Securities and Exchange Commission
Washington, DC 20549
-----------------
FORM 10-Q
Amendment No. 1
(Mark One)
[X] Quarterly Report Pursuant To Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended January 31, 1997.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _____________ to _______________
Commission file 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)
Registrant's telephone number including area code
(703) 758-3600
_____________________________________________________________________
_____________________________________________________________________
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 January 31,
1997, 11,014,444 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 10
PART II - OTHER INFORMATION 21
SIGNATURES 22
EXHIBIT INDEX 23
<PAGE>
Report of Independent Accountants
To the Board of Directors of PHP Healthcare Corporation:
We have reviewed the accompanying Condensed Consolidated Statements
of Operations, Balance Sheets and Statements of Cash Flows of PHP
Healthcare Corporation and consolidated subsidiaries as of January
31, 1997, and for the three month and nine month periods ended
January 31, 1997 and 1996, included on pages 3 through 9 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.
March 17, 1997
2
<PAGE>
PHP HEALTHCARE CORPORATION
Condensed Consolidated Statements of Operations
Three Months and Nine Months ended January 31, 1997 and 1996
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Nine Months
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues............................ $50,434 $52,886 $162,280 $147,934
Direct costs........................ 42,543 42,305 130,510 119,100
_______ _______ ________ ________
Gross profit................... 7,891 10,581 31,770 28,834
General and administrative expenses. 8,165 7,039 22,584 20,971
Reserve for Medicaid receivables
(note 2).......................... 9,822 --- 9,822 ---
Former chairman retirement package
(note 4).......................... 2,275 --- 2,275 ---
Restructuring charges (note 5)...... 2,550 --- 2,550 ---
_______ _______ ________ ________
Operating income (loss)........ (14,921) 3,542 (5,461) 7,863
Other income (expense):
Interest expense................. (1,360) (979) (4,128) (2,076)
Interest income.................. 470 482 1,679 885
Miscellaneous income (expense)... (34) (20) (67) 49
Gain on sale of subsidiary stock. --- 2,247 --- 2,247
Minority interest in earnings of
subsidiaries................... (78) --- (316) ---
_______ _______ ________ ________
Earnings (loss) before income
taxes.......................... (15,923) 5,272 (8,293) 8,968
Income tax expense (benefit)........ (6,021) 1,112 (3,151) 2,554
_______ _______ ________ ________
Net earnings (loss)........... $(9,902)$ 4,160 $(5,142) $ 6,414
======= ======= ======== ========
Net earnings (loss) per share....... $ (0.72)$ 0.31 $ (0.37)$ 0.48
======= ======= ======== ========
Weighted average number of common
and common equivalent shares
outstanding...................... 13,679 13,603 13,733 13,280
======= ======= ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
PHP HEALTHCARE CORPORATION
Condensed Consolidated Balance Sheets
As of January 31, 1997 and April 30, 1996
(In thousands, except share data)
<TABLE>
<CAPTION>
January 31 April 30,
1997 1996
---- ----
<S> <C> <C>
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents............. $ 29,148 $ 48,647
Accounts receivable, net (note 2)..... 47,924 46,578
Pharmaceutical and medical supplies... 785 1,039
Receivables from officers............. 4,101 3,263
Other current assets.................. 6,395 4,048
________ ________
Total current assets.............. 88,353 103,575
Property and equipment, net............ 27,595 22,685
Excess of cost over fair value of
assets acquired, net of
accumulated amortization
of $962 in January and $810 in April. 2,959 2,942
Deferred income taxes.................. 1,321 543
Receivables from officers, net......... 1,072 1,072
Other assets........................... 5,440 4,538
________ ________
$126,740 $135,355
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of notes payable
- other........................... 574 545
Accounts payable.................... 8,046 9,520
Claims payable - medical services... 4,646 9,154
Accrued salaries and benefits
(notes 4 and 5)................... 15,020 11,228
Deferred income taxes............... 1,322 4,322
Billings in excess of costs......... 1,105 244
________ ________
Total current liabilities 30,713 35,013
Notes payable - other, net of current
maturities........................... 1,486 1,921
Convertible subordinated debentures.... 65,986 65,608
Deferred gain on sale of building...... 938 1,002
Other liabilities...................... 696 519
________ ________
Total liabilities 99,819 104,063
________ ________
Minority interest...................... 862 545
________ ________
Stockholders' equity:
Preferred stock, $.01 par value,
500,000 shares authorized, none
issued............................ --- ---
Common stock, $.01 par value,
25,000,000 shares authorized,
14,272,929 shares issued in
January and 14,203,987 shares in
April............................. 143 142
Additional paid-in-capital.......... 30,982 30,529
Note receivable from sale of stock.. (900) (900)
Retained earnings................... 2,406 7,548
Treasury stock, 3,258,485 common
shares, at cost................... (6,572) (6,572)
________ ________
Total stockholders' equity 26,059 30,747
Contingencies (note 6) ________ ________
$126,740 $135,355
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
PHP HEALTHCARE CORPORATION
Condensed Consolidated Statements of Cash Flows
Three Months and Nine Months Ended January 31, 1997 and 1996
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Nine Months
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss).................$ (9,902) $ 4,160 $ (5,142) $ 6,414
Adjustments to reconcile net
earnings (loss) to net cash
used in operating activities:
Gain on sale of subsidiary stock. --- (2,247) --- (2,247)
Minority interest in earnings
of subsidiaries................ 78 --- 316 ---
Depreciation and amortization.... 1,136 1,188 3,712 3,235
Increase (decrease) in deferred
income taxes................... (3,778) 440 (3,778) 1,882
Other items, net.................. (21) (21) (64) (61)
Changes in operating assets and
liabilities:
Decrease (increase) in accounts
receivable, net................. 11,878 (7,776) (1,346)(13,499)
Decrease in pharmaceutical and
medical supplies................ 177 5 254 99
Decrease (increase) in other
current assets.................. (687) 431 (2,348) (632)
Increase in other assets.......... (430) (195) (996) (623)
Increase (decrease) in accounts
payable......................... (3,499) (1,904) (1,473) 350
Increase (decrease) in claims
payable......................... (1,219) (1,794) (4,508) 675
Increase in accrued salaries and
benefits........................ 1,802 549 3,792 1,999
Increase (decrease) in billings
in excess of costs.............. 934 (583) 861 188
Decrease in income taxes payable.. (2,845) --- --- ---
Increase (decrease) in other
liabilities..................... 89 (196) 177 201
_______ _______ _______ _______
Net cash used in operating
activities..................... (6,287) (7,943) (10,543) (2,019)
_______ _______ _______ _______
Cash flows from investing activities:
Acquisition of property and
equipment........................ (2,041) (1,112) (8,166) (2,445)
Sale of subsidiary stock.......... --- 3,000 --- 3,000
_______ _______ _______ _______
Net cash provided by (used in)
investing activities........... (2,041) 1,888 (8,166) 555
_______ _______ _______ _______
Cash flows from financing activities:
Proceeds from issuance of convertible
subordinated debentures........... --- 65,831 --- 65,831
Net repayments under revolving
promissory notes.................. --- (17,815) --- (20,546)
Borrowing on notes payable.......... --- --- --- 1,918
Repayments on notes payable......... (138) (3,732) (406) (5,329)
Receivables from officers........... 3 (81) (838) (259)
Proceeds from exercise of stock options 97 216 454 328
_______ _______ _______ _______
Net cash provided by (used in)
financing activities............ (38) 44,419 (790) 41,943
_______ _______ _______ _______
Net increase (decrease)
in cash and cash equivalents.... (8,366) 38,364 (19,499) 40,479
Cash and cash equivalents, beginning
of period........................... 37,514 3,293 48,647 1,178
_______ _______ _______ _______
Cash and cash equivalents, end of
period.............................. $29,148 $41,657 $29,148 $41,657
======= ======= ======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
PHP HEALTHCARE CORPORATION
Notes to Condensed Consolidated Financial Statements
January 31, 1997
(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
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 Condensed 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 a final settlement of these contracts
for the periods 1992 through 1996 under the method prescribed by the
new law results in amounts due the Company in excess of the $17.6
million and $14.4 million in receivables recorded at October 31, 1996
and April 30, 1996, respectively, which amounts have been consistently
calculated based upon the Company's conservative interpretation of
the methods in effect prior to the enactment of the new law.
For several years the Company engaged in on-going good faith
discussions and negotiations with the District regarding amounts due for
the 1992 and 1994 contract years. That process ultimately resulted
in an agreement to settle these amounts due the Company for
$18.9 million. It is now evident to the Company, however, through
recent comments in the local press, that payment has been blocked.
Consequently, in light of the clearly prolonged timeframe to resolve
these issues, the Company has determined to recognize reserves of
$9.8 million against its Medicaid receivables from the District of
Columbia, principally relating to services provided during the 1992
to 1994 contract years.
The Company remains committed to pursuing its contractual
rights for the amounts it is due from the District.
(3) Notes Payable - Bank
The Company has extended the term of its primary banking
facility, a $12.2 million revolving promissory note, until May 1997.
This credit facility, previously due to expire in November 1996, was
extended at principally the same terms and conditions.
As a result of the several one-time charges against earnings
recorded during the third quarter of fiscal year 1997, the Company
was not in compliance with certain of the various financial covenants
in the borrowing agreement with its primary bank as of January 31,
1997. The Company is in the process of obtaining a waiver for all
conditions of noncompliance. At January 31, 1997, the Company had no
borrowings under the agreement.
7
<PAGE>
PHP HEALTHCARE CORPORATION
Notes to Condensed Consolidated Financial Statements (cont'd.)
(4) Retirement of Former Chairman
On January 31, 1997, the Company's Founder, Chairman and Chief
Executive Officer, Charles H. Robbins, retired. The Board of
Directors provided Mr. Robbins a retirement agreement that included a
one-time $2 million payment and a payment of $275,000 related to a
one-year noncompetition agreement. The agreement further requires
Mr. Robbins to repay (by April 30, 1997) all outstanding notes
receivable and accrued interest due the Company within the Senior
Executive Loan Program and notes receivable related to certain life
insurance policies. Under the agreement, Mr. Robbins has the right
(through April 30, 1997) to require the Company to purchase up to
200,000 shares of his stock in the Company at the then current market
price. The agreement contains additional clauses which include,
among other things, a "standstill" provision and restrictions on the
timing of any dispositions of Mr. Robbins' holdings in the Company.
For the quarter ended January 31, 1997, the Company recognized
$2.275 million in expense related to the retirement agreement.
(5) Restructuring Charges
During the third quarter ended January 31, 1997, the Company
incurred restructuring charges of $2.55 million. Within a broad
restructuring effort, this charge resulted from two specific
decisions made by the Board of Directors.
In late November 1996, the Company made the strategic decision
to terminate its long-term care line of business, an unprofitable
operation, in the Government Managed Care Services division.
The Company has recognized a net loss of $1.8 million related to the
restructuring for the termination of this line of business.
Effective January 31, 1997, the Company made the
strategic decision to terminate the Company's facilities development
and maintenance function operated out of the corporate offices
through the Company's wholly owned subsidiary, Sterling Communities
Corporation. Future building and facilities management needs will be
fulfilled through outsourced vendor relationships. The Company incurred a
restructuring charge of $750,000 for severance and other termination
costs associated with the elimination of this function.
8
<PAGE>
PHP HEALTHCARE CORPORATION
Notes to Condensed Consolidated Financial Statements (cont'd.)
(6) 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 $115,000 and
$1.1 million in excess of insurance coverage. The Company has not
recorded any reserves related to these actions at January 31, 1997.
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) Subsequent Event - Acquisition of New Jersey Family Healthcare
Centers
On February 28, 1997, the Company purchased 10 healthcare
centers from Blue Cross and Blue Shield of New Jersey (BCBSNJ) for
approximately $35 million cash, 90,000 shares of the Company's
treasury stock, and other consideration. Concurrently, the Company
sold the 6 owned health center buildings to a subsidiary of G&L Realty
Corporation for $22.5 million. Based in Beverly Hills, California,
G&L Realty, which is traded on the New York Stock Exchange, is a
healthcare real estate investment trust specializing in medical office
buildings and other healthcare facilities. The Company has a minority
interest in the subsidiary and has entered into 25-year lease
commitments for these same buildings. The Company has also advanced
approximately $18 million as a short-term secured loan to the subsidiary
until permanent financing is obtained.
The acquisition will be accounted for using the purchase method
of accounting and accordingly, the purchase price will be allocated
to the acquired tangible and identifiable intangible assets and
liabilities based on their respective fair values. Final accounting
for this acquisition is still subject to various appraisals which
must be undertaken to assign values to the tangible and intangible
assets acquired.
9
<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 five
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.
10
<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 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 Nine Months
ended January 31, ended January 31,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues.................... 100.0% 100.0% 100.0% 100.0%
Direct costs................ 84.3 80.0 80.4 80.5
_____ _____ _____ _____
Gross profit................ 15.7 20.0 19.6 19.5
General and administrative
expenses................... 16.2 13.3 13.9 14.2
Reserve for Medicaid
receivables................ 19.4 --- 6.0 ---
Former chairman retirement
package.................... 4.5 --- 1.4 ---
Restructuring charges....... 5.1 --- 1.6 ---
_____ _____ _____ _____
Operating income (loss)..... (29.5) 6.7 (3.3) 5.3
Other income (expense)...... (2.0) 3.3 (1.8) 0.7
_____ _____ _____ _____
Earnings (loss) before income
taxes....................... (31.5) 10.0 (5.1) 6.0
Income tax expense (benefit) (11.9) 2.1 (1.9) 1.7
_____ _____ _____ _____
Net earnings (loss)......... (19.6) 7.9 (3.2) 4.3
===== ===== ===== =====
</TABLE>
11
<PAGE>
PHP HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (continued)
RESULTS OF OPERATIONS
The Three Months Ended January 31, 1997 Compared To
The Three Months Ended January 31, 1996
The following table indicates revenue by the Company's service
divisions and the related percentage of total revenue:
<TABLE>
<CAPTION> January 31, 1997 January 31, 1996
Revenue % of Revenue % of
Division (000's) Total (000's) Total
<S> <C> <C> <C> <C>
Government Managed Care Services $22,810 45.2 $24,403 46.1
Commercial Managed Care Services 27,624 54.8 28,483 53.9
Total $50,434 100.0 $52,886 100.0
</TABLE>
The Company's revenue decreased by 4.7% or $2.5 million to $50.4
million for the quarter ended January 31, 1997 compared to $52.9
million for the prior year quarter. This decrease in revenues was
the result of decreases in both the Government Managed Care Services
division and the Commercial Managed Care Services division.
The Commercial Managed Care Services division revenue decreased
by $0.9 million or 3.0%, to $27.6 million for the quarter ended
January 31, 1997, compared to $28.5 million for the quarter ended
January 31, 1996. This overall decrease results from a decrease in
enrollment at D.C. Chartered Health Plan, Inc. ("CHP"), the Company's
wholly-owned HMO in the District of Columbia, and no current
receivable being recorded during the third quarter pending resolution of
the issues with the District. CHP believes it is due amounts for enrollees
not yet paid for, fee for service billings and a payment rate reduction not
actuarially certified. Management believes the Company is due
significant payments relating to these non-recorded receivables.
The revenue decrease at CHP was almost entirely offset by two sources of
revenue increases. The first revenue increase was due to increased
enrollment at Virginia Chartered Health Plan, Inc. ("VACHP"), the Company's
majority owned Medicaid HMO operating in selected markets in the
Commonwealth of Virginia, which commenced operations in November 1995.
The second revenue increase resulted from revenue earned during the current
quarter for ISOC development, management and operations related to
strategic ventures, primarily in Connecticut.
Government Managed Care Services division revenue decreased by
$1.6 million or 6.6% to $22.8 million for the quarter ended January
31, 1997, compared to $24.4 million for the quarter ended January 31,
1996. This net decrease in revenues is the result of: (1) the
completion of seven ambulatory care projects, two mental health
projects, and one medical staffing project on various dates since the
prior year third quarter, and (2) a revenue decrease resulting from
the Company's decision to terminate its long-term care line of
business. These revenue decreases were offset by
12
<PAGE>
PHP HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (continued)
increases due to: (1) one new total managed care correctional
facilities project, two new ambulatory care projects, and one new
mental health project, which commenced operations on various dates
since the prior year third quarter, and (2) an increase in the number
of inmates and in the per inmate reimbursement rate at an existing
total managed care correctional facilities project.
The Company's gross profit decreased by 25.4% or $2.7 million,
to $7.9 million for the quarter ended January 31, 1997, compared to
$10.6 million for the prior year third quarter. As a percentage of
revenue, gross profit decreased to 15.7% for the current year third
quarter compared to 20.0% for the same period in the prior year.
Gross profit decreased in both the Commercial Managed Care Services
division and the Government Managed Care Services division.
The Commercial Managed Care Services division gross profit
decrease resulted from CHP operations discussed above and moving costs
associated with the Company's utilization management firm, including
leasehold writeoffs. This decrease was partially offset by an
increase in VACHP operations and the ISOC strategic ventures, for the
same reasons cited above as causing a net decrease in revenues.
The Government Managed Care Services division gross profit
decreased due to the completion of certain projects as described
above and related completion costs, partially offset by increases
due to the commencement of operations on new projects as described above.
General and administrative expenses increased $1.2 million to
$8.2 million for the quarter ended January 31, 1997 from $7.0
million for the prior year third quarter. The increase is due to
increased salary costs at the corporate headquarters resulting from
additional personnel related to the Company's Commercial Managed
Care ISOC initiatives, and the associated office space and sundry
cost items that accompany an increase in personnel. Additionally, during
the third quarter, the Company incurred incremental costs associated with the
New Jersey ISOC. General and administrative expenses also increased
as a result of the VACHP business, which commenced operations in
November 1995. As a percentage of revenue, general and administrative
expenses increased to 16.2% for the current year third quarter compared
to 13.3% during the prior year period.
During the third quarter ended January 31, 1997, the Company
recorded a $9.8 million reserve for Medicaid receivables associated
with the Company's Medicaid operations at CHP in the District of
Columbia, principally relating to services provided during the 1992
to 1994 contract years. For several years the Company engaged in on-
going good faith discussions and negotiations with the District
regarding these amounts. During February 1997, that process
ultimately resulted in an agreement to settle these receivables
due the Company for an amount significantly in excess of what the
Company had recorded. Subsequently, however, it became evident to
the Company, through recent comments in the local press, that payment
has been blocked. The Company remains committed to pursuing its
contractual rights for the amounts it is due from the District.
However, in light of the clearly prolonged timeframe to resolve these
issues, the Company has determined to recognize this reserve.
13
<PAGE>
PHP HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (continued)
During the third quarter ended January 31, 1997, the Company
recognized $2.275 million in expense for a retirement package
provided to the Company's Founder, Chairman and Chief Executive
Officer, Charles H. Robbins.
During the third quarter ended January 31, 1997, the Company
incurred restructuring charges of $2.55 million. Within a broad
restructuring effort, this charge resulted from two specific
decisions made by the Board of Directors.
In late November 1996, the Company made the strategic decision
to terminate its long-term care line of business in the Government
Managed Care Services division. The Company determined that
maintaining this capability internally was not essential to its
success in providing vertically integrated healthcare services, in
whole or in part, through the Company's ISOC products. In addition,
the Company did not feel that the relationship between the risk it
assumed on these projects and the opportunity for profit was
adequately balanced. The Company has recognized a net loss of $1.8
million related to the restructuring for the termination of this line
of business.
Effective January 31, 1997, the Company made the
strategic decision to terminate the Company's facilities development
and maintenance function operated out of the corporate offices
through the Company's wholly owned subsidiary, Sterling Communities
Corporation. The elimination of these activities will allow the
Company to concentrate its resources and energy on its core missions.
Future building and facilities management needs will be fulfilled
through outsourced vendor relationships. The Company incurred a
restructuring charge of $750,000 for severance and other termination
costs associated with the elimination of this function.
The Company experienced an operating loss of $14.9 million in
the current year third quarter, a decrease of $18.4 million as
compared to operating income of $3.5 million in the prior year third
quarter. Operating margin decreased to a loss of 29.5% compared to
earnings of 6.7%. This decrease primarily resulted from the one-
time charges against earnings discussed above for the Medicaid
reserve, the Chairman's retirement package, and the restructuring
charges. Operating income also decreased due to the gross profit
decreases in both the Commercial Managed Care and Government Managed
Care Services divisions and the increased general and administrative
expenses, as discussed above.
Interest expense increased by $381,000, to $1,360,000 for the
quarter ended January 31, 1997, from $979,000 for the quarter ended
January 31, 1996. 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.
14
<PAGE>
PHP HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (continued)
Interest income remained consistent, decreasing by $12,000, to
$470,000 for the quarter ended January 31, 1997 from $482,000 for the
quarter ended January 31, 1996.
The effective income tax rates of 37.8% in the third quarter of
fiscal 1997 and 21.1% in the third quarter of fiscal 1996 represent
the combined federal and state income tax rates adjusted as
necessary. The gain resulting from the sale of a 30% interest in
Virginia Chartered Health Plan, Inc. to University Health Services,
is a non-taxable transaction and therefore no provision for income
taxes was included in the Company's results of operations for the
quarter ended January 31, 1996. Exclusive of this gain, the combined
effective income tax rate for the quarter would have been 36.8%.
Net earnings decreased by $14.1 million, to a loss of $9.9
million or $0.72 per share, from net earnings of $4.2 million or
$0.31 per share, for the quarters ended January 31, 1997 and 1996,
respectively.
RESULTS OF OPERATIONS
The Nine Months Ended January 31, 1997 Compared To
The Nine Months Ended January 31, 1996
The following table indicates revenues by the Company's service
divisions and the related percentage of total revenues:
<TABLE>
<CAPTION>
January 31, 1997 January 31, 1996
----------------- -----------------
Revenues % of Revenues % of
Division (000's) Total (000's) Total
- -------- -------- ----- ------- -----
<S> <C> <C> <C> <C>
Government Managed Care Services $ 75,355 46.4 $ 72,507 49.0
Commercial Managed Care Services 86,925 53.6 75,427 51.0
________ _____ _______ _____
Total $162,280 100.0 $147,934 100.0
======== ===== ======== =====
</TABLE>
The Company's revenues increased by 9.7% or $14.4 million to
$162.3 million for the nine months ended January 31, 1997 compared to
$147.9 million for the prior year nine month period. This overall
increase results from an increase in both the Commercial Managed Care
Services division and the Government Managed Care Services division.
15
<PAGE>
PHP HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (continued)
Commercial Managed Care Services division revenues increased by
$11.5 million or 15.2%, to $86.9 million for the nine months ended
January 31, 1997, compared with $75.4 million for the nine months
ended January 31, 1996. 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, it was not fully operational during the prior year nine
month period. 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. Additionally, revenues earned from
the Company's BCBSNJ ISOC project increased due to greater
utilization by the constituent population of the ten ISOCs being
managed and operated by the Company. These Commercial Managed Care
Services division revenue increases were offset by a decrease in
CHP revenue related to a decrease in enrollment and no receivables
being recorded in the third quarter pending resolution of the issues
with the District. CHP believes it is due amounts for enrollees
not yet paid for, fee for service billings and a payment rate reduction
not actuarially certified. Management believes the Company is due
significant payments relating to these non-recorded receivables.
Additionally, decreases resulted from the non-recurrence of construction
revenues earned during the prior year nine month period related to the
completion of the tenth and final BCBSNJ ISOC health center which
opened in September 1995.
Government Managed Care Services division revenues increased by
$2.9 million or 3.9% to $75.4 million for the nine months ended
January 31, 1997 compared to $72.5 million for the nine month period
ended January 31, 1996. This increase in revenues is the result of:
(1) a new total managed care correctional facilities project, three
new ambulatory care projects, and one new mental health project which
commenced operations on various dates since the prior year nine month
period, and (2) an increase in the number of inmates and in the per
inmate reimbursement rate at an existing total managed care
correctional facilities project. These revenue increases were offset
by decreases resulting from the completion of nine ambulatory care
projects, two mental health projects and one medical staffing project
since the prior year nine month period.
The Company's gross profit increased by 10.2% or $3.0 million,
to $31.8 million for the nine months ended January 31, 1997 compared
with $28.8 million during the prior year period. As a percentage of
revenue, gross profit increased to 19.6% for the current nine month
period compared to 19.5% during the prior year. This gross profit
improvement resulted from an increase in the Commercial Managed Care
Services division, offset by a slight decrease in 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 fully operational during the prior year nine
month period, (2) increased activity for ISOC development, management
and operations related to strategic ventures in Connecticut and other
markets, and (3) increased gross profit earned from the BCBSNJ ISOC
project resulting from greater utilization by the constituent
population of the ten ISOCs being managed and operated by the
Company. These increases were offset by a decrease in revenue
related to CHP operations discussed above.
16
<PAGE>
PHP HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (continued)
The Government Managed Care Services division gross profit net
decrease is the result of several increases and decreases. The
decreases are attributable to: (1) decreases due to the completion
of certain projects as described above, (2) the $300,000 settlement
of the Company's outstanding claim with the Department of the Army
related to a former PRIMUS project during the prior year second
quarter, and (3) a decrease in revenue at one mental health project
resulting from a decrease in the scope of service when the contract
was renewed near the end of fiscal year 1996. These decreases were
offset by increases resulting from: (1) the commencement of
operations on new projects as described above, and (2) an increase in
the number of inmates and the per inmate reimbursement rate at an
existing total managed care correctional facilities project
General and administrative expenses increased 7.7% or $1.6
million, to $22.6 million for the nine months ended January 31,
1997, from $21.0 million for the same period in the prior year. The
increase is due to increased salary costs at the corporate
headquarters resulting from additional personnel related to the
Company's Commercial Managed Care ISOC initiatives, and the
associated office space and sundry cost items that accompany an
increase in personnel. General and administrative expenses also
increased as a result of the VACHP business which commenced
operations in November 1995. As a percentage of revenue, general and
administrative expenses decreased to 13.9% for the current year nine
month period compared to 14.2% during the prior year nine month
period.
During the third quarter ended January 31, 1997, the Company
recorded a $9.8 million reserve for Medicaid receivables associated
with the Company's Medicaid operations at CHP in the District of
Columbia, principally relating to services provided during the 1992
to 1994 contract years. For several years the Company engaged in on-
going good faith discussions and negotiations with the District
regarding these amounts. During February 1997, that process
ultimately resulted in an agreement to settle these receivables
due the Company for an amount significantly in excess of what the
Company had recorded. Subsequently, however, it became evident to
the Company, through recent comments in the local press, that payment
has been blocked. The Company remains committed to pursuing its
contractual rights for the amounts it is due from the District.
However, in light of the clearly prolonged timeframe to resolve these
issues, the Company has determined to recognize this reserve.
During the period ended January 31, 1997, the Company
recognized $2.275 million in expense for a retirement package
provided to the Company's Founder, Chairman and Chief Executive
Officer, Charles H. Robbins.
During the nine months ended January 31, 1997, the Company
incurred restructuring charges of $2.55 million. Within a broad
restructuring effort, this charge resulted from two specific
decisions made by the Board of Directors.
17
<PAGE>
PHP HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (continued)
In late November 1996, the Company made the strategic decision
to terminate its long-term care line of business in the Government
Managed Care Services division. The Company determined that
maintaining this capability internally was not essential to its
success in providing vertically integrated healthcare services, in
whole or in part, through the Company's ISOC products. In addition,
the Company did not feel that the relationship between the risk it
assumed on these projects and the opportunity for profit was adequately
balanced. The Company has recognized a net loss of $1.8 million related
to the restructuring for the termination of this line of business.
Effective January 31, 1997, the Board of Directors made the
strategic decision to terminate the Company's facilities development
and maintenance function operated out of the corporate offices
through the Company's wholly owned subsidiary, Sterling Communities
Corporation. The elimination of these activities will allow the
Company to concentrate its resources and energy on its core missions.
Future building and facilities management needs will be fulfilled
through outsourced vendor relationships. The Company incurred a
restructuring charge of $750,000 for severance and other termination
costs associated with the elimination of this function.
The Company experienced an operating loss of $5.5 million in
the current year nine month period, a decrease of $13.4 million as
compared to operating income of $7.9 million for the nine months
ended January 31, 1996. Operating margin decreased to a loss of
3.3% compared to earnings of 5.3%. This decrease primarily resulted
from the one-time charges against earnings discussed above for the
Medicaid reserve, the Chairman's retirement package, and the
restructuring charges. Operating income also decreased due to the
increased general and administrative expenses, as discussed above,
offset by the increased gross profit margins.
Interest expense increased by $2.0 million to $4.1 million for
the nine months ended January 31, 1997, from $2.1 million for the
prior year nine month period. 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 $794,000 to $1,679,000 for the nine
months ended January 31, 1997, from $885,000 for the prior year nine
month period. This increase is due to the interest earned on the
increased cash and cash equivalents currently available to the
Company resulting from the issuance of $69.0 million in convertible
subordinated debentures in December 1995.
18
<PAGE>
PHP HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (continued)
The effective income tax rates of 38.0% for the nine months
ended January 31, 1997 and 28.5% for the nine months ended January
31, 1996 represent the combined federal and state income tax rates
adjusted as necessary. The gain resulting from the sale of a 30%
interest in VACHP to University Health Services, Inc., is a non-
taxable transaction and therefore no provision for income
taxes was included in the Company's results of operations for the
nine months ended January 31, 1996. Exclusive of this gain, combined
effective income tax rate for the period ended January 31, 1996 would
have been 38.0%.
Net earnings decreased by $11.5 million, to a loss of $5.1
million or $0.37 per share, from net earnings of $6.4 million or
$0.48 per share, for the nine months ended January 31, 1997, and
1996, 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 $69.0 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 nine months ended January 31, 1997, operations used
$10.5 million in cash. This represents a $8.5 million change from
the $2.0 million used in operations in the prior year nine month
period. This decrease in cash provided by operations is primarily
due to a net loss of $5.1 million, delayed payments from BCBSNJ
1 and a decrease in claims payable of $4.5 million in the current
year nine month period.
The $5.1 million loss is primarily the result of the reserve
recorded for the Medicaid receivables associated with the Company's
Medicaid operations at CHP in the District of Columbia, and
additional expenses associated with the retirement of the Company's
Founder, Chairman and Chief Executive Officer and the Company's
restructuring activities in the nine months ended January 31, 1997.
On February 28, 1997, upon closing the BCBSNJ health center
purchase, the Company received over $7.7 million of delayed payments
from BCBSNJ principally relating to the period before January 31, 1997.
The decrease in claims payable is attributable to
an improved payment cycle and the decrease in enrollment at CHP,
partially offset by an increase in enrollment at VACHP.
The Company's number of days revenue in average outstanding
receivables was 72 days for the nine months ended January 31, 1997
compared to 51 days for the prior year nine month period. This
increase is due to the difference between the payment and revenue
processes on the BCBSNJ project, increased receivables related to
the Company's commercial ISOC ventures, and a change in the mix of
government contracts such that there are now fewer prepaid contracts.
19
<PAGE>
PHP HEALTHCARE CORPORATION
Investing activities used $8.2 million in cash during the nine
months ended January 31, 1997, compared to $555,000 provided during
the nine months ended January 31, 1996. 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
primarily related to investments made for one new and one expanded
ambulatory care clinic in the Government Managed Care Services
division, and to certain infrastructure investments the Company has
made related to its Commercial Managed Care health enterprise
ventures. During the prior year nine month period, the cash provided
was due to the sale of a minority interest in a subsidiary, reduced
by the acquisition of property and equipment.
Financing activities used $790,000 in cash during the nine
months ended January 31, 1997, compared to $41.9 million provided by
financing activities during the nine months ended January 31, 1996.
The current nine month use of cash is principally due to advances
made to officers. In December 1995, the Company sold $69.0 million
of convertible subordinated debentures resulting in net proceeds of
$65.8 million. With these proceeds, the Company completely repaid
all outstanding bank debt in the prior year nine month period.
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.
20
<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 and nine months ended January 31, 1997 and 1996
15.1 Letter of Coopers & Lybrand, L.L.P. regarding Unaudited
Interim Financial Statements
21
<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
Executive Vice President and
Chief Financial Officer
Date: March 17, 1997
22
<PAGE>
PHP HEALTHCARE CORPORATION
EXHIBIT INDEX
Exhibit Item Page
11.0 Statement re: Computation of per share earnings 23
for the three months and nine months ended
January 31, 1997 and 1996
15.1 Letter of Coopers & Lybrand, L.L.P. regarding 24
Unaudited Interim Financial Statements
EXHIBIT 11
Statement Re: Computation of per Share Earnings
Three Months and Nine Months ended
January 31, 1997 and 1996
<TABLE>
<CAPTION>
Three Months Nine Months
ended January 31, ended January 31,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary
Net earnings (loss)...... $(9,902,000) $4,160,000 $(5,142,000) $6,414,000
============ ========== ============ ==========
Weighted average number of
common shares outstanding. 11,093,894 10,949,439 11,074,366 10,930,272
Add common share equivalents
(determined using the
"treasury stock method")
representing shares
issuable upon exercise of
stock options and warrants. 2,673,721 2,741,879 2,746,838 2,438,759
Shares held in escrow........ (88,572) (88,572) (88,572) (88,572)
___________ ___________ ___________ ___________
Weighted average number of
shares used in calculation
of primary earnings per
share...................... 13,679,043 13,602,746 13,732,632 13,280,459
=========== =========== =========== ===========
Primary earnings (loss)
per common share.......... $ (0.72) $ 0.31 $ (0.37) $ 0.48
=========== =========== =========== ===========
Fully diluted
Net earnings (loss)...... $(9,902,000) $4,160,000 $(5,142,000) $6,414,000
Net interest expense
related to convertible
debt.................. 5,000 357,000 16,000 362,000
___________ ___________ ____________ __________
Net earnings (loss)
as adjusted............ $(9,897,000) $4,517,000 $(5,126,000) $6,776,000
=========== =========== ============ ==========
Weighted average number of
common shares outstanding. 11,093,894 10,949,439 11,074,366 10,930,272
Add common share equivalents
(determined using the
"treasury stock" method)
representing shares
issuable upon exercise of
stock options, warrants,
and convertible notes
payable................... 2,673,721 2,848,082 2,746,838 2,867,806
Assumed conversion of
convertible debt.......... 111,111 1,353,111 111,111 525,111
Shares held in escrow....... (88,572) (88,572) (88,572) (88,572)
__________ __________ ____________ __________
Weighted average number of
shares used in calculation
of fully diluted earnings
per share................. 13,790,154 15,062,060 13,843,743 14,234,617
========== ========== ========== ==========
Fully diluted earnings
(loss) per common share..... $ (0.72) $ 0.30 $ (0.37) $ 0.48
</TABLE> ========== ========== ========== ==========
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 March 14, 1997 on our review of
interim financial information of PHP Healthcare Corporation and
consolidated subsidiaries as of January 31, 1997 and for the three month
and nine month periods ended January 31, 1997 and 1996, 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.
March 17, 1997
<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
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CIK> 0000803568
<NAME> PHP Healthcare Corporation
<S> <C>
<PERIOD-TYPE> 9-Mos
<FISCAL-YEAR-END> Apr-30-1997
<PERIOD-START> May-01-1996
<PERIOD-END> Jan-31-1997
<CASH> 29,148
<SECURITIES> 0
<RECEIVABLES> 48,095
<ALLOWANCES> 171
<INVENTORY> 785
<CURRENT-ASSETS> 88,353
<PP&E> 44,104
<DEPRECIATION> 16,509
<TOTAL-ASSETS> 126,740
<CURRENT-LIABILITIES> 30,713
<BONDS> 65,986
<COMMON> 143
0
0
<OTHER-SE> 25,916
<TOTAL-LIABILITY-AND-EQUITY> 126,740
<SALES> 0
<TOTAL-REVENUES> 162,280
<CGS> 0
<TOTAL-COSTS> 130,510
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,128
<INCOME-PRETAX> (8,293)
<INCOME-TAX> (3,151)
<INCOME-CONTINUING> (5,142)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,142)
<EPS-PRIMARY> (0.37)
<EPS-DILUTED> (0.37)
</TABLE>
