Securities and Exchange Commission
Washington, DC 20549
-----------------
FORM 10-Q
Amendment No. 3
(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....... $ (0.90)$ 0.31 $ (0.47)$ 0.48
======= ======= ======== ========
Weighted average number of common
and common equivalent shares
outstanding...................... 11,005 13,603 10,986 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:
January 31, 1997 January 31, 1996
Revenue % of Revenue % of
Division (000's) Total (000's) Total
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
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 $0.90 per share based on 11,005,322 weighted average shares
outstanding, from net earnings of $4.2 million or $0.31 per share based
on 13,602,746 weighted average shares and equivalent shares outstanding,
for the quarters ended January 31, 1997 and 1996, respectively. The
accounting guidelines prohibit the inclusion of the common share
equivalents in the per share calculation during periods when a net
loss has occurred. If the common share equivalents were included in the
current period per share calculation, the loss per share would be $0.72.
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 $0.47 per share based on 10,985,794 weighted average shares
outstanding, from net earnings of $6.4 million or $0.48 per share based
on 13,280,459 weighted average shares and equivalent shares outstanding,
for the nine months ended January 31, 1997, and 1996, respectively. The
accounting guidelines prohibit the inclusion of the common share
equivalents in the per share calculation during periods when a net loss
has occurred. If common share equivalents were included in the
current period per share calculation, the loss per share would be $0.37.
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.
The 1996 annual meeting of shareholders was held on
November 25, 1996. The nominees for Director elected at the
meeting were as follows:
Votes Cast
Nominee For Withheld
Robert L. Bowles, Jr. 9,680,594 62,670
Donald J. Ruffing 9,662,787 80,477
Joseph G. Mathews 9,679,496 63,768
The other directors whose term of office continued after the
meeting were Paul T. Cuzmanes, Jack M. Mazur, Charles P. Reilly,
Charles H. Robbins, George E. Schafer, M.D., and Michael D.
Starr. Mr. Robbins subsequently retired from the Board of
Directors effective January 31, 1997.
At the 1996 annual meeting, the stockholders also approved
the PHP Healthcare Corporation 1996 Incentive Plan, with holders
of 8,949,067 shares voting for approval, holders of 390,549
shares voting against approval, and holders of 36,304 shares
abstaining.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
3.1 Articles of Incorporation of PHP Healthcare Corporation
3.2 Bylaws of PHP Healthcare Corporation
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 31, 1997
22
<PAGE>
PHP HEALTHCARE CORPORATION
EXHIBIT INDEX
Exhibit Item Page
3.1 Articles of Incorporation of PHP Healthcare
Corporation
3.2 Bylaws of PHP Healthcare Corporation
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
EXHIBIT 3.1
Restated Certificate of Incorporation
of
PHP Healthcare Corporation
(Incorporated on January 2, 1986 under the name PHP Corporation)
PHP Healthcare Corporation, a corporation organized and
existing under the laws of the State of Delaware, does hereby
certify:
FIRST: The name of the corporation is PHP Healthcare
Corporation (the "Corporation").
SECOND: The original Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of
Delaware on January 2, 1986.
THIRD: A Certificate of Amendment was filed with the
Secretary of State of the State of Delaware on February 7, 1986,
a Certificate of Amendment was filed with the Secretary of State
of the State of Delaware on February 27, 1986, a Certificate of
Merger of PHP Corporation Into PHP Healthcare Corporation was
filed with the Secretary of State of the State of Delaware on
March 24, 1986, a Certificate of Amendment was filed with the
Secretary of State of the State of Delaware on September 24,
1986, a Certificate of Amendment was filed with the Secretary of
State of the State of Delaware on October 6, 1986, a Certificate
of Stock Designation of Series A Junior Participating Preferred
Stock of PHP Healthcare Corporation was filed with the Secretary
of State of the State of Delaware on April 13, 1992, an Amended
Certificate of Designation of Series A Junior Participating
Preferred Stock of PHP Healthcare Corporation was filed with the
Secretary of State of the State of Delaware on August 11, 1992, a
Certificate of Amendment was filed with the Secretary of State of
the State of Delaware on November 5, 1992, and a Certificate of
Merger of Paragon Ambulatory Surgery, Inc. Into PHP Healthcare
Corporation was filed with the Secretary of State of the State of
Delaware on September 29, 1994.
FOURTH: Pursuant to Section 245 of the General Corporation
Law of the State of Delaware, this Restated Certificate of
Incorporation restates and integrates and does not further amend
the provisions of the original Certificate of Incorporation of
the Corporation as heretofore amended or supplemented.
FIFTH: The text of the Certificate of Incorporation, as
heretofore amended or supplemented, is hereby restated to read in
its entirety as follows:
<PAGE>
1. The name of the Corporation is PHP Healthcare
Corporation (the "Corporation").
2. The address of its registered office in the State
of Delaware is 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its
registered agent at such address is The Corporation Trust
Company.
3. The nature of the business or purposes to be
conducted or promoted is to engage in any lawful act or
activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
4. The aggregate number, class, par value, if any, of
shares which the Corporation shall have authority to issue
shall be 25,500,000 shares, consisting of (a) 25,000,000
shares of voting Common Stock with a par value of $0.01 per
share, and (b) 500,000 shares of Preferred Stock with a par
value of $0.01 per share which shall have (i) those voting
rights required by law and (ii) voting rights equal to those
of Common Stock except to the extent the voting rights of
any series of Preferred Stock shall be denied or limited by
the Board of Directors authorizing resolution as hereinafter
provided.
The preferences, qualifications, limitations,
restrictions and special or relative rights including
convertible rights, if any, of the Corporation's Common
Stock are as follows: None.
The preferences, qualifications, limitations,
restrictions and special or relative rights including
convertible rights, if any, of the Corporation's Preferred
Stock are to be designated as follows:
A. The Board of Directors, by adoption of an
authorizing resolution, may cause Preferred Stock to be
issued from time to time in one or more series.
B. The Board of Directors, by adoption of an
authorizing resolution, may with regard to the shares
of any series of Preferred Stock:
(1) Fix the distinctive serial designation
of the shares of any such series;
(2) Fix the rate or amount per annum at
which holders of the shares or any series shall be
entitled to receive dividends, if any;
<PAGE>
(3) Fix the date from which dividends on
shares issued before the date for payment of the
first dividend shall be cumulative, if any;
(4) Fix the redemptive price and the terms
of redemption, if any;
(5) Fix the amounts payable on the shares of
any series in the event of dissolution or
liquidation of the Corporation, if any;
(6) Fix the terms and amount of any sinking
fund to be used for the purchase or redemption of
shares, if any;
(7) Fix the terms and conditions under which
the shares of any such series shall be made
convertible into or exchangeable for other
securities of the Corporation, if any;
(8) Deny or limit the voting rights of such
Preferred Stock not required by law; and
(9) Fix such other preferences,
qualifications, limitations, restrictions and
special or relative rights applicable to any
series as may be permitted by law.
Pursuant to Section 105 of the General Corporation Law
of the State of Delaware and this Restated Certificate of
Incorporation, the Board of Directors duly adopted
resolutions on July 24, 1992 to create the Series A Junior
Participating Preferred Stock, par value $.01 per share.
The designation, number of shares, the powers, relative
rights, preferences, limitations and other special rights of
the Series A Junior Participating Preferred Stock are set
forth in Exhibit A to this Restated Certificate of
Incorporation.
5. The corporation is to have perpetual existence.
6. In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly
authorized to make, alter or repeal the By-laws of the
Corporation.
7. Meetings of stockholders may be held within or
without the State of Delaware, as the By-laws may provide.
The books of the Corporation may be kept (subject to any
provision contained in the statutes) outside the State of
Delaware at
<PAGE>
such place or places as may be designated from time to time
by the Board of Directors or in the By-laws of the
Corporation.
8. The Corporation reserves the right to amend,
alter, change or repeal any provision contained in this
Restated Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this
reservation.
9. Except as otherwise provided in Section 102(b) of
the General Corporation Law of the State of Delaware as
amended from time to time, no director shall be personally
liable to the Corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director.
10. (a) Classified Board. The number of
directors of the Corporation which shall constitute the
entire Board of Directors shall be set forth in the By-laws
of the Corporation, but such number shall in no case be less
than five or greater than twelve. Upon the adoption of this
Article 10, the directors shall be divided into three
classes (I, II and III), as nearly equal in number as
possible, and no class shall include less than three
directors. The initial term of office for members of Class
I shall expire at the annual meeting of stockholders in
1993; the initial term of office for members of Class II
shall expire at the annual meeting of stockholders in 1994;
and the initial term of office for members of Class III
shall expire at the annual meeting of stockholders in 1995.
At each annual meeting of stockholders following such
initial classification and election, directors elected to
succeed those directors whose terms expire shall be elected
for a term of office to expire at the third succeeding
annual meeting of stockholders after their election, and
shall continue to hold office until their respective
successors are elected and qualified. In the event of any
increase in the number of directors fixed by the Board of
Directors, the additional directors shall be so classified
that all classes of directors have as nearly equal numbers
of directors as may be possible. In the event of any
decrease in the number of directors, all classes of
directors shall be decreased equally as nearly as may be
possible.
(b) Vacancies. Newly created directorships
resulting from any increase in the number of directors or
any vacancies in the Board of Directors resulting from
death, resignation, retirement, disqualification, removal
from office or any other cause shall be filled only by the
Board of Directors, provided that a quorum is then in office
and present, or only by a majority of the directors then in
office, if less than a quorum is then in office, or by the
sole remaining director. Directors elected to fill a newly
created directorship or other vacancies shall hold
<PAGE>
office for remainder of the full term of the class of
directors in which the new directorship was created or the
vacancy occurred and until such director's successor has
been elected and has qualified.
Notwithstanding the foregoing provision of this
Article 10, whenever the holders of any one or more class or
series of Preferred Stock issued by the Corporation shall
have the right, voting separately by class or series, to
elect directors at an annual or special meeting of
stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be
governed by the rights and preferences of such Preferred
Stock as set forth in this Restated Certificate of
Incorporation, and such directors so elected shall not be
divided into classes pursuant to this Article 10 unless
expressly provided by such rights and preferences.
(c) Election. Elections of directors need not be
by written ballot unless the By-laws of the Corporation
shall so provide.
(d) Amendment. Notwithstanding any other
provision of this Restated Certificate of Incorporation, the
affirmative vote of the holders of at least two-thirds of
the Corporation's capital stock issued and outstanding and
entitled to vote thereon is required to amend, alter or
repeal any provisions of, or adopt any provisions
inconsistent with, this Article 10.
11. Pursuant to Section 228(a) of the General
Corporation Law of the State of Delaware, any action
required to be taken at any annual or special meeting of
stockholders of the Corporation, or any action which may be
taken at any annual or special meeting of such stockholders,
may be taken only at such annual or special meeting of the
stockholders. Notwithstanding any other provision of this
Restated Certificate of Incorporation, the affirmative vote
of the holders of at least two-thirds of the Corporation's
capital stock issued and outstanding and entitled to vote
thereon is required to amend, alter or repeal any provision
of, or adopt any provisions inconsistent with, this Article
11.
SIXTH: This Restated Certificate of Incorporation was
duly adopted by the Board of Directors of the Corporation in
accordance with Section 245 of the General Corporation Law of the
State of Delaware.
<PAGE>
IN WITNESS WHEREOF, PHP Healthcare Corporation has caused its
corporate seal to be hereunto affixed and this Restated
Certificate of Incorporation to be signed by Charles H. Robbins,
its Chief Executive Officer, this __ day of November, 1996.
PHP Healthcare Corporation
By:
Charles H. Robbins
Chief Executive Officer
EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS
OF
PHP HEALTHCARE CORPORATION
(AS OF NOVEMBER 5, 1992)
ARTICLE I. OFFICES
The principal office of the corporation in the State of
Delaware shall be located at 1209 Orange Street, Wilmington,
Delaware, County of New Castle. The corporation may have such
other offices, either within or without the State of Delaware, as
the Board of Directors may designate or as the business of the
corporation may require from time to time.
The registered office of the corporation required by
the General Corporation Law of Delaware to be maintained in the
State of Delaware may be, but need not be, identical with the
principal office in the State of Delaware, and the address of the
registered office may be changed from time to time by the Board
of Directors.
ARTICLE II. SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of
the shareholders shall be held each year on such date and at such
time as shall be determined by the Board of Directors for the
purpose of electing Directors and for the transaction of such
other business as may come before the meeting.
Section 2. Special Meetings. A special meeting of
the shareholders may be called by the President or by the Board
of Directors for any purpose or purposes.
Section 3. Place of Meeting. The Board of
Directors may designate any place, either within or without the
State of Delaware, as the place of meeting for any annual meeting
of the shareholders or for any special meeting of the
shareholders called by the Board of Directors, except that a
meeting called expressly for the purpose of removal of directors
shall be held at the registered office or principal business
office of the corporation in the State of Delaware or in the city
or county of the State of Delaware in which the principal
business office of the corporation is located. A waiver of
notice signed by all shareholders entitled to vote at a meeting
may designate any place, either within or without the State of
Delaware, as the place for the holding of such meeting unless
such meeting is called expressly for the purpose of removal of
directors, in which event the place for the holding of such
meeting shall be at the registered office or principal business
office of the corporation in the State of Delaware or in the city
or county of the State of Delaware in which the principal
business office of the corporation is
<PAGE>
located. If no designation is made, or if a special meeting be
otherwise called, the place of meeting shall be the registered
office of the corporation in the State of Delaware.
Section 4. Notice of Meeting. Written notice
stating the place, day and hour of the meeting and the purpose or
purposes for which the meeting is called, shall, unless otherwise
allowed or prescribed by statute, be delivered not less than ten
or more than sixty days before the date of the meeting, either
personally or by mail, or at the direction of the President, or
the secretary, or the persons calling the meeting, to each
shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the shareholder
at his address as it appears on the records of the corporation,
with postage thereon prepaid.
Section 5. Meetings, How Convened. Every meeting,
for whatever purpose, of the shareholders in the corporation
shall be convened by its President, Secretary or other officer or
any of the persons calling the meeting by notice given as herein
provided.
Section 6. Closing Transfer - Books; Record Date.
The Board of Directors shall have power to close the transfer
books of the corporation for a period not exceeding sixty days
preceding the date of any meeting of shareholders, or the date of
payment of any dividend, or the date of the allotment of
shareholders' rights, or the date when any change or conversion
or exchange of shares shall go into effect; provided, however,
that in lieu of closing the stock transfer books, the Board of
Directors may fix in advance a date, not exceeding sixty days
preceding the date of any meeting of shareholders, or the date
for the payment of any dividend, or the date for the allotment of
rights, or the date when any change or conversion or exchange of
shares shall go into effect, as a record date for the
determination of the shareholders entitled to notice of, and to
vote at, the meeting and any adjournment thereof, or to receive
payment of the dividend, or to the allotment of rights, or to
exercise the rights in respect of the change, conversion or
exchange of shares. In such case, only the shareholders who are
shareholders of record on the date of closing the transfer books,
or on the record date so fixed, shall be entitled to notice of,
and to vote at, the meeting and any adjournment thereof, or to
receive payment of the dividend, or to receive the allotment of
rights, or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the
corporation after the date of closing of the transfer books or
the record date fixed as aforesaid. If the Board of Directors
does not close the transfer books or set a record date, only the
shareholders who are shareholders of record at the close of
business on the twentieth day preceding the date of the meeting
shall be entitled to notice of, and to vote at, the meeting, and
any adjournment of the meeting; except that, if prior to the
meeting written waivers of notice of the meeting are signed and
delivered to the corporation by all of the shareholders of record
at the time the meeting is convened, only the shareholders who
are shareholders of record at the time the meeting is convened
shall be entitled to vote at the meeting, and any adjournment of
the meeting.
Section 7. Voting Lists. The officer having charge
of the stock transfer books for shares of the corporation shall
make, at least 10 days before each meeting of the shareholders, a
complete list of the shareholders entitled to vote at such
meeting, arranged in alphabetical order, with the address of and
the number of shares held by each, which list, for a period of 10
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days prior to such meeting shall be kept on file at the
registered office of the corporation and shall be subject to
inspection by any shareholder at any time during usual business
hours. Such list shall also be produced and kept open at the
time and place of the meeting and shall be subject to the
inspection of any shareholder during the whole time of the
meeting. The original share ledger or transfer books, or a
duplicate thereof kept in the State of Delaware, shall be prima
facie evidence as to who are the shareholders entitled to examine
such list or share ledger or transfer book or to vote at any
meeting of the shareholders.
Section 8. Quorum. A majority of the outstanding
shares of the corporation entitled to vote, represented in person
or by proxy, shall constitute a quorum at any meeting of
shareholders. If less than a quorum is present, those present
may adjourn the meeting to a specified date not longer than
ninety days after such adjournment, and no notice need be given
of such adjournment to shareholders not present at the meeting.
Every decision of a majority of such quorum shall be valid as a
corporate act unless a different vote is required by law, the
Articles of Incorporation or the By-Laws of the corporation.
Section 9. Proxies. At all meetings of
shareholders, a shareholder may vote in person or by proxy
executed in writing by the shareholder or by his duly authorized
attorney in fact. Such proxy shall be filed with the Secretary
of the corporation before or at the time of the meeting. No
proxy shall be valid after eleven months from the date of its
execution, unless otherwise provided in the proxy. A duly
executed proxy shall be irrevocable only if it states that it is
irrevocable and if, and only so long as, it is coupled with an
interest sufficient in law to support an irrevocable power of
attorney. The interest with which it is coupled need not be an
interest in the shares themselves. If any instrument of proxy
designates two or more persons to act as proxy, in the absence of
any provisions in the proxy to the contrary, the persons
designated may represent and vote the shares in accordance with
the vote or consent of the majority of the persons names as
proxies. If only one such proxy is present, the proxy may vote
all of the shares, and all the shares standing in the name of the
principal or principals for whom such proxy acts shall be deemed
represented for the purpose of obtaining a quorum. The foregoing
provisions shall apply to the voting of shares by proxies for any
two or more administrators, executors, trustees or other
fiduciaries, unless an instrument or order of court appointing
them otherwise directs.
Section 10. Voting of Shares. Each outstanding
share entitled to vote shall be entitled to one vote upon each
matter submitted to a vote at a meeting of the shareholders.
Section 11. Voting of Shares by Certain Holders.
Shares standing in the name of another corporation may be voted
by such officer, agent or proxy as the by-laws of such
corporation may prescribe, or, in the absence of such provision,
as the Board of Directors of such corporation may determine.
Shares standing in the name of a deceased person may be
voted by his administrator or executor, either in person or by
proxy. Shares standing in the name of a guardian, curator, or
trustee may be voted by such fiduciary, either in person or by
proxy, but no
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guardian, curator, or trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted
by such receiver, and shares held by or under the control of a
receiver may be voted by such receiver without the transfer
thereof into his name if authority so to do be contained in an
appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be
entitled to vote such shares until the shares have been
transferred into the name of the pledgee, and thereafter the
pledgee shall be entitled to vote the shares so transferred.
Neither shares of its own stock held by the
corporation, nor those held by another corporation if a majority
of the shares entitled to vote for the election of directors of
such other corporation are owned beneficially and of record (and
not in trust) by this corporation, shall be voted at any meeting
or counted in determining the total number of outstanding shares
at any given time.
Section 12. Shareholders' Right to Examine Books and
Records. This corporation shall keep correct and complete books
and records of account, including the amount of its assets and
liabilities, minutes of the proceedings of its shareholders and
Board of Dierctors, and the names and places of residence of its
officers; and it shall keep at its registered office or principal
place of business in this state, or at the office of its transfer
agent in this state, if any, books and records in which shall be
recorded the number or shares subscribed, the names of the owners
of the shares, then numbers owned by them respectively, the
amount of shares paid, and by whom, and the transfer of such
shares with the date of transfer. Each shareholder may, during
normal business hours, have access to the books of the
corporation, to examine the same under such regulations as may be
prescribed by these By-Laws.
Section 13. Notice of Stockholder Proposals. (a) At
an annual meeting of the stockholders, only such business shall
be conducted, and only such proposals shall be acted upon, as
shall have been brought before the annual meeting (i) by, or at
the direction of, the Board of Directors or (ii) by any
stockholder of record of the Corporation who complies with the
notice procedures set forth in this Section 13 of these Bylaws.
For a proposal to be properly brought before an annual meeting by
a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the corporation. To be
timely, a stockholder's notice must be delivered to, or mailed
and received at, the principal executive offices of the
corporation not less than sixty (60) days nor more than ninety
(90) days prior to the scheduled annual meeting, regardless of
any postponements, deferrals or adjournments of that meeting to a
later date; provided, however, that if less than seventy (70)
days' notice or prior public disclosure of the date of the
scheduled annual meeting is given or made, notice by the
stockholder to be timely must be so delivered or received not
later than the close of business on the tenth (10th) day
following the earlier of the day on which such notice of the date
of the scheduled annual meeting was mailed or the day on which
such public disclosure was made. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder
proposes to bring before the annual
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<PAGE>
meeting (i) a brief description of the proposal desired to be
brought before the annual meeting and the reasons for conducting
such business at the annual meeting, (ii) the name and address,
as they appear on the corporation's books, of the stockholders
proposing such business and any other stockholders known by such
stockholder to be supporting such proposal, (iii) the class and
number of shares of the corporation's stock which are
beneficially owned by the stockholder on the date of such
stockholder notice and by any other stockholders known by such
stockholder to be supporting such proposal on the date of such
stockholder notice, and (iv) any financial interest of the
stockholder in such proposal.
(b) If the presiding officer determines that a
stockholder proposal was not made in accordance with the terms of
this Section 13, he shall so declare at the annual meeting and
any such proposal shall not be acted upon at the annual meeting.
(c) This provision shall not prevent the consideration
and approval or disapproval at the annual meeting of reports of
officers, directors and committees of the Board of Directors,
but, in connection with such reports, no business shall be acted
upon at such annual meeting unless stated, filed and received as
herein provided.
Section 14. Director Nominations. Nominations for
the election of directors may be made by the Board of Directors
or a nominating committee appointed by the Board of Directors or
by any stockholder entitled to vote in the election of directors
generally. However, any stockholder entitled to vote in the
election of directors generally may nominate one or more persons
for election as directors at a meeting only if written notice of
such stockholder's intent to make such nomination or nominations
has been given, either by personal delivery or by United States
mail, postage prepaid, to the Secretary of the corporation not
later than (i) with respect to an election to be held at an
annual meeting of stockholders, ninety (90) days prior to the
anniversary date of the immediately preceding annual meeting, and
(ii) with respect to an election to be held at a special meeting
of stockholders for the election of directors, the close of
business on the (10th) day following the date on which notice of
such meeting is first given to stockholders. Each such notice
shall set forth: (a) the name and address of the stockholder who
intends to make the nomination and of the person or persons to be
nominated; (b) a representation that the stockholder is a holder
of record of stock of the corporation entitled to vote at such
meeting and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the
notice; (c) a description of all arrangements or understandings
between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder; (d)
such other information regarding each nominee proposed by such
stockholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and
Exchange Commission as then in effect; and (e) the consent of
each nominee to serve as a director of the corporation if so
elected. The presiding officer of the meeting may refuse to
acknowledge the nomination of any person not made in compliance
with the foregoing procedure.
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ARTICLE III. BOARD OF DIRECTORS
Section 1. General Powers. The property and
business of the corporation shall be controlled and managed by
its Board of Directors.
Section 2. Number, Term and Qualification. The
initial number of directors of the corporation shall be seven
(7). Thereafter, the number of directors shall be fixed from
time to time by resolution of the Board of Directors. Directors
need not be residents of the State of Delaware or shareholders of
the corporation.
Section 3. Regular Meetings. A regular meeting of
the Board of Directors shall be held without other notice than
this By-Law immediately after, and at the same place as, the
annual meeting of shareholders. The Board of Directors may
provide, by resolution, the time and place, either within or
without the State of Delaware, for the holding of additional
regular meetings without other notice than such resolution.
Section 4. Special Meetings. Special Meetings of
the Board of Directors may be called by or at the request of the
President or any two directors. The person or persons authorized
to call special meetings of the Board of Directors may fix any
place, either within or without the State of Delaware, as the
place for holding any special meeting of the Board of Directors
called by them.
Section 5. Notice. Notice of any special meeting
shall be given to each director at least (a) twelve (12) hours
before the meeting if given by telephone or if delivered at his
residence or usual place of business by telex, telecopy,
telegraph, or similar means or (b) two (2) days before the
meeting if delivered by mail to the director's residence or usual
place of business. Such notice shall be deemed to be delivered
when deposited in the United States mail so addressed, with
postage prepaid, or when transmitted if sent by telex, telecopy,
telegraph or similar means. The attendance of a director at a
meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business
to be transacted at, nor the purpose of, any regular or special
meeting of the Board of Directors need be specified in the notice
or waiver of notice of such meeting.
Section 6. Quorum. A majority of the full Board of
Directors shall constitute a quorum for the transaction of
business, but if less than a majority are present at a meeting, a
majority of the directors present may adjourn the meeting from
time to time without further notice. Members of the Board of
Directors may participate in a meeting of the Board of Directors,
whether regular or special, by means of conference, telephone or
similar communications equipment whereby all persons
participating in the meeting can hear each other, and
participation in a meeting in this manner shall constitute
presence in person at the meeting.
Section 7. Manner of Acting. The act of a majority
of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors, unless the
act of a different number is required by statute, the Articles of
Incorporation or these By-Laws.
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Section 8. Action Without a Meeting. Any action
that may be taken at a meeting of the Board of Directors may be
taken without a meeting if consents in writing, setting forth the
action so taken, are signed by all of the directors. Such
written consent or consents shall be filed by the Secretary with
the minutes of the proceedings of the Board of Directors, and
shall have the same force and effect as a unanimous vote of such
directors.
Section 9. Resignations. Any director may resign
at any time by giving written notice to the Board of Directors,
the President or the Secretary of the corporation. Written
notice shall be delivered by certified or registered mail, with
postage thereon prepaid and a return receipt requested. Such
resignation shall take effect at the date of the receipt of such
notice which date of receipt shall be deemed to be the date
indicated upon the registered or certified mail return receipt,
or at any later time specified therein; unless otherwise
specified, acceptance of such resignation shall not be necessary
to make it effective.
Section 10. Removal. Any director or directors may
be removed, with or without cause, at a meeting of the
shareholders called expressly for that purpose. The entire Board
of Directors may be removed by a vote of the holders of a
majority of shares then entitled to vote at an election of
directors. If less than the entire board is to be removed, no
one of the directors may be removed if the votes cast against the
director's removal would be sufficient to elect the director if
then cumulatively voted at an election of the entire Board of
Directors, or, if there be classes of directors, at an election
of the class of directors of which the director is part.
Section 11. Compensation. By resolution of the
Board of Directors, each director may be paid his expenses, if
any, of attendance at each meeting of the Board of Directors, and
may be paid a stated salary as director or a fixed sum for
attendance at each meeting of the Board of Directors or both. No
such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation
therefor.
Section 12. Presumption of Assent. A director of
the corporation who is present at a meeting of the Board of
Directors at which action on any corporate matter is taken shall
be presumed to have assented to the action taken unless his
dissent shall be entered in the minutes of the meeting or unless
he shall file his written dissent to such action with the person
acting as Secretary of the meeting before the adjournment thereof
or shall forward such dissent by registered mail to the Secretary
of the corporation immediately after the adjournment of the
meeting. Such right to dissent shall not apply to a director who
voted in favor of such action.
Section 13. Executive Committee. The Board of
Directors, by resolution adopted by a majority of the board, may
designate two or more directors to constitute an executive
committee, which committee shall have and exercise all of the
authority of the Board of Directors in the management of the
corporation.
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ARTICLE IV. OFFICERS
Section 1. Number. The officers of the corporation
shall be a Chairman of the Board, a President, one or more Vice-
Presidents (the number thereof to be determined by the Board of
Directors), a Secretary, an Assistant Secretary, and a Treasurer,
each of whom shall be elected by the Board of Directors. Such
other officers and assistant officers as may be deemed necessary
may be elected or appointed by the Board of Directors. Any two
or more offices may be held by the same person.
Section 2. Election and Term of Office. The
officers of the corporation to be elected by the Board of
Directors shall be elected annually by the Board of Directors at
the first meeting of the Board of Directors held after each
annual meeting of the shareholders. If the election of officers
shall not be held at such meeting, such election shall be held as
soon thereafter as conveniently may be arranged. Each officer
shall hold office until his successor shall have been duly
elected and shall have qualified or until his death or until he
shall resign or shall have been removed in the manner hereinafter
provided.
Section 3. Removal. Any officer or agent elected
or appointed by the Board of Directors may be removed by the
Board of Directors whenever in its judgment the best interest of
the corporation will be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person
so removed. Election or appointment of an officer or agent shall
not of itself create contract rights.
Section 4. Resignations. Any officer may resign at
any time by giving written notice to the Board of Directors, the
President or the Secretary of the corporation. Written notice
shall be delivered by certified or registered mail, with postage
thereon prepaid and a return receipt requested. Such resignation
shall take effect at the date of the receipt of such notice which
date of receipt shall be deemed to be the date indicated upon the
registered or certified mail return receipt, or at any later time
specified therein; unless otherwise specified herein, the
acceptance of such resignation shall not be necessary to make it
effective.
Section 5. Vacancies. A vacancy in any office
because of death, incapacity, resignation, removal,
disqualification or otherwise, may be filled by the Board of
Directors for the unexpired portion of the term.
Section 6. Chairman of the Board of Directors. The
Chairman of the Board shall preside at all meetings of the
shareholders and of the Board of Directors. The Chairman of the
Board may sign, with the Secretary or any other proper officer of
the corporation thereunto authorized by the Board of Directors,
certificates for shares of the corporation, and any deeds,
mortgages, bonds, contracts, or other instruments which the Board
of Directors has authorized to be executed, except in cases where
the signing and execution thereof shall be expressly delegated by
the Board of Directors or by these By-Laws to some other officer
or agent of the corporation, or shall be required by law to be
otherwise signed or executed. The Chairman also shall perform
such other duties as may be prescribed by the Board of Directors
from time to time.
Section 7. The President. The President shall be
the principal executive officer of the corporation and shall in
general supervise and control all of the business and affairs
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of the corporation. In the absence of the Chairman of the Board,
whether due to resignation, incapacity or any other cause, the
President shall preside at all meetings of the shareholders and
of the Board of Directors. The President shall preside at these
meetings only so long as the Chairman of the Board remains
absent, or until the Board of Directors elects a new Chairman of
the Board. The President may sign, with the Secretary or any
other proper officer of the corporation thereunto authorized by
the Board of Directors, certificates for shares of the
corporation, any deeds, mortgages, bonds, contracts, or other
instruments which the Board of Directors has authorized to be
executed, except in cases where the signing and execution thereof
shall be expressly delegated by the Board of Directors or by
these By-Laws to some other officer or agent of the corporation,
or shall be required by law to be otherwise signed or executed.
The President may vote in person or by proxy shares in other
corporations standing in the name of the corporation. The
President shall in general perform all duties as may be
prescribed by the Board of Directors from time to time.
Section 8. The Vice-President. In the absence of
the President, whether due to resignation, incapacity or any
other cause, or in the event of the President's death, inability
or refusal to act, the Vice-President (or in the event there be
more than one Vice-President, the Vice-Presidents in the order
designated at the time of their election, or in the absence of
any designation, then in the order of their election) shall
perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions
upon the President. The Vice-President shall exercise such
powers only long as the President remains absent or
incapacitated, or until the Board of Directors elects a new
President. Any Vice-President may sign, with the Secretary, the
Assistant Secretary, Treasurer or an Assistant Treasurer,
certificates for shares of the corporation; and shall perform
such other duties as from time to time may be assigned to him by
the President or by the Board of Directors.
Section 9. The Secretary. The Secretary shall (a)
keep the minutes of the proceedings of the shareholders and of
the Board of Directors in one or more books provided for that
purpose; (b) see that all notices are duly given in accordance
with the provisions of these By-Laws or as required by law; (c)
be custodian of the corporate records and of the seal of the
corporation and see that the seal of the corporation is affixed
to all documents the execution of which on behalf of the
corporation under its seal is duly authorized; (d) keep a
register of the post office address of each shareholder which
shall be furnished to the Secretary by such shareholder; (e) sign
with the Chairman of the Board, the President, or a Vice-
President, certificates for shares of the corporation, the
issuance of which shall have been authorized by resolution of the
Board of Directors; (f) have general charge of the stock transfer
books of the corporation; and (g) in general perform all duties
incident to the office of Secretary and such duties as from time
to time may be assigned to the Secretary by the President or by
the Board of Directors.
Section 10. The Assistant Secretary. In the absence
of the Secretary, whether due to resignation, incapacity or any
other cause, or in the event of the Secretary's death, inability
or refusal to act, the Assistant Secretary shall perform the
duties of the Secretary, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the
Secretary. The Assistant Secretary shall exercise such powers
only so long as the Secretary remains absent or incapacitated, or
until the Board of Directors elects a new Secretary. The
Assistant Secretary
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also shall perform such other duties as from time to time may be
assigned to him by the President or by the Board of Directors.
Section 11. The Treasurer. The Treasurer shall:
(a) have charge and custody of and be responsible for all funds
and securities of the corporation; (b) receive and give receipts
for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the
corporation in such banks, trust companies or other depositories
as shall be selected in accordance with the provisions of Article
V of these By-Laws; and (c) in general perform all of the duties
incident to the office of Treasurer and such other duties as from
time to time may be assigned to the Treasurer by the President or
by the Board of Directors. If required by the Board of
Directors, the Treasurer shall give a bond for the faithful
discharge of the Treasurer's duties in such sum and with such
surety or sureties as the Board of Directors shall determine.
Section 12. Salaries. The salaries of the officers
shall be fixed from time to time by the Board of Directors and no
officer shall be prevented from receiving such salary by reason
of the fact that the officer is also a director of the
corporation and participated in determining and voting upon the
salary.
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. The Board of Directors may
authorize any officer or officers, agent or agents, to enter into
any contract or execute and deliver any instrument in the name
and on behalf of the corporation, and such authority may be
general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on
behalf of the corporation and no evidence of indebtedness shall
be issued in its name unless authorized by a resolution of the
Board of Directors. Such authority may be general or confined to
specific instances.
Section 3. Checks, Drafts, etc. All checks, drafts
or other orders for the payment of money, notes or other
evidences of indebtedness issued in the name of the corporation,
shall be signed by such officer or officers, agent or agents of
the corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
Section 4. Deposits. All funds of the corporation
not otherwise employed shall be deposited from time to time to
the credit of the corporation in such banks, trust companies or
other depositories as the Board of Directors may select.
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates
representing shares of the corporation shall be in such form as
shall be determined by the Board of Directors.
- 10 -
<PAGE>
The shares of the corporation represented by
certificates shall be signed by the President or a Vice-
President, and by the Secretary of an Assistant Secretary or the
Treasurer or an Assistant Treasurer of such corporation and
sealed with the seal of the corporation. Such seal may be
facsimile, engraved or printed. If such certificate is
countersigned by a transfer agent or registrar other than the
corporation or its employees, any other signature on the
certificate may be facsimile, engraved or printed. All
certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the person to whom
the shares represented thereby are issued, with the number of
shares and date of issue, shall be entered on the stock transfer
books of the corporation. All certificates surrendered to the
corporation for transfer shall be canceled, and no new
certificate shall be issued until the former certificate for a
like number of shares shall have been surrendered and canceled,
except that in case of a lost, destroyed or mutilated certificate
a new one may be issued therefor upon such terms and indemnify to
the corporation as the Board of Directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares
of the corporation shall be made only on the stock transfer books
of the corporation by the holder of record thereof or by his
legal representative, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary of
the corporation, and on surrender for cancellation of the
certificate for such shares. The person in whose name shares
stand on the books of the corporation shall be deemed by the
corporation to be the owner thereof for all purposes.
ARTICLE VII. FISCAL YEAR
The fiscal year of the corporation shall begin on the
1st day of May and end on the last day of April in each year.
ARTICLE VIII. DIVIDENDS
The Board of Directors may, from time to time, declare
and the corporation may pay dividends on its outstanding shares
in the manner, and upon the terms and conditions provided by law
and the Articles of Incorporation of the corporation.
ARTICLE IX. INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS.
The corporation shall indemnify any person who is, or
was, a director, officer, employer or agent of the corporation to
the fullest extent permitted by law, except that the corporation
may, but need not, purchase indemnity insurance.
ARTICLE X. CORPORATE SEAL
The Board of Directors shall provide a corporate seal
in the form affixed hereto.
- 11 -
<PAGE>
ARTICLE XI. WAIVER OF NOTICE
Whenever any notice is required to be given to any
shareholder or director of the corporation under the provisions
of these By-Laws or of the Articles of Incorporation or of the
General Corporation Law of Delaware, a waiver thereof in writing
signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
ARTICLE XII. AMENDMENTS
These By-Laws may be altered, amended or replaced and
new By-Laws adopted by action of a majority of the directors at
any regular or special meeting of the directors. These By-Laws
may also be altered, amended or repealed and new By-Laws adopted
by the affirmative vote of the holders of two-thirds of the stock
issued and outstanding and entitled to vote thereon.
- 12 -
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 Earnings Per Share
- --------------------------
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
=========== =========== =========== ===========
When a loss occurs, common
share equivalents are
excluded from the
calculation of earnings
per share because they
are antidilutive.
Primary - without common share
equivalents
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
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
without common share
equivalents............... 11,005,322 11,860,867 10,985,794 10,841,700
=========== =========== ========== ==========
Primary earnings (loss)
per common share
without common share
equivalents............... $ (0.90) $ 0.35 $ (0.47) $ 0.59
=========== =========== =========== ==========
(continued on next page)
</TABLE>
EXHIBIT 11
Statement Re: Computation of per Share Earnings
Three Months and Nine Months ended
January 31, 1997 and 1996
(Continued from previous page)
<TABLE>
<CAPTION>
Three Months Nine Months
ended January 31, ended January 31,
1997 1996 1997 1996
---- ---- ---- ----
Fully Dilued Earnings Per Share
- -------------------------------
<S> <C> <C> <C> <C>
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
========== ========== ========== ==========
When a loss occurs, common
share equivalents are
excluded from the
calculation of earnings
per share because they
are antidilutive.
Fully diluted - without
common share equivalents
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
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
without common share
equivalents............... 11,005,322 11,860,867 10,985,794 10,841,700
=========== =========== ========== ==========
Fully diluted earnings
(loss) per common share
without common share
equivalents............... $ (0.90) $ 0.35 $ (0.47) $ 0.59
=========== =========== =========== ==========
</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>