those described in the context of
such forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's exposure to market risk for changes in interest rates
relates primarily to the Company's cash equivalents and its Credit Facility.
12
<PAGE> 15
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not currently subject to any material litigation or, to
the Company's knowledge, is any material litigation threatened against the
Company other than routine litigation arising in the ordinary course of
business, which litigation is expected to be covered by liability insurance and
all of which is not expected to have a material adverse effect on the Company's
business, financial condition or results of operations. There can be no
assurance that the Company will not subsequently be named as a defendant in
additional lawsuits.
There can be no assurance that the Company will not be named as a
defendant in lawsuits for matters arising out of events that occurred prior to
the acquisition of the related radiology practices. Each practice has retained
responsibility for, and /or agreed to indemnify the Company in full against, the
liabilities associated with these lawsuits. In the event the Company is named as
a party in any of these lawsuits, or a monetary judgment is entered against the
Company and indemnification is unavailable for any reason, the Company's
business, financial condition and results of operations could be materially
adversely affected.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. See Index to Exhibits following signatures.
(b) Reports on Form 8-K
13
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN PHYSICIAN PARTNERS,INC.
Date: May 14, 1999 /s/ MARK L. WAGAR
-----------------
Mark L. Wagar
Chairman of the Board, President and
Chief Executive Officer
(Principal Executive Officer)
Date: May 14, 1999 /s/ SAMI S. ABBASI
------------------
Sami S. Abbasi
Senior Vice President and Chief Financial
Officer
(Principal Financial Officer)
Date: May 14, 1999 /s/ DAVID W. YOUNG
------------------
David W. Young
Treasurer and Controller
(Principal Accounting Officer)
14
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
2.1 Agreement and Plan of Reorganization and Merger, dated June
27, 1997 by and among American Physician Partners, Inc.,
Carroll Imaging Associates, P.A., Diagnostic Imaging
Associates, P.A., Drs. Copeland, Hyman and Shackman, P.A.,
Drs. Decarlo, Lyon, Hearn & Pazourek, P.A., Drs. Thomas,
Wallop, Kim & Lewis, P.A., Harbor Radiologists, P.A., and
Perilla, Syndler & Associates, P.A. **
2.2 Agreement and Plan of Reorganization and Merger, dated June
27, 1997 by and between American Physician Partners, Inc.,
Radiology and Nuclear Medicine, A Professional Association. **
2.3 Agreement and Plan of Reorganization and Merger, dated June
27, 1997 by and between American Physician Partners, Inc., and
Mid Rockland Imaging Associates, P.C.**
2.4 Agreement and Plan of Reorganization and Merger, dated June
27, 1997 by and between American Physician Partners, Inc., and
Rockland Radiological Group, P.C.**
2.5 Agreement and Plan of Reorganization and Merger, dated June
27, 1997 by and between American Physician Partners, Inc., and
Advanced Imaging of Orange County, P.C. **
2.6 Agreement and Plan of Reorganization and Merger, dated June
27, 1997 by and between American Physician Partners, Inc., and
Central Imaging Associates, P.C. **
2.7 Agreement and Plan of Reorganization and Merger, dated June
27, 1997 by and between American Physician Partners, Inc., and
Nyack Magnetic Resonance Imaging, P.C. **
2.8 Agreement and Plan of Reorganization and Merger, dated June
27, 1997 by and between American Physician Partners, Inc., and
Pelham Imaging Associates, P.C. **
2.9 Agreement and Plan of Reorganization and Merger, dated June
27, 1997 by and between American Physician Partners, Inc., and
Women's Imaging Consultants, P.C. **
2.10 Agreement and Plan of Reorganization and Merger, dated June
27, 1997 by and between American Physician Partners, Inc., and
Pacific Imaging Consultants, A Medical Group, Inc. **
2.11 Agreement and Plan of Reorganization and Merger, dated June
27, 1997 by and between American Physician Partners, Inc., and
Total Medical Imaging, Inc.**
2.12 Agreement and Plan of Reorganization and Merger, dated June
27, 1997 by and between American Physician Partners, Inc., and
Valley Radiologists Medical Group, Inc. **
2.13 Agreement and Plan of Reorganization and Merger, dated June
27, 1997 by and between American Physician Partners, Inc., and
The Ide Group, P.C. **
2.14 Agreement and Plan of Reorganization and Merger, dated June
27, 1997 by and between American Physician Partners, Inc., and
M&S X-Ray Associates, P.A. **
2.15 Agreement and Plan of Reorganization and Merger, dated June
27, 1997 by and between American Physician Partners, Inc., and
South Texas MR, Inc. **
2.16 Agreement and Plan of Exchange, dated June 27, 1997 by and
between American Physician Partners, Inc., and San Antonio MR,
Inc. **
2.17 Agreement and Plan of Exchange, dated June 27, 1997 by and
among American Physician Partners, Inc., Lexington MR, Ltd.
and the Sellers. **
2.18 Agreement and Plan of Exchange, dated June 27, 1997 by and
among American Physician Partners, Inc., Madison Square Joint
Venture and the Sellers. **
2.19 Agreement and Plan of Exchange, dated June 27, 1997 by and
among American Physician Partners, Inc., South Texas No. 1 MRI
Limited Partnership, a Texas limited partnership, and the
Sellers. **
2.20 Agreement and Plan of Exchange, dated June 27, 1997 by and
among American Physician Partners, Inc., San Antonio MRI
Partnership No. 2 Ltd., a Texas limited partnership, and the
Sellers**
2.21 Agreement and Plan of Exchange, dated June 27, 1997 by and
between American Physician Partners, Inc., and the Sellers **
</TABLE>
<PAGE> 18
<TABLE>
<S> <C>
2.22 Amendment No. 1 to the Agreement and Plan of Reorganization
and Merger, dated as of September 30, 1997, by and among
American Physician Partners, Inc., Carroll Imaging Associates,
P.A., Diagnostic Imaging Associates, P.A., Drs. Thomas,
Wallop, Kim & Lewis, P.A., Drs. Copeland, Hyman & Shackman,
P.A., Drs. DeCarlo, Lyon, Hearn & Pazourek, P.A., Harbor
Radiologists, P.A., and Perilla, Sindler & Associates, P.A.**
2.23 Amendment No. 1 to the Agreement and Plan of Reorganization
and Merger, dated as of September 30, 1997, by and between
American Physician Partners, Inc., and Radiology and Nuclear
Medicine, A Professional Association.**
2.24 Amendment No. 1 to the Agreement and Plan of Reorganization
and Merger, dated as of September 30, 1997, by and between
American Physician Partners, Inc., and Mid Rockland Imaging
Associates, P.C.**
2.25 Amendment No. 1 to the Agreement and Plan of Reorganization
and Merger, dated as of September 30, 1997, by and between
American Physician Partners, Inc., and Rockland Radiological
Group, P.C.**
2.26 Amendment No. 1 to the Agreement and Plan of Reorganization
and Merger, dated as of September 30, 1997, by and between
American Physician Partners, Inc., and Advanced Imaging of
Orange County, P.C.**
2.27 Amendment No. 1 to the Agreement and Plan of Reorganization
and Merger, dated as of September 30, 1997, by and between
American Physician Partners, Inc., and Central Imaging
Associates, P.C.**
2.28 Amendment No. 1 to the Agreement and Plan of Reorganization
and Merger, dated as of September 30, 1997, by and between
American Physician Partners, Inc., and Nyack Magnetic
Resonance Imaging, P.C.**
2.29 Amendment No. 1 to the Agreement and Plan of Reorganization
and Merger, dated as of September 30, 1997, by and between
American Physician Partners, Inc., and Pelham Imaging
Associates, P.C.**
2.30 Amendment No. 1 to the Agreement and Plan of Reorganization
and Merger, dated as of September 30, 1997, by and between
American Physician Partners, Inc., and Women's Imaging
Consultants, P.C.**
2.31 Amendment No. 1 to the Agreement and Plan of Reorganization
and Merger, dated as of September 30, 1997, by and between
American Physician Partners, Inc., and Pacific Imaging
Consultants, A Medical Group, Inc.**
2.32 Amendment No. 1 to the Agreement and Plan of Reorganization
and Merger, dated as of September 30, 1997, by and between
American Physician Partners, Inc., and Total Medical Imaging,
Inc.**
2.33 Amendment No. 1 to the Agreement and Plan of Reorganization
and Merger, dated as of September 30, 1997, by and between
American Physician Partners, Inc., and Valley Radiologists
Medical Group, Inc.**
2.34 Amendment No. 1 to the Agreement and Plan of Reorganization
and Merger, dated as of September 30, 1997, by and between
American Physician Partners, Inc., and The Ide Group, P.C.**
2.35 Amendment No. 1 to the Agreement and Plan of Reorganization
and Merger, dated as of September 30, 1997, by and between
American Physician Partners, Inc., and M & S X-Ray Associates,
P.A.**
2.36 Amendment No. 1 to the Agreement and Plan of Reorganization
and Merger, dated as of September 30, 1997, by and between
American Physician Partners, Inc., and South Texas MR, Inc.**
2.37 Amendment No. 1 to the Agreement and Plan of Reorganization
and Merger, dated as of September 30, 1997, by and between
American Physician Partners, Inc., and San Antonio MR, Inc.**
2.38 Amendment No. 1 to the Agreement and Plan of Exchange, dated
September 30, 1997, by and between American Physician
Partners, Inc., and Lexington MR, Ltd.**
2.39 Amendment No. 1 to the Agreement and Plan of Exchange, dated
September 30, 1997, by and between American Physician
Partners, Inc., and Madison Square Joint Venture.**
2.40 Amendment No. 1 to the Agreement and Plan of Exchange, dated
September 30, 1997, by and between American Physician
Partners, Inc., and South Texas No. 1 MRI Limited
Partnership.**
</TABLE>
<PAGE> 19
<TABLE>
<S> <C>
2.41 Amendment No. 1 to the Agreement and Plan of Exchange, dated
September 30, 1997, by and between American Physician
Partners, Inc., and San Antonio MRI Partnership No. 2, Ltd.**
2.42 Asset Purchase Agreement, dated as of January 1, 1998, by and
among American Physician Partners, Inc., Community Radiology
Associates, Inc., Drs. Korsower and Pion Radiology, P.A., and
the Principal Stockholders ****
2.43 Asset Purchase Agreement, dated as of January 12, 1998, by and
among American Physician Partners, Inc., Valley Imaging
Partners, Inc., Questar Imaging, Inc. and Questar Imaging VR,
Inc. ****
2.44 Asset Purchase Agreement, dated as of January 23, 1998, by and
among American Physician Partners, Inc., Valley Imaging
Partners, Inc., PAL Imaging Corp. and the Principal
Stockholders ****
2.45 Asset Purchase Agreement, dated as of April 1, 1998, by and
among American Physician Partners, Inc., Treasure Coast
Imaging Partners, Inc. and Radiology Imaging Associates,
Basilico, Gallagher and Raffa, M.D., P.A. and Robert F.
Basilico, M.D., Edward Gallagher, M.D., R.J. Raffa, M.D.,
Joseph T. Charles, M.D., Alex N. Vennos, M.D., and Robin J.
Connolly, M.D.*****
2.46 Asset Purchase Agreement, dated as of April 1, 1998, by and
among American Physician Partners, Inc., Treasure Coast
Imaging Partners, Inc. and St. Lucie Imaging and Breast
Center, Inc. and Robert F. Basilico, M.D., Edward Gallagher,
M.D., R.J. Raffa, M.D., Joseph T. Charles, M.D., Alex N.
Vennos, M.D., and Robin J. Connolly, M.D.*****
2.47 Asset Purchase Agreement, dated as of April 28, 1998, by and
among American Physician Partners, Inc., Valley Imaging
Partners, Inc., LXL, Ltd. and the Partners of LXL, Ltd.*****
2.48 Asset Purchase Agreement, dated as of June 1, 1998, by and
among American Physician Partners, Inc., Mid Rockland Imaging
Partners, Inc., Empire State Imaging Partners, Inc., RF
Management Corp. and Modern Medical Modalities
Corporation*****
2.49 Asset Purchase Agreement, dated as of June 23, 1998, by and
among American Physician Partners, Inc., Valley Imaging
Partners, Inc., Brewster Imaging Center, Inc. and Each
Principal Stockholder*****
2.50 Asset Purchase Agreement, dated as of June 29, 1998, by and
among American Physician Partners, Inc., Valley Imaging
Partners, Inc. and Bryan M. Shieman, M.D., a sole
proprietorship d/b/a El Camino Center for Osteoporosis and/or
ECOO II*****
2.51 Stock Purchase Agreement, dated September 1, 1998, by and
among American Physician Partners, Inc., WB&A Imaging
Partners, Inc. and Vimla Bhooshan, M.D., John B. DeGrazia,
M.D., Edwin Goldstein, M.D., Paul T. Lubar, M.D., Calvin D.
Neithamer, M.D., William P. O'Grady, M.D., Robert A. Olshaker,
M.D., Stanley M. Perl, M.D., Michael S. Usher, M.D., Alan B.
Kronthal, M.D., Steven A. Meyers, M.D., Victor A. Bracey, M.D.
and Larry W. Busching ******
2.52 Asset Purchase Agreement, dated September 1, 1998, by and
among American Physician Partners, Inc., Ormond Imaging
Partners, Inc., Magnetic Resonance Imaging Associates Limited
Partnership and Paul T. Lubar, Stanley M. Perl, Michael S.
Usher, John B. DeGrazia, Larry W. Busching, Vimla Bhooshan,
William P. O'Grady, Robert A. Olshaker, and Calvin D.
Neithamer ******
2.53 Asset Purchase Agreement, dated September 1, 1998, by and
among American Physician Partners, Inc., Ormond Imaging
Partners, Inc., Duke Associates Limited Partnership and Paul
T. Lubar, Stanley M. Perl, Michael S. Usher, John B. DeGrazia,
Larry W. Busching, Vimla Bhooshan, William P. O'Grady, Edwin
Goldstein, Robert A. Olshaker, Calvin D. Neithamer and Alan J.
Kronthal ******
3.1 Restated Certificate of Incorporation of American Physician
Partners, Inc.***
3.2 Amended and Restated Bylaws of American Physician Partners,
Inc.***
4.1 Form of certificate evidencing ownership of Common Stock of
American Physician Partners, Inc.*** 4.2 Form of Convertible
Promissory Note of American Physician Partners, Inc.**
10.1 American Physician Partners, Inc. 1996 Stock Option Plan.**
10.2 Employment Agreement between American Physician Partners, Inc.
and Gregory L. Solomon.**
10.3 Employment Agreement between American Physician Partners, Inc.
and Mark S. Martin.**
10.4 Employment Agreement between American Physician Partners, Inc.
and Sami S. Abbasi.**
10.5 Employment Agreement between American Physician Partners, Inc.
and Paul M. Jolas.**
</TABLE>
<PAGE> 20
<TABLE>
<S> <C>
10.6 Form of Indemnification Agreement for certain Directors and
Officers.***
10.7 Form of Registration Rights Agreement.**
10.8 Service Agreement dated November 26, 1997, by and among
American Physician Partners, Inc., APPI-Advanced Radiology,
Inc. and Carroll Imaging Associates, P.A., Diagnostic Imaging
Associates, P.A., Drs. Thomas, Wallop, Kim & Lewis, P.A., Drs.
Copeland, Hyman and Shackman, P.A., Drs. Decarlo, Lyon, Hearn
& Pazourek, P.A., Harbor Radiologists, P.A., Perilla, Sindler
& Associates, P.A.**
10.9 Service Agreement dated November 26, 1997, by and among
American Physician Partners, Inc., Ide Admin Corp. and Ide
Imaging Group, P.C.**
10.10 Service Agreement dated November 26, 1997, by and among
American Physician Partners, Inc., M & S X-Ray Associates,
P.A. and M&S Imaging Associates, P.A.**
10.11 Service Agreement dated November 26, 1997, by and among
American Physician Partners, Inc., Rockland Radiological
Group, P.C. and The Greater Rockland Radiological Group,
P.C.**
10.12 Service Agreement dated November , by and among American
Physician Partners, Inc., Advanced Imaging of Orange County,
P.C. and The Greater Rockland Radiological Group, P.C.**
10.13 Service Agreement dated November 26, 1997, by and among
American Physician Partners, Inc., Central Imaging Associates,
P.C. and The Greater Rockland Radiological Group, P.C.**
10.14 Service Agreement dated November 26, 1997, by and among
American Physician Partners, Inc., Nyack Magnetic Resonance
Imaging, P.C. and The Greater Rockland Radiological Group,
P.C.**
10.15 Service Agreement dated November 26, 1997, by and among
American Physician Partners, Inc., Pelham Imaging Associates,
P.C. and The Greater Rockland Radiological Group, P.C.**
10.16 Service Agreement dated November 26, 1997, by and among
American Physician Partners, Inc., Women's Imaging
Consultants, P.C. and The Greater Rockland Radiological Group,
P.C.**
10.17 Service Agreement dated November 26, 1997, by and among
American Physician Partners, Inc., APPI-Pacific Imaging Inc.
and PIC Medical Group, Inc.**
10.18 Service Agreement dated November 26, 1997, by and among
American Physician Partners, Inc., Radiology and Nuclear
Medicine, a Professional Association and RNM L.L.C.**
10.19 Service Agreement dated November 26, 1997, by and among
American Physician Partners, Inc., APPI-Valley Radiology, Inc.
and Valley Radiology Medical Associates, Inc.**
10.20 Consulting Agreement between American Physician Partners, Inc.
and Michael L. Sherman, M.D.***
10.21 Office Building Lease Agreement between Dallas Main Center
Limited Partnership and American Physician Partners, Inc.***
10.22 First Amendment to Office Building Lease Agreement between
Dallas Main Center Limited Partnership and American Physician
Partners, Inc.***
10.23 Credit Agreement by and among American Physician Partners,
Inc., GE Capital Corporation and the other credit parties
signatory thereto.***
10.24 Consulting Agreement between American Physician Partners, Inc.
and Lawrence R. Muroff, M.D.***
10.25 Side Letter dated November 12, 1997 by and between American
Physician Partners, Inc. and Lawrence Muroff, M.D.***
10.26 Side Letter dated November 12, 1997 by and between American
Physician Partners, Inc. and Mark Martin.***
10.27 Side Letter dated November 12, 1997 by and between American
Physician Partners, Inc. and Sami Abbasi.***
10.28 Side Letter dated November 12, 1997 by and between American
Physician Partners, Inc. and Gregory L. Solomon.***
10.29 First Amendment to Consulting Agreement between American
Physician Partners, Inc. and Lawrence R. Muroff, M.D.***
10.30 Side Letter dated November 12, 1997 by and between American
Physician Partners, Inc. and Michael Sherman, M.D.***
10.31 Side Letter dated November 12, 1997 by and between American
Physician Partners, Inc. and Paul M. Jolas.***
</TABLE>
<PAGE> 21
<TABLE>
<S> <C>
10.32 Side Letter dated November 12, 1997 by and between American
Physician Partners, Inc. and Derace Schaffer, M.D.***
10.33 Side Letter dated November 12, 1997 by and between American
Physician Partners, Inc. and John Pappajohn.***
10.34 Side Letter dated November 12, 1997 by and between American
Physician Partners, Inc. and Mary Pappajohn.***
10.35 Side Letter dated November 12, 1997 by and between American
Physician Partners, Inc. and Thebes Ltd.***
10.36 Side Letter dated November 12, 1997 by and between American
Physician Partners, Inc. and Halkis Ltd.***
10.37 Service Agreement dated January 1, 1998, by and among American
Physician Partners, Inc., Community Imaging Partners, Inc.,
Community Radiology Associates, Inc. and Drs. Korsower and
Pion Radiology, P.A.****
10.38 Service Agreement dated April 1, 1998, by and among American
Physician Partners, Inc., Treasure Coast Imaging Partners,
Inc. and Radiology Imaging Associates - Basilico, Gallagher &
Raffa, M.D., P.A. *****
10.39 First Amendment to Credit Agreement and Consent dated May 19,
1998, by and among American Physician Partners, Inc., General
Electric Capital Corporation and the other credit parties
signatory thereto*****
10.40 Employment Agreement between American Physician Partners, Inc.
and Mark L. Wagar*****
10.41 Service Agreement dated September 1, 1998, by and among
American Physician Partners, Inc., WB&A Imaging Partners, Inc.
and WB&A Imaging, P.C. ******
10.42 Office Building Lease Agreement between The Equitable-Nissei
Dallas Company and Fibreboard Corporation ******
10.43 Office Building Sublease Agreement by and between Fibreboard
Corporation and American Physician Partners, Inc. ******
10.44 First Amendment to Employment Agreement between American
Physician Partners, Inc. and Mark L. Wagar *
10.45 First Amendment to Employment Agreement between American
Physician Partners, Inc. and Mark S. Martin *
10.46 First Amendment to Employment Agreement between American
Physician Partners, Inc. and Sami S. Abbasi *
10.47 First Amendment to Employment Agreement between American
Physician Partners, Inc. and Paul M. Jolas *
27 Financial Data Schedule *
</TABLE>
- --------------
* Filed herewith.
** Incorporated by reference to the corresponding Exhibit number to the
registrant's Registration Statement No. 333-31611 on Form S-4.
*** Incorporated by reference to the corresponding Exhibit number to the
registrant's Registration Statement No. 333-30205 on Form S-1.
**** Incorporated by reference to the corresponding Exhibit number to the
registrant's Form 10-Q filed on May 15, 1998.
***** Incorporated by reference to the corresponding Exhibit number to the
registrant's Form 10-Q filed on August 14, 1998.
****** Incorporated by reference to the corresponding Exhibit number to the
registrant's Form 10-Q filed on November 13, 1998.
<PAGE> 1
Exhibit 10.44
AMENDMENT OF EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT, dated as of January 1, 1999 is
by and between American Physician Partners, Inc., a Delaware corporation (the
"Company"), and Mark L. Wagar (the "Employee").
WHEREAS, the parties to this Amendment entered into that certain
Employment Agreement, dated as of May 20, 1998, (the "Employment Agreement");
and
WHEREAS, the Company and the Employee desire to enter into this
Amendment in order to reflect an increase in the Employee's base salary and to
make certain other amendments;
NOW, THEREFORE, in consideration of the mutual covenants and conditions
set forth herein, the parties hereby agree as follows:
1. The Employment Agreement is hereby amended to delete the existing
Section 3.1 and to add the following as a new Section 3.1:
"Section 3.1 SALARY. For the performance of the Employee's duties
hereunder, the Company shall pay the Employee an annual salary of
$400,000, payable (less required withholdings) no less frequently than
twice monthly."
2. For purposes of delivering notice to the Company, the address that
should be inserted into Section 6.8 for notices to the Company should be amended
to read as follows:
"American Physician Partners, Inc.
3600 Chase Tower, 2200 Ross Avenue
Dallas, Texas 75201-2776."
IN WITNESS WHEREOF, the undersigned parties have executed this
Amendment effective as of the date first written above.
AMERICAN PHYSICIAN PARTNERS, INC.
By: /s/ Paul M. Jolas
---------------------------------------------
Paul M. Jolas
General Counsel, Senior
Vice President and Secretary
EMPLOYEE:
By: /s/ Mark L. Wagar
---------------------------------------------
Mark L.Wagar
<PAGE> 1
Exhibit 10.45
AMENDMENT OF EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT, dated as of January 1, 1999 is
by and between American Physician Partners, Inc., a Delaware corporation (the
"Company"), and Mark S. Martin (the "Employee").
WHEREAS, the parties to this Amendment entered into that certain
Employment Agreement, dated as of June 12, 1996, (the "Employment Agreement");
and
WHEREAS, the Company and the Employee desire to enter into this
Amendment in order to reflect an increase in the Employee's base salary and to
make certain other amendments;
NOW, THEREFORE, in consideration of the mutual covenants and conditions
set forth herein, the parties hereby agree as follows:
1. The Employment Agreement is hereby amended to delete the existing
Section 3.1 and to add the following as a new Section 3.1:
"Section 3.1 SALARY. For the performance of the Employee's duties
hereunder, the Company shall pay the Employee an annual salary of
$235,000, payable (less required withholdings) no less frequently than
twice monthly."
2. The Employment Agreement is hereby amended to add the following
language to the end of Section 5.2(b):
"Employee shall be entitled to receive an additional six months of his
then applicable salary, excluding bonus, if he is unable to secure a
position with (i) reasonably equivalent duties and (ii) a cash
compensation package substantially similar to his base salary at the
time of termination (an "Equivalent Position"); provided, however, that
payments pursuant to this sentence would be paid monthly and only until
such time as the Employee secured an Equivalent Position."
3. For purposes of delivering notice to the Company, the address that
should be inserted into Section 6.8 should be as follows:
"American Physician Partners, Inc.
3600 Chase Tower, 2200 Ross Avenue
Dallas, Texas 75201-2776."
<PAGE> 2
IN WITNESS WHEREOF, the undersigned parties have executed this
Amendment effective as of the date first written above.
AMERICAN PHYSICIAN PARTNERS, INC.
By: /s/ Mark L. Wagar
--------------------------------------------
Mark L. Wagar
Chairman, President and CEO
EMPLOYEE:
By: /s/ Mark S. Martin
--------------------------------------------
Mark S. Martin
<PAGE> 1
Exhibit 10.46
AMENDMENT OF EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT, dated as of January 1, 1999 is
by and between American Physician Partners, Inc., a Delaware corporation (the
"Company"), and Sami S. Abbasi (the "Employee").
WHEREAS, the parties to this Amendment entered into that certain
Employment Agreement, dated as of July 31, 1996, (the "Employment Agreement");
and
WHEREAS, the Company and the Employee desire to enter into this
Amendment in order to reflect an increase in the Employee's base salary and to
make certain other amendments;
NOW, THEREFORE, in consideration of the mutual covenants and conditions
set forth herein, the parties hereby agree as follows:
1. The Employment Agreement is hereby amended to delete the existing
Section 3.1 and to add the following as a new Section 3.1:
"Section 3.1 SALARY. For the performance of the Employee's duties
hereunder, the Company shall pay the Employee an annual salary of
$235,000, payable (less required withholdings) no less frequently than
twice monthly."
2. The Employment Agreement is hereby amended to add the following
language to the end of Section 5.2(b):
"Employee shall be entitled to receive an additional six months of his
then applicable salary, excluding bonus, if he is unable to secure a
position with (i) reasonably equivalent duties and (ii) a cash
compensation package substantially similar to his base salary at the
time of termination (an "Equivalent Position"); provided, however, that
payments pursuant to this sentence would be paid monthly and only until
such time as the Employee secured an Equivalent Position."
3. For purposes of delivering notice to the Company, the address that
should be inserted into Section 6.8 should be as follows:
"American Physician Partners, Inc.
3600 Chase Tower, 2200 Ross Avenue
Dallas, Texas 75201-2776."
<PAGE> 2
IN WITNESS WHEREOF, the undersigned parties have executed this
Amendment effective as of the date first written above.
AMERICAN PHYSICIAN PARTNERS, INC.
By: /s/ Mark L. Wagar
---------------------------------------------
Mark L. Wagar
Chairman, President and CEO
EMPLOYEE:
By: /s/ Sami S. Abbasi
---------------------------------------------
Sami S. Abbasi
<PAGE> 1
Exhibit 10.47
AMENDMENT OF EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT, dated as of January 1, 1999 is
by and between American Physician Partners, Inc., a Delaware corporation (the
"Company"), and Paul M. Jolas (the "Employee").
WHEREAS, the parties to this Amendment entered into that certain
Employment Agreement, dated as of July 31, 1996, (the "Employment Agreement");
and
WHEREAS, the Company and the Employee desire to enter into this
Amendment in order to reflect an increase in the Employee's base salary and to
make certain other amendments;
NOW, THEREFORE, in consideration of the mutual covenants and conditions
set forth herein, the parties hereby agree as follows:
1. The Employment Agreement is hereby amended to delete the existing
Section 3.1 and to add the following as a new Section 3.1:
"Section 3.1 SALARY. For the performance of the Employee's duties
hereunder, the Company shall pay the Employee an annual salary of
$180,000, payable (less required withholdings) no less frequently than
twice monthly."
2. The Employment Agreement is hereby amended to add the following
language to the end of Section 5.2(b):
"Employee shall be entitled to receive an additional six months of his
then applicable salary, excluding bonus, if he is unable to secure a
position with (i) reasonably equivalent duties and (ii) a cash
compensation package substantially similar to his base salary at the
time of termination (an "Equivalent Position"); provided, however, that
payments pursuant to this sentence would be paid monthly and only until
such time as the Employee secured an Equivalent Position."
3. For purposes of delivering notice to the Company, the address that
should be inserted into Section 6.8 should be as follows:
"American Physician Partners, Inc.
3600 Chase Tower, 2200 Ross Avenue
Dallas, Texas 75201-2776."
<PAGE> 2
IN WITNESS WHEREOF, the undersigned parties have executed this
Amendment effective as of the date first written above.
AMERICAN PHYSICIAN PARTNERS, INC.
By: /s/ Mark L. Wagar
----------------------------------------------
Mark L. Wagar
Chairman, President and CEO
EMPLOYEE:
By: /s/ Paul M. Jolas
----------------------------------------------
Paul M. Jolas
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 4,419
<SECURITIES> 0
<RECEIVABLES> 40,636
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 49,636
<PP&E> 42,128
<DEPRECIATION> 0
<TOTAL-ASSETS> 167,556
<CURRENT-LIABILITIES> 29,587
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 11,235
<TOTAL-LIABILITY-AND-EQUITY> 167,556
<SALES> 0
<TOTAL-REVENUES> 39,195
<CGS> 0
<TOTAL-COSTS> 31,059
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,340
<INCOME-PRETAX> 6,265
<INCOME-TAX> 2,381
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,884
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.20
</TABLE>
