Securities and Exchange Commission
Washington, DC 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 ended July 31, 1996.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _____________ to _______________
Commission file number 0-16235
PHP Healthcare Corporation
_____________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 54-1023168
_____________________________________________________________________
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)
11440 Commerce Park Drive, Reston, VA 20191
_____________________________________________________________________
(Address of principal executive offices)
(703) 758-3600
_____________________________________________________________________
(Registrant's telephone number including area code)
_____________________________________________________________________
Former name, former address and former fiscal year, if changed since
last report.
Indicate by check whether the registrant (i) 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.
Common stock, par value $.01 per share, outstanding as of July 31,
1996, 10,966,284 shares.
<PAGE>
INDEX
PAGE
----
PART I - FINANCIAL INFORMATION
Report of Independent Accountants 2
Condensed Consolidated Statements of Operations 3
Condensed Consolidated Balance Sheets 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of Results of
Operations and Financial Condition 8
PART II - OTHER INFORMATION 14
SIGNATURES 15
EXHIBIT INDEX 16
1
<PAGE>
Report of Independent Accountants
To the Board of Directors of PHP Healthcare Corporation:
We have reviewed the accompanying Condensed Consolidated Statement of
Operations, Balance Sheet and Statement of Cash Flows of PHP
Healthcare Corporation and consolidated subsidiaries as of July 31,
1996, and for the three months ended July 31, 1996 and 1995, included on
pages 3 through 7 of this Form 10-Q. These condensed consolidated financial
statements are the responsibility of the company's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data and making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying condensed consolidated
financial statements for them to be in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.
Washington, D.C.
September 12, 1996
2
<PAGE>
PHP HEALTHCARE CORPORATION
Condensed Consolidated Statements of Operations
Three Months ended July 31, 1996 and 1995
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months
------------
1996 1995
---- ----
<S> <C> <C>
Revenue....................................... $53,428 $46,171
Direct costs.................................. 42,122 37,654
_______ _______
Gross profit............................. 11,306 8,517
General and administrative expenses........... 7,073 6,733
_______ _______
Operating income......................... 4,233 1,784
Other income (expense):
Interest expense.................... (1,357) (524)
Interest income..................... 655 201
Miscellaneous income (expense)...... (38) 31
Minority interest in earnings
of subsidiaries................... (34) ---
_______ _______
Earnings before income taxes............. 3,459 1,492
Income tax expense............................ 1,300 567
_______ _______
Net earnings............................. $ 2,159 $ 925
======= =======
Net earnings per share........................ $ 0.16 $ 0.07
======= =======
Weighted average number of common and common
equivalent shares outstanding............... 13,789 12,595
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial
statements.
3
<PAGE>
PHP HEALTHCARE CORPORATION
Condensed Consolidated Balance Sheets
As of July 31, 1996 and April 30, 1996
(In thousands, except share data)
<TABLE>
<CAPTION>
July 31 April 30,
1996 1996
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................... $ 40,140 $ 48,647
Accounts receivable, net (note 2)........... 51,166 46,578
Pharmaceutical and medical supplies......... 1,038 1,039
Receivables from officers................... 4,017 3,263
Other current assets........................ 4,667 4,048
________ ________
Total current assets..................... 101,028 103,575
Property and equipment, net.................... 24,098 22,685
Excess of cost over fair value of assets
acquired, net of accumulated amortization of
$961 in July and $810 in April............... 2,904 2,942
Deferred income taxes.......................... 543 543
Receivables from officers, net................. 1,072 1,072
Other assets................................... 4,909 4,538
________ ________
$134,554 $135,355
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of notes payable - other. 555 545
Accounts payable............................ 7,317 9,520
Claims payable - medical services........... 7,570 9,154
Accrued salaries and benefits............... 11,112 11,228
Income taxes payable........................ 878 ---
Deferred income taxes....................... 4,322 4,322
Billings in excess of costs................. 193 244
________ ________
Total current liabilities................ 31,947 35,013
Notes payable - other, net of current
maturities.................................. 1,778 1,921
Convertible subordinated debentures............ 65,733 65,608
Deferred gain on sale of building.............. 981 1,002
Other liabilities.............................. 572 519
________ ________
Total liabilities........................ 101,011 104,063
________ ________
Minority interest.............................. 580 545
________ ________
Stockholders' equity:
Preferred stock, $.01 par value, 500,000
shares authorized, none issued............ --- ---
Common stock, $.01 par value, 25,000,000
shares authorized, 14,224,769 shares issued
in July and 14,203,987 shares in April.... 142 142
Additional paid-in-capital.................. 30,586 30,529
Note receivable from sale of stock.......... (900) (900)
Retained earnings........................... 9,707 7,548
Treasury stock, 3,258,485 common shares in
July and April, at cost................... (6,572) (6,572)
________ ________
Total stockholders' equity............... 32,963 30,747
Contingencies (notes 2 and 3)..................
________ ________
$134,554 $135,355
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial
statements.
4
<PAGE>
PHP HEALTHCARE CORPORATION
Condensed Consolidated Statements of Cash Flows
Three Months Ended July 31, 1996 and 1995
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings.................................. $ 2,159 $ 925
Adjustments to reconcile net earnings to net
cash provided by (used in) operating
activities:
Minority interest in earnings of
subsidiaries.............................. 34 ---
Depreciation and amortization............... 1,292 881
Other items, net............................ (21) (18)
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable,
net...................................... (4,588) 859
Decrease in pharmaceutical and medical
supplies................................. 1 12
Increase in other current assets.......... (619) (579)
Increase in other assets.................. (371) (360)
Increase (decrease) in accounts payable... (2,203) 294
Increase (decrease) in claims payable..... (1,584) 2,046
Decrease in accrued salaries and benefits. (116) (116)
Decrease in billings in excess of costs... (51) (152)
Increase in income taxes payable.......... 878 567
Increase in other liabilities............. 53 37
_______ _______
Net cash provided by (used in)
operating activities.................. (5,136) 4,396
_______ _______
Cash flows from investing activities:
Acquisition of property and equipment......... (2,541) (801)
_______ _______
Net cash used in investing activities... (2,541) (801)
_______ _______
Cash flows from financing activities:
Net repayments under revolving promissory notes --- (6)
Borrowings on notes payable................... --- 485
Repayments on notes payable................... (133) (792)
Receivables from officers..................... (754) (88)
Proceeds from the exercise of stock options... 57 48
_______ _______
Net cash used in financing activities... (830) (353)
_______ _______
Net increase (decrease) in cash
and cash equivalents.................. (8,507) 3,242
Cash and cash equivalents, beginning of period. 48,647 1,178
_______ _______
Cash and cash equivalents, end of period....... $40,140 $ 4,420
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial
statements.
5
<PAGE>
PHP HEALTHCARE CORPORATION
Notes to Condensed Consolidated Financial Statements
July 31, 1996
(Unaudited)
(1) Summary of Significant Accounting Policies
(a) Basis of Presentation
In the opinion of the Company, the interim condensed
consolidated financial statements include all adjustments, consisting
of only normal recurring adjustments, necessary for a fair
presentation of the results for the interim periods. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The interim condensed
consolidated financial statements should be read in conjunction with
the Company's April 30, 1996 and 1995 audited consolidated financial
statements. The year-end condensed consolidated balance sheet data
was derived from audited consolidated financial statements but does
not include all disclosures required by generally accepted accounting
principles. The interim operating results are not necessarily
indicative of the operating results for the full fiscal year. Certain
amounts in the fiscal year 1996 condensed consolidated financial
statements have been reclassified to conform with the fiscal year
1997 presentation.
(b) New Accounting Pronouncement
In October 1995, the Financial Accounting Standards Board (FASB)
issued SFAS No. 123, "Accounting for Stock-Based Compensation". As
permitted by the Standard, the Company does not intend to adopt the
provisions for recognizing compensation expense for grants to
employees of stock, stock options, and other equity instruments based
on a new fair value method. Accordingly, this Standard is not
expected to have any impact on amounts recorded in the Company's
consolidated financial statements. However, beginning with fiscal
year 1997, the Standard will require the Company to disclose
additional information in the footnotes to its annual consolidated
financial statements, including pro forma net income and earnings per
share under the new fair value method.
(2) Accounts Receivable
(a) Contract Settlement Receivable
D.C. Chartered Health Plan, Inc. ("CHP"), a wholly-owned health
maintenance organization, earns substantially all of its revenue
as a prepaid Medicaid contractor with the D.C. Department of Human
Services (DCDHS) providing health care services to Medicaid recipients
in the District of Columbia. The Medicaid program is jointly funded
by the District of Columbia and the Health Care Finance Administration
(HCFA) of the Department of Health and Human Services (HHS).
CHP receives interim payments on an estimated basis with a final
settlement occurring at the end of the contract period for the
difference between amounts earned and the interim payments. The
final settlement process with DCDHS and HCFA is subject to defined
upper payment limits and requires an audit of CHP's activities. Due
to the unique nature of these contracts, DCDHS has not undergone a
final settlement process for this type of contract.
6
<PAGE>
PHP HEALTHCARE CORPORATION
Notes to Consolidated Consolidated Financial Statements (cont'd.)
In April 1996, the U.S. Government enacted a law, the effect of
which requires the Company's contracts with DCDHS to be settled
retroactively on a capitated-rate-per-enrollee basis. Prior to the
enactment of the law, the terms of the contracts provided that the
final settlements would be on a non-risk basis, calculated in part on
a cost-based methodology.
The Company believes that the final settlement of these
contracts under the method prescribed by the new law may result in
payments to the Company materially in excess of the $15.1 million and
$14.4 million in receivables recorded at July 31, 1996 and April 30,
1996, respectively, which amounts have been consistently estimated
based upon the Company's conservative interpretation of amounts due
under the methods in effect prior to the enactment of the new law.
Because the settlement under the method prescribed by the new
law will require further discussions with the District of Columbia,
which have not yet been completed, the amount of any such settlement
in excess of recorded amounts is not presently determinable.
(3) Contingencies
The Company is a defendant in various legal actions. The
principal actions allege or involve claims under contractual
arrangements, employment matters, and medical malpractice with an
estimated possible range of loss between approximately $50,000 and
$1.0 million in excess of insurance coverage. The Company has not
recorded any reserves related to these actions at July 31, 1996. In
the opinion of management, after consultation with legal counsel, the
possible additional losses related to these actions, if any, will not
result in any material adverse effect on the Company's consolidated
financial position, results of operations, or cash flows. The Company
maintains medical malpractice insurance coverage which provides for
reimbursement of any claim amounts in excess of $250,000 and $50,000
per incident for government and commercial business, respectively.
7
<PAGE>
PHP HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
GENERAL
In response to the industry shift to manage and integrate the various
components of the health care delivery system, PHP has transformed to
a managed care solutions company. Over the past three years, the
Company has altered its focus from a historic dependence on
government contracts to a focus on commercial managed care markets.
Prior to 1993, over 98% of PHP's revenue came from government-related
contracts. PHP's government service contracts required the Company
to manage health care providers in a variety of delivery settings.
In 1992, management realized that the knowledge, expertise and skills
which the Company had acquired in managing health care providers for
government agencies could also be applied to serve the commercial
managed care market. At the same time, management supplemented the
Company's existing competencies with additional skills and
capabilities in order to take full advantage of the opportunities
available in commercial managed care. The Company added to existing
capabilities by making several key acquisitions, investing in
information systems and recruiting experienced managed care
executives. With this added expertise, PHP has expanded its
commercial business so that, in fiscal 1996 and 1995, its commercial
business accounted for approximately 50% of PHP's total revenues.
Revenues from the Commercial Managed Care Services division have
grown, in part as a result of acquisitions, to $106.9 million or
52.6% of total revenues in 1996 from $1.3 million or 1% of total
revenues in 1992. Operations in this division consist of the
Company's integrated system of care ("ISOC") applied in whole or in
part to: (i) the Company's project with Blue Cross Blue Shield
("BCBSNJ") to operate ten ISOCs in the State of New Jersey, (ii)
family health centers which are operated on a contract basis for
large employers, and (iii) the Company's HMOs in the District of
Columbia and Virginia, primarily serving the government assisted
Medicaid population. In these operations, the Company undertakes to
provide specified health care benefits to the participating
populations. Also, in November 1995, PHP and St. Vincent's Health
Services Corporation ("St. Vincent's"), an affiliate of the Daughters
of Charity National Health System East, Inc. (the "Daughters of
Charity-East"), formed Connecticut Health Enterprises, L.L.C.
("CHE"), a limited liability company for the purpose of developing an
ISOC in Fairfield County, Connecticut. The CHE ISOC commenced
operations in April 1996 and functions as an alliance between PHP,
St. Vincent's, Fairfield County physicians and other hospitals and
ancillary providers. This system of health care is marketed to
insurers, HMOs, and government agencies, which contract for a total
health care delivery system. The Company is compensated for its
Commercial Managed Care Services through a combination of capitation
fees, management fees, cost reimbursements, incentive fees related to
cost savings and profits from equity participation.
Revenues from the Government Managed Care Services division have
decreased slightly to $96.4 million in 1996 from a peak of $116.4
million in 1992. Operations in this division consist of health care
services provided to government agencies across a diverse scope of
service groups including ambulatory care, medical staffing, mental
health, long-term care, and total managed care. The Company
generally performs these services under unit-price, fixed-price, cost-
reimbursement-plus-fee, and fixed-rate-labor hour contracts.
8
<PAGE>
PHP HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (continued)
The Company's revenues have increased to $203.4 million in 1996 from
$118.0 million in 1992. Gross profit margins increased to 19% and
11% in 1996 and 1995, respectively, after having decreased to 6% and
7% in 1994 and 1993, respectively. The Company earned net income of
$9.1 million and $952,000 in 1996 and 1995, respectively, after net
losses of $9.3 million and $3.8 million in 1994 and 1993,
respectively. The 1994 and 1993 losses were due to increased
business development costs related to commercial business efforts,
increased corporate support staff costs, government contract proposal
activity costs, increased interest expense resulting from various
acquisitions and capital expenditures to meet operational needs, and
write-offs of receivables under certain contracts.
The following table sets forth, for the periods indicated,
certain items in the Company's Condensed Consolidated Statements of
Operations expressed as a percentage of revenue:
<TABLE>
<CAPTION>
Three Months
ended July 31,
--------------
1996 1995
---- ----
<S> <C> <C>
Revenue........................................ 100.0% 100.0%
Direct costs................................... 78.8 81.6
_____ _____
Gross profit................................... 21.2 18.4
General and administrative expenses............ 13.2 14.6
_____ _____
Operating income............................... 8.0 3.8
Other income/(expense)......................... (1.5) (0.6)
_____ _____
Earnings before income taxes................... 6.5 3.2
Income tax expense............................. 2.5 1.2
_____ _____
Net earnings................................... 4.0 2.0
===== =====
</TABLE>
RESULTS OF OPERATIONS
The Three Months Ended July 31, 1996 Compared To
The Three Months Ended July 31, 1995
The following table indicates revenue by the Company's service
divisions and the related percentage of total revenue:
<TABLE>
<CAPTION>
July 31, 1996 July 31, 1995
------------- -------------
Revenue % of Revenue % of
Division (000's) Total (000's) Total
- -------- -------- ----- -------- -----
<S> <C> <C> <C> <C>
Government Managed Care Services $24,654 46.1 $23,347 50.6
Commercial Managed Care Services 28,774 53.9 22,824 49.4
------- ---- ------- ----
Total $53,428 100.0 $46,171 100.0
======= ===== ======= =====
</TABLE>
9
<PAGE>
PHP HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (continued)
The Company's revenue increased by $7.2 million to $53.4 million
for the quarter ended July 31, 1996 compared to $46.2 million for the
prior year first quarter. This overall increase is due to growth in
both the Government Managed Care Services division and the Commercial
Managed Care Services division.
The Commercial Managed Care Services division revenue increased
by $6.0 million or 26.3%, to $28.8 million for the quarter ended July
31, 1996 compared to $22.8 million for the quarter ended July 31,
1995. The largest increase was provided by the Company's subsidiary,
Virginia Chartered Health Plan, Inc. ("VACHP"), a Medicaid HMO
operating in selected markets in the Commonwealth of Virginia. VACHP
commenced operations in November 1995, and therefore, there were no
corresponding revenues during the prior year first quarter.
Commercial Managed Care Services division revenue also increased due
to revenue earned during the current quarter for ISOC development,
management and operations related to strategic ventures in
Connecticut and other markets. Revenues earned from the Company's
BCBSNJ ISOC project also increased due to greater utilization by the
constituent population of the ten health centers being managed and
operated by the Company. These Commercial Managed Care Services
division revenue increases were slightly offset by the non-recurrence
of construction revenues earned during the prior year first quarter
related to the completion of the tenth and final BCBSNJ ISOC health
center which opened in September 1995.
Government Managed Care Services division revenue increased by
$1.3 million to $24.6 million for the quarter ended July 31, 1996,
compared to $23.3 million for the quarter ended July 31, 1995. This
increase in revenues is the result of: (1) two new long-term nursing
home projects which commenced operations near the end of the prior
year first quarter, (2) a new ambulatory care project which commenced
operations in October 1995, and (3) a new total managed care
correctional facilities project which commenced operations in July
1996. These revenue increases were offset by decreases resulting
from the completion of four ambulatory care projects, and two medical
staffing projects since the prior year first quarter.
The Company's gross profit increased by 33% or $2.8 million, to
$11.3 million for the quarter ended July 31, 1996 compared to $8.5
million for the prior year first quarter. As a percentage of
revenue, gross profit increased to 21.2% for the current year first
quarter compared to 18.4% for the same period in the prior year.
This overall gross profit improvement resulted from an increase in
both the Commercial Managed Care Services division and the Government
Managed Care Services division.
The Commercial Managed Care Services division gross profit
increase was primarily attributable to: (1) the gross profit earned
by VACHP, which was not operational during the prior year first
quarter, and (2) a decrease in medical costs at CHP mostly associated
with a slight decrease in member months. This decrease in member months
resulted from a periodic examination conducted by the District of Columbia,
of its Medicaid eligibility roster.
10
<PAGE>
PHP HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (continued)
Government Managed Care Services division gross profit increased
due to the commencement of new projects offset by the completion of
certain projects as described above.
General and administrative expenses increased 5% or $400,000,
to $7.1 million for the quarter ended July 31, 1996 from $6.7
million for the prior year first quarter. The increase is primarily
due to additional general and administrative expenses related to the
new VACHP subsidiary. As a percentage of revenue, general and
administrative expenses decreased to 13.2% for the current year
first quarter compared to 14.6% during the prior year period.
Operating income more than doubled, increasing by $2.4 million
to $4.2 million for the quarter ended July 31, 1996 from $1.8
million for the quarter ended July 31, 1995. Operating margin
increased to 7.9% from 3.9%. This increase was primarily due to the
expanded gross profit margins, offset in part, by increased general
and administrative expenses.
Interest expense increased by $833,000, to $1,357,000 for the
quarter ended July 31, 1996 from $524,000 for the quarter ended July
31, 1995. This increase in interest expense is due to the increase
in the Company's long term debt resulting from the issuance of $69.0
million in convertible subordinated debentures in December 1995.
Interest income increased by $454,000, to $655,000 for the
quarter ended July 31, 1996 from $201,000 for the quarter ended July
31, 1995. This increase is due to the interest earned on the
increased cash and cash equivalents currently available to the
Company resulting from the sale of $69.0 million in convertible
subordinated debentures in December 1995.
The effective income tax rates of 37.6% in the first quarter of
fiscal 1997 and 38.0% in the first quarter of fiscal 1996 represent
the combined federal and state income tax rates adjusted as
necessary.
Net earnings increased by $1.2 million, to $2.2 million or $0.16
per share, from $925,000 or $0.07 per share, for the quarters ended
July 31, 1996 and 1995, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Typically, the Company's principal sources of funds are
operations and bank borrowings. In December 1995, however, the
Company issued $69 million of convertible subordinated debentures
resulting in net proceeds of $65.8 million. The Company used these
proceeds to extinguish all outstanding bank debt and will use the
remaining amount to fund expansion of its Commercial Managed Care
Services division.
During the three months ended July 31, 1996 operations used $5.1
million in cash. This represents a $9.5 million change from the $4.4
million in cash provided by operations in the prior
11
<PAGE>
PHP HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (continued)
year three month period. This decrease in cash provided by
operations is primarily due to an increase in accounts receivable
of $4.6 million, a decrease in accounts payable of $2.2 million,
and an increase in claims payable-medical services of $1.6 million.
Of the $4.6 million increase in the Company's accounts
receivable at July 31, 1996, $4.1 million of the increase is
attributable to the BCBSNJ ISOC project. Under the existing contract,
the Company is prepaid for services provided on this project,
however, the parties are actively engaged in negotiations of a
proposed transaction wherein the Company would purchase the ten
health centers and provide services as a provider service network
on a non-exclusive basis to BCBSNJ. This new arrangement is
pursuant to a global capitation with a minimum guarantee of both
members and revenue for a minimum of three years. Current
operating payments due the Company and other adjustments will be
netted against the purchase price upon closing of the new arrangement
which is intended to be made effective July 1, 1996. Additionally,
the Company experienced an increase in accounts receivable of $1.3
million related to the new Maryland Department of Correction project
which began operations on July 1, 1996. According to the terms of this
contract, the Company invoices for services provided approximately
ten (10) days after month-end and anticipates receipt of payment
forty-five (45) days after invoicing.
The $2.2 million decrease in accounts payable mostly relates to:
(1) a $1.0 million decrease in accrued interest payable on the
convertible subordinated debentures issued by the Company in December
1995, which have semi-annual interest payments on June 15 and
December 15 (the Company made an interest payment of $2.2 million in
June 1996), and (2) a $1.0 million decrease in accrued legal,
accounting and other professional service fees mostly related to the
convertible subordinated debentures issued in December 1995 and the
development of Connecticut Health Enterprises and similar health
enterprise ventures, which were outstanding at April 30, but were
paid as of July 31.
The decrease in claims payable-medical services is due to a
fluctuation in the timing of payments to providers.
The Company's number of days revenue in average outstanding
receivables was 70 days for the three months ended July 31, 1996
compared to 48 days for the prior year three month period. This
increase is a result of the unusual increase in accounts receivable
from BCBSNJ discussed above.
Investing activities used $2.5 million in cash during the three
months ended July 31, 1996, compared to $801,000 used during the
three months ended July 31, 1995. These uses of cash for investing
activities are entirely due to the acquisition of property and
equipment. The increase during the current fiscal period is related
to certain infrastructure investments the Company has made related to
its Commercial Managed Care health enterprise ventures.
12
<PAGE>
PHP HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (continued)
Financing activities used $829,000 in cash during the three
months ended July 31, 1996, compared to $353,000 used in financing
activities during the three months ended July 31, 1995. The current
three month use of cash is principally due to advances made to
officers. During the prior year three months, the Company's use of
cash for financing activities was due to: (1) the repayment in full
of non-recourse notes and certain prepayments of term notes as a
result of the sale of its office building in Reston, Virginia and,
(2) certain repayments of revolving promissory notes and term notes
as a result of the sale of two of its outpatient surgery centers.
The Company believes that the current cash and cash equivalents,
anticipated cash flow generated by operations and its borrowing
capabilities will be sufficient for known future capital needs of the
Company. There may be, however, further expansion opportunities
which require additional external financing and the Company may, from
time to time, consider obtaining such funds through the public and
private issuance of equity or debt securities.
13
<PAGE>
PHP HEALTHCARE CORPORATION
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
11.0 Statement re: Computation of per share earnings for the
three months ended July 31, 1996 and 1995
15.1 Letter of Coopers & Lybrand, L.L.P. regarding Unaudited
Interim Financial Statements
14
<PAGE>
PHP HEALTHCARE CORPORATION
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 duly authorized.
PHP HEALTHCARE CORPORATION
(Registrant)
By: /s/ Anthony M. Picini
__________________________
ANTHONY M. PICINI
Senior Vice President of Finance and
Chief Financial Officer
Date: September 16, 1996
__________________
15
<PAGE>
PHP HEALTHCARE CORPORATION
EXHIBIT INDEX
Exhibit Item Page
11.0 Statement re: Computation of per share earnings for 17
the three months ended July 31, 1996 and 1995
15.1 Letter of Coopers & Lybrand, L.L.P. regarding 18
Unaudited Interim Financial Statements
16
PHP HEALTHCARE CORPORATION
EXHIBIT 11
Statement Re: Computation of per Share Earnings
Three Months ended
July 31, 1996 and 1995
<TABLE>
<CAPTION>
Three Months
ended July 31,
-------------
1996 1995
---- ----
<S> <C> <C>
Primary
Net earnings............................... $ 2,159,000 $ 925,000
=========== ===========
Weighted average number of common
shares outstanding.......................... 11,044,095 10,908,770
Add common share equivalents (determined
using the "treasury stock method") repre-
senting shares issuable upon exercise of
stock options and warrants.................. 2,833,254 1,774,306
Shares held in escrow......................... (88,572) (88,572)
___________ ___________
Weighted average number of shares used
in calculation of primary earnings per
share....................................... 13,788,777 12,594,504
=========== ===========
Primary earnings per common share............. $ 0.16 $ 0.07
=========== ===========
Fully diluted
Net earnings............................... $ 2,159,000 $ 925,000
Net interest expense related to
dilutive convertible debt.............. 6,000 6,000
___________ ___________
Net earnings as adjusted................... $ 2,165,000 $ 931,000
=========== ===========
Weighted average number of common
shares outstanding.......................... 11,044,095 10,908,770
Add common share equivalents (determined
using the "treasury stock" method) repre-
senting shares issuable upon exercise of
stock options, warrants, and convertible
notes payable............................... 2,833,254 1,893,392
Assumed conversion of convertible debt........ 111,111 111,111
Shares held in escrow......................... (88,572) (88,572)
___________ ___________
Weighted average number of shares used
in calculation of fully diluted earnings
per share.................................. 13,899,888 12,824,701
=========== ===========
Fully diluted earnings per common share $ 0.16 $ 0.07
=========== ===========
</TABLE>
17
<PAGE>
Exhibit 15.1
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: PHP Healthcare Corporation, Registrations on Form S-3 and on
Form S-8
We are aware that our report dated September 12, 1996 on our review
of interim financial information of PHP Healthcare Corporation and
consolidated subsidiaries as of July 31, 1996 and for the three-month
periods ended July 31, 1996 and 1995, and included in the Company's
quarterly report on Form 10-Q for the quarter then ended is incorporated
by reference in Registration Statement No. 33-301101 on Form S-3 and
in Registration Statement No. 33-41577 on Form S-8. Pursuant to Rule
436(c) under the Securities Act of 1933, this report should not be
considered a part of the prospectus and registration statement prepared
or certified by us within the meaning of Section 7 and 11 of that Act.
Coopers & Lybrand L.L.P.
Washington, D.C.
September 12, 1996
18
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the financial statements for PHP Healthcare Corporation and is
qualified in it entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CIK> 0000803568
<NAME> PHP Healthcare Corporation
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> Apr-30-1997
<PERIOD-START> May-01-1996
<PERIOD-END> Jul-31-1996
<CASH> 40,140
<SECURITIES> 0
<RECEIVABLES> 51,381
<ALLOWANCES> 215
<INVENTORY> 0
<CURRENT-ASSETS> 101,028
<PP&E> 41,152
<DEPRECIATION> 17,054
<TOTAL-ASSETS> 134,554
<CURRENT-LIABILITIES> 31,947
<BONDS> 65,733
<COMMON> 142
0
0
<OTHER-SE> 32,821
<TOTAL-LIABILITY-AND-EQUITY> 134,554
<SALES> 0
<TOTAL-REVENUES> 53,428
<CGS> 0
<TOTAL-COSTS> 42,122
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,357
<INCOME-PRETAX> 3,459
<INCOME-TAX> 1,300
<INCOME-CONTINUING> 2,159
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,159
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
