<PAGE>
DRAFT#2 - 5/15/97
Securities and Exchange Commission
Washington, DC 20549
-----------------
FORM 10-Q/A-6
(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>
AMENDMENT NO. 6
The undersigned registrant hereby files this Amendment No. 6 (the
"Amendment") for purposes of amending Part II, Item 5. The Amendment is set
forth below:
ITEM 5. OTHER INFORMATION
Item 5 of Form 10-Q/A of PHP Healthcare Corporation (the "Company") dated
April 29, 1997, is hereby amended in its entirety as follows:
On February 28, 1997, the Company and a real estate investment trust
subsidiary in which the Company owns a minority interest (the "REIT") acquired
ten primary care facilities located throughout New Jersey formerly operated by
Blue Cross and Blue Shield of New Jersey, Inc. ("BCBSNJ"). The ten health
centers were originally designed, built and managed by the Company under a
management agreement with BCBSNJ. Under the management agreement, the Company
recruited physicians and other center staff, developed an integrated referral
network of medical and surgical specialists, and designed the utilization, case
management and quality assurance systems for the health centers.
The total consideration paid by the Company and the REIT to BCBSNJ,
approximately $35 million, was determined through arms' length negotiations
between the Company and BCBSNJ. Of the $35 million received by BCBSNJ, $22
million was paid by the REIT and the balance was paid by the Company, including
$10.6 million in cash and 90,000 shares of the Company's common stock. In
addition, in connection with the transaction, the Company made a $0.9 million
capital contribution to the REIT and advanced the REIT an additional $18
million, including $16 million in short-term secured loans and $2 million in
long-term secured loans until permanent financing is obtained. The Company's
portion of the cash consideration paid to BCBSNJ and the amounts contributed or
advanced to the REIT were obtained from a combination of cash on hand, equipment
lease financing and borrowings on its bank line of credit.
The Company will use the health centers as the cornerstone of a
provider sponsored integrated health care delivery network to be operated on a
non-exclusive basis for BCBSNJ, and other third party payors, including HMOs.
The integrated health care delivery network will operate under the name Pinnacle
Health Enterprises and resemble other provider service networks managed by the
Company in Connecticut and Georgia, which align the Company with local hospital
and physician partners.
In addition, the physicians previously employed at the health centers are
now employed by a professional medical group affiliated with the Company.
Concurrent with the purchase agreement the Company and BCBSNJ entered into a
network services agreement pursuant to which the Company provides certain health
care services to enrolled BCBSNJ beneficiaries through global capitation based
on market rates. Under the network services agreement, BCBSNJ has guaranteed
certain global capitation payments to the Company over a three year period.
1
<PAGE>
The following documents are included in this report:
(a) Financial statements of the business acquired.
- Health Center Operations of Blue Cross Blue and Shield of New Jersey,
Inc. financial statements as of and for the year ended December 31,
1996, together with Report of Independent Public Accountants.
(b) Pro forma financial information.
The following pro forma financial information is required by Article
11 of Regulation S-X.
- PHP Healthcare Corporation Pro Forma Consolidated Balance Sheet as of
January 31, 1997, which reflects the acquisition of the Health Center
Operations as of that date (unaudited).
- PHP Healthcare Corporation Pro Forma Combined Statements of Operations
for the Nine Months ended January 31, 1997 (unaudited).
- PHP Healthcare Corporation Pro Forma Combined Statements of Operations
for the Year ended April 30, 1996 (unaudited).
- PHP Healthcare Corporation Notes to Pro Forma Combined Financial
Statements for the Year ended April 30, 1996 (unaudited) and the Nine
Months ended January 31, 1997 (unaudited).
2
<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: MAY 16, 1997
------------------
3
<PAGE>
HEALTH CENTER OPERATIONS OF
BLUE CROSS AND BLUE SHIELD OF NEW JERSEY, INC.
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1996
TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
4
<PAGE>
[Arthur Andersen LLP logo appears here]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Blue Cross and Blue Shield of New Jersey, Inc.:
We have audited the accompanying statement of assets and liabilities of the
Health Center Operations of Blue Cross Blue and Shield of New Jersey, Inc. (an
operating segment of Blue Cross and Blue Shield of New Jersey, Inc.) as of
December 31, 1996, and the related statement of operations for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
As discussed in Note 1 to the financial statements, the accompanying
financial statements present the carved-out portion of Blue Cross and Blue
Shield of New Jersey, Inc.'s assets and liabilities and results of operations,
referred to as the Health Center Operations, and may not necessarily be
indicative of the financial position or results of operations that would have
existed if the Health Center Operations had been operated as an unaffiliated
company. Certain expenses are the result of allocations of total expenses
incurred by Blue Cross and Blue Shield of New Jersey, Inc.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Health Center Operations
of Blue Cross and Blue Shield of New Jersey, Inc. as of December 31, 1996, and
the results of its operations for the year then ended in conformity with
generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Roseland, New Jersey
May 15, 1997
5
<PAGE>
HEALTH CENTER OPERATIONS OF
BLUE CROSS AND BLUE SHIELD OF NEW JERSEY, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
ASSETS
------
Current assets:
Accounts receivable. . . . . . . . . . . . . . . . . . . . $ 650,000
Inventories. . . . . . . . . . . . . . . . . . . . . . . . 686,619
Prepaid expenses and other . . . . . . . . . . . . . . . . 57,183
---------
Total current assets . . . . . . . . . . . . . . . . . . 1,393,802
Property and equipment:
Equipment. . . . . . . . . . . . . . . . . . . . . . . . . 6,843,634
Leasehold improvements . . . . . . . . . . . . . . . . . . 5,229,359
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,072,907
Building . . . . . . . . . . . . . . . . . . . . . . . . . 12,234,282
---------
30,380,182
Less accumulated depreciation and amortization . . . . . . (4,453,724)
-----------
Property and equipment, net . . . . . . . . . . . . . . 25,926,458
Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . 165,960
---------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . $27,486,220
-----------
-----------
LIABILITIES
-----------
Obligations under capital lease, current portion . . . . . . . $1,270,000
Obligations under capital lease, of net of current portion . . 2,223,000
Commitments and Contingencies, (Note 4)
ASSETS IN EXCESS OF LIABILITIES
-------------------------------
Assets in excess of liabilities . . . . . . . . . . . . . . . 23,993,220
----------
Total liabilities and assets in excess of liabilities . . . . $27,486,220
-----------
-----------
The accompanying notes to financial statements are an integral part of this
statement.
6
<PAGE>
HEALTH CENTER OPERATIONS OF
BLUE CROSS AND BLUE SHIELD OF NEW JERSEY, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
Revenues:
Capitation . . . . . . . . . . . . . . . . . . . . . . . . $ 3,666,058
Fee for service. . . . . . . . . . . . . . . . . . . . . . 4,499,906
---------
Total Revenues . . . . . . . . . . . . . . . . . . . . . 8,165,964
---------
Expenses:
Physician expenses . . . . . . . . . . . . . . . . . . . . 6,380,275
Center operating expenses. . . . . . . . . . . . . . . . . 13,973,647
Facility costs . . . . . . . . . . . . . . . . . . . . . . 3,974,464
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,061,766
---------
Total Expenses . . . . . . . . . . . . . . . . . . . . . 25,390,152
----------
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . $(17,224,188)
------------
------------
The accompanying notes to financial statements are an integral part of this
statement.
7
<PAGE>
HEALTH CENTER OPERATIONS OF
BLUE CROSS AND BLUE SHIELD OF NEW JERSEY, INC.
NOTES TO FINANCIAL STATEMENTS
1) DESCRIPTION OF OPERATIONS INCLUDED IN THE ACCOMPANYING FINANCIAL STATEMENTS
On February 28, 1997, PHP Healthcare Corporation ("PHP") acquired certain
assets and assumed certain liabilities from Blue Cross and Blue Shield of
New Jersey's Health Center operations. The accompanying statement of
assets and liabilities and statement of operations present the carved-out
portion of the Health Center Operations. This carved-out portion is herein
referred to as the "Health Center Operations" (the "HCO"). Concurrent with
the purchase, PHP and BCBSNJ entered into a network services agreement
pursuant to which PHP provides certain health care services to enrolled
BCBSNJ beneficiaries through global capitation. Under the network services
agreement, BCBSNJ has guaranteed certain global capitation payments to PHP
over a three year period. However, the effects of the network services
agreement are not included in the statement of operations. These assets
and liabilities and results of operations may not necessarily be indicative
of the financial position or results of operations that would have existed
if the Health Center Operations had been operated as an unaffiliated
company. Certain expenses are the result of allocations of total expenses
incurred by Blue Cross and Blue Shield of New Jersey.
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RECOGNITION OF REVENUE
(A) CAPITATION REVENUES
Primary Care capitation revenues are recorded as revenue in the month
for which the covered member is entitled to primary care service.
Capitation revenue from a related party accounted for approximately
100% of total capitation revenues in 1996.
(B) FEE FOR SERVICE REVENUES
Fee for service revenues are recorded in the month for which the
services are provided.
INVENTORIES
Inventories, consisting principally of pharmaceuticals and medical supplies
held for resale, are stated at the lower of cost or net realizable value.
Cost is determined by specific identification.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Major additions and
improvements are capitalized, while minor replacements, and maintenance
and repairs that do not increase the useful lives of the property are
expensed as incurred. Depreciation and amortization are provided using
the straight-line method over the estimated useful lives of the related
assets, ranging from five to thirty years.
INCOME TAXS
The HCO's financial statements have been presented or carved-out basis.
BCBSN has not allocated any income tax benefit to the HCO for 1996.
8
<PAGE>
HEALTH CENTER OPERATIONS OF
BLUE CROSS AND BLUE SHIELD OF NEW JERSEY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
(3) EMPLOYEE BENEFIT AND HEALTH PLANS
SAVINGS AND INVESTMENT PLAN
The physicians, together with other Blue Cross and Blue Shield of New
Jersey subsidiaries, participate in a qualified defined contribution
savings plan covering substantially all full-time employees as allowed
under Section 401(k) of the Internal Revenue Code. All physicians with six
months of service are eligible for membership. Total expenses allocated
for participating physicians in the health centers was approximately
$96,000 in 1996.
PENSION AND RETIREMENT PLAN
Substantially all the health center physicians, together with employees of
other Blue Cross and Blue Shield of New Jersey subsidiaries are covered
under a pension plan which provides benefits based upon employee
compensation and years of service. The costs allocated to the HCO were
approximately $289,000 for 1996.
(4) COMMITMENTS AND CONTINGENCIES
The HCO has leases for health center space, and equipment
that expire on various dates over the next eight years. The health center
leases provide for increased real estate taxes and building operating
costs through annual adjustments. Total rental expenses for
leases for the year was approximately $2.4 million.
Future minimum rental payments under noncancelable leases at
December 31, 1996, are as follows: $1.4 million in 1997, $1.4 million in
1998, $1.4 million in 1999, $1.4 million in 2000, $1.4 million in 2001, and
$4.4 million thereafter.
9
<PAGE>
HEALTH CENTER OPERATIONS OF
BLUE CROSS AND BLUE SHIELD OF NEW JERSEY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(5) RELATED PARTY TRANSACTIONS
Overhead costs of approximately $135,000 were allocated to the HCO by PHP
for the year ended December 31, 1996.
10
<PAGE>
PHP HEALTHCARE CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED FINANCIAL STATEMENTS
On February 28, 1997, the PHP Healthcare Corporation (the "Company")
acquired ten health care centers ("HCO") from Blue Cross and Blue Shield of New
Jersey ("BCBSNJ"). This transaction was accounted for as a purchase.
The Pro Forma Combined Statement of Operations for the year ended April 30,
1996 and the nine months ended January 31, 1997, and the Pro Forma Combined
Balance Sheet of the Company as of January 31, 1997, give effect to the
acquisition of the HCO which was completed on February 28, 1997. The
adjustments related to the Pro Forma Combined Statement of Operations assume the
transaction was consummated effective May 1, 1995.
The Pro Forma financial information is not necessarily indicative of the
results of operations which would have been attained had the acquisition been
consummated on the date indicated or that which may be attained in the future.
The Pro Forma financial information should be read in conjunction with the
historical consolidated financial statements of PHP and the HCO.
11
<PAGE>
<TABLE>
<CAPTION>
PHP HEALTHCARE CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED BALANCE SHEETS
AS OF JANUARY 31, 1997 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
ACTUAL
------
PRO FORMA PRO FORMA
PHP HCO ADJUSTMENTS COMBINED
--- --- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . $ 29,148 $ (11,181)(1) $ 17,967
Accounts receivable, net . . . . . . . . . . . . . 47,924 $ 650 (10,190)(2) 38,384
Pharmaceutical and medical supplies . . . . . . . . 785 630 1,415
Receivables from officers . . . . . . . . . . . . . 4,101 4,101
Other current assets. . . . . . . . . . . . . . . . 6,395 166 6,561
-------- --------- -------- ---------
Total current assets . . . . . . . . . . . . . . 88,353 1,446 (21,371) 68,428
Property and equipment, net . . . . . . . . . . . . . . 27,595 25,552 5,228(3) 58,375
Intangible assets . . . . . . . . . . . . . . . . . . . 2,959 10,670(4) 13,629
Deferred income taxes . . . . . . . . . . . . . . . . . 1,321 1,321
Receivables from officers, net. . . . . . . . . . . . . 1,072 1,072
Other assets. . . . . . . . . . . . . . . . . . . . . . 5,440 108 5,548
-------- --------- -------- ---------
$126,740 $ 27,106 $ (5,473) $148,373
-------- --------- -------- ---------
-------- --------- -------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of notes payable - other. . . . . 574 9,200(1) 9,774
Accounts payable . . . . . . . . . . . . . . . . . . 8,046 8,046
Claims payable - medical services. . . . . . . . . . 4,646 2,891(5) 7,537
Accrued salaries and benefits . . . . . . . . . . . 15,020 15,020
Deferred income taxes. . . . . . . . . . . . . . . . 1,322 1,322
Billings in excess of costs. . . . . . . . . . . . . 1,105 1,105
-------- --------- -------- ---------
Total current liabilities. . . . . . . . . . . . 30,713 12,091 42,804
Notes payable - other, net of current liabilities . . . 1,486 3,506 94(1) 5,086
Convertible subordinated debentures . . . . . . . . . . 65,986 65,986
Deferred gain on sale of building . . . . . . . . . . . 938 938
Other liabilities . . . . . . . . . . . . . . . . . . . 696 696
-------- --------- -------- ---------
Total liabilities. . . . . . . . . . . . . . . . 99,819 3,506 12,185 115,510
-------- --------- -------- ---------
Assets in excess of liabilities . . . . . . . . . . . . 23,600 (23,600) ---
Minority interest . . . . . . . . . . . . . . . . . . . 862 3,542(6) 4,404
-------- --------- -------- ---------
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 in January . . . . . . 143 143
Additional paid-in capital . . . . . . . . . . . . . 30,982 2,400(7) 33,382
Note receivable from sale of stock . . . . . . . . . (900) (900)
Retained earnings. . . . . . . . . . . . . . . . . . 2,406 2,406
Treasury stock, 3,258,485 common shares, at cost . . (6,572) (6,572)
-------- --------- -------- ---------
Total stockholders' equity . . . . . . . . . . . . . 26,059 2,400 28,459
Contingencies . . . . . . . . . . . . . . . . . . . . .
-------- --------- -------- ---------
$126,740 $ 27,106 $ (5,473) $ 148,373
-------- --------- ---------- ---------
-------- --------- ---------- ---------
</TABLE>
The accompanying notes are an integral part of this statement.
12
<PAGE>
<TABLE>
<CAPTION>
PHP HEALTHCARE CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED JANUARY 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ACTUAL
------
PRO FORMA PRO FORMA
PHP HCO ADJUSTMENTS COMBINED
--- --- ----------- --------
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . $162,280 $ 7,287 $ 12,231 (8) $181,798
Direct costs . . . . . . . . . . . . . . . . . . . . . 130,510 19,361 (121)(9)(10)(11) 149,750
-------- ------- -------- ---------
Gross profit. . . . . . . . . . . . . . . . . . . . 31,770 (12,074) 12,352 32,048
General and administrative expenses. . . . . . . . . . 22,584 22,584
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) . . . . . . . . . . . . . . (5,461) (12,074) 12,352 (5,183)
Other income (expense):
Interest expense. . . . . . . . . . . . . . . . (4,128) (4,128)
Interest income . . . . . . . . . . . . . . . . 1,679 1,679
Miscellaneous income (expense). . . . . . . . . (67) (67)
Minority interest in earnings of
subsidiaries . . . . . . . . . . . . . . . (316) (316)
---------- ----------- --------- ----------
Earnings (loss) before income taxes . . . . . . . . (8,293) (12,074) 12,352 (8,015)
Income tax expense (benefit) . . . . . . . . . . . . . (3,151) --- 105 (3,046)
---------- ----------- --------- ----------
Net earnings (loss) . . . . . . . . . . . . . . . . $ (5,142) $ (12,074) $ 12,247 $ (4,969)
---------- ----------- --------- ----------
---------- ----------- --------- ----------
Net earnings (loss) per share. . . . . . . . . . . . . $ (0.47) $ (0.45)
---------- ----------
---------- ----------
Weighted average number of common 11,076
and common equivalent shares outstanding . . . . . . . 10,986 11,986
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of this statement.
13
<PAGE>
<TABLE>
<CAPTION>
PHP HEALTHCARE CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1996 (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ACTUAL
------
PRO FORMA PRO FORMA
PHP HCO ADJUSTMENTS COMBINED
--- --- ----------- --------
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . $203,360 $ 9,400 $ (294)(8) $212,466
Direct costs . . . . . . . . . . . . . . . . . . . . . 163,582 22,136 (5,912)(9)(10)(11) 179,806
---------- ----------- --------- ----------
Gross profit. . . . . . . . . . . . . . . . . . . . 39,778 (12,736) 5,618 32,660
General and administrative expenses. . . . . . . . . . 27,173 --- --- 27,173
---------- ----------- --------- ----------
Operating income (loss) . . . . . . . . . . . . . . 12,605 (12,736) 5,618 5,487
Other income (expense):
Interest expense. . . . . . . . . . . . . . . . (3,363) (3,363)
Interest income . . . . . . . . . . . . . . . . 1,448 1,448
Miscellaneous income (expense). . . . . . . . . 69 69
Gain on sale of subsidiary stock. . . . . . . . 2,247 2,247
Minority interest in earnings of
subsidiaries. . . . . . . . . . . . . . . . . . 212 212
---------- ----------- --------- ----------
Earnings (loss) before income taxes. . . . 13,218 (12,736) 5,618 6,100
Income tax expense (benefit) . . . . . . . . . . . . . 4,100 --- (2,209) 1,891
---------- ----------- --------- ----------
Net earnings (loss). . . . . . . . . . . . $ 9,118 $ (12,736) $ 7,827 $ 4,209
---------- ----------- --------- ----------
---------- ----------- --------- ----------
Net earnings (loss) per share:
Primary . . . . . . . . . . . . . . . . . . . . . $ .68 $ 0.31
---------- ----------
---------- ----------
Diluted . . . . . . . . . . . . . . . . . . . . . $ .66 $ 0.30
---------- ----------
---------- ----------
Weighted average number of common
and common equivalent shares outstanding:
Primary . . . . . . . . . . . . . . . . . . . . . 13,429 13,519
---------- ----------
---------- ----------
Diluted . . . . . . . . . . . . . . . . . . . . . 13,873 13,963
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of this statement.
14
<PAGE>
PHP HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
FOR THE YEAR ENDED APRIL 30, 1996 (UNAUDITED) AND
THE NINE MONTHS ENDED JANUARY 31, 1997
(1) CASH PAID AND DEBT INCURRED
The pro forma adjustment to cash and notes payable represents cash paid to
BCBSNJ and advances made to the REIT subsidiary.
(2) ACCOUNTS RECEIVABLE
The pro forma adjustment to accounts receivable represents payments on amounts
due to PHP net of acquired accounts receivables.
(3) PROPERTY AND EQUIPMENT
The pro forma adjustment to property and equipment represents the increase in
the estimated fair value of the acquired property and equipment.
(4) INTANGIBLE ASSETS
The pro forma adjustment to intangible assets represents the addition to
intangible assets resulting from the excess of the purchase price paid in the
acquisitions over the fair market value of the tangible net assets acquired. The
allocations of intangible assets are based on current estimates. Such amounts
may ultimately be modified on valuations to be obtained.
(5) CLAIMS PAYABLE
The pro forma adjustment to claims payable represents the estimated incurred but
not reported claims costs for services provided under the global capitation
network services agreement.
(6) REIT PARTICIPATION
The pro forma adjustment to minority interest represents the investment by the
parent REIT into the REIT subsidiary which, due to PHP's significant advances to
the REIT subsidiary, will be accounted for as a minority interest with the REIT
subsidiary consolidated into PHP.
(7) STOCK ISSUANCE
The pro forma adjustment to additional paid-in-capital represents the value of
the shares issued by PHP to BCBSNJ in conjunction with the acquisition.
(8) GLOBAL CAPITATION
The pro forma adjustment to revenues represents the expansion from primary care
capitation to global capitation. Also included in this adjustment is the
elimination of revenues recorded by PHP under its previous arrangement with
BCBSNJ for management and operations of the centers.
(9) EXPANDED SERVICE COSTS
The pro forma adjustment to direct costs represents the estimated costs of
providing additional services under global capitation included in the network
services agreement. Also included in this adjustment is the elimination of the
health center costs recorded by PHP under its previous arrangement with BCBSNJ
for management and operations of the centers.
(10) NONRECURRING COSTS
The pro forma adjustment to direct costs represents the elimination of certain
nonrecurring costs related to allocations charged by the parent company for
data processing and other administrative services. Also included in this
adjustment in the elimination of costs associated with the restructuring of the
health center operations.
(11) AMORTIZATION EXPENSE
The pro forma adjustment to direct costs represents the increase in amortization
of intangible assets recorded in conjunction with the acquisition utilizing the
historical amortization policies of PHP.
15
