<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A-2
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 17, 1997
PHP HEALTHCARE CORPORATION
(Exact name of Registrant as specified in its charter)
State or other jurisdiction of incorporation: Delaware
Commission File No.: 0-16235
I.R.S. Employer Identification No.: 54-1023168
Address of principal executive offices: 11440 Commerce Park Drive
Reston, VA 20191
Registrant's telephone number, including area code: (703) 758-3600
Former name or former address, if changed since last report: Not applicable
<PAGE>
PHP HEALTHCARE CORPORATION
The undersigned registrant hereby files this Amendment No. 2 (the "Amendment")
for the purpose of amending and restating in its entirety Item 7. The Amendment
is set forth below.
Item 7. Financial Statements and Exhibits
- ------------------------------------------
Item 7 is hereby amended and restated in its entirety to read as follows:
The following documents are included in this report:
a) Financial statements of the business acquired
- - HIP of New Jersey, Inc. and Subsidiary Consolidated Financial Statements and
Additional Information as of and for the years ended December 31, 1996 and 1995,
with Report of Independent Auditors (see Exhibit 99.1)
- - HIP of New Jersey, Inc. and Subsidiary Consolidated Financial Statements and
Additional Information as of and for the years ended December 31, 1995 and 1994,
with Report of Independent Auditors (see Exhibit 99.2)
- - HIP of New Jersey, Inc. and Subsidiary Interim (unaudited) Financial
Statements and Additional Information as of and for the period ended September
30, 1997 (see Exhibit 99.3)
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 Combined Balance Sheet as of October 31,
1997 (unaudited)
- - PHP Healthcare Corporation Pro Forma Combined Statements of Operations for the
Six Months ended October 31, 1997 (unaudited).
- - PHP Healthcare Corporation Pro Forma Combined Statements of Operations for the
Year ended April 30, 1997 (unaudited).
- - PHP Healthcare Corporation Notes to Pro Forma Combined Statements of
Operations for the Year ended April 30, 1997 (unaudited) and the Six Months
ended October 31, 1997 (unaudited).
c) Exhibits. The following exhibits are furnished as a part of this report.
- -----------------------------------------------------------------------------
Exhibit Description
------- -----------
4.1 Warrant Agreement between PHP Healthcare Corporation and First Trust
of New York, National Association, Warrant Agreement, dated as of
October 31, 1997*
10.1 Asset Purchase Agreement by and between PHP Healthcare Corporation
and HIP of New Jersey, Inc., dated as of July 24, 1997**
10.2 Credit Agreement, dated October 31, 1997, among PHP Healthcare
Corporation as Borrower and The Initial Lenders and Initial Issuing
Bank Named Herein as Initial Lenders and Initial Issuing Bank and
NationsBank, N.A. as Collateral Agent and Administrative Agent*
2
<PAGE>
PHP HEALTHCARE CORPORATION
10.3 Security Agreement, dated as of October 31, 1997, from PHP Healthcare
Corporation. The Other Grantors Referred to Herein and The Additional
Grantors Referred to Herein as Grantors to NationsBank, N.A. as
Administrative Agent*
10.4 Subsidiary Guaranty, dated as of October 31, 1997, from each of the
Subsidiaries of PHP Healthcare Corporation listed on the Signature
Pages Hereof and the Additional Subsidiary Guarantors referred to
herein as Guarantors in favor of the Secured Parties referred to in
the Credit Agreement referred to herein**
10.5 Letter Amendment dated as of January 14, 1998 to the Credit
Agreement, dated October 31, 1997, among PHP Healthcare Corporation
as Borrower and the Initial Lenders and Initial Issuing Bank named
herein as Initial Lenders and Initial Issuing Bank and NationsBank,
N.A. as Collateral Agent and Administrative Agent***
23.1 Consent of Independent Auditors***
99.1 HIP of New Jersey, Inc. and Subsidiary Consolidated Financial
Statements and Additional Information as of and for the Years ended
December 31, 1996 and 1995, with Report of Independent Auditors***
99.2 HIP of New Jersey, Inc. and Subsidiary Consolidated Financial
Statements and Additional Information as of and for the Years ended
December 31, 1995 and 1994, with Report of Independent Auditors***
99.3 HIP of New Jersey, Inc. and Subsidiary Interim (unaudited) Financial
Statements and Additional Information as of and for the Period ended
September 30, 1997
* Document filed as an exhibit to the Company's 8-K Report (File No. 0-16235)
on November 17, 1997, bearing the same exhibit number, which is incorporated
herein by reference.
** Document filed as an exhibit to the Company's 10-Q Report (File No. 0-16235)
for the period ended July 31, 1997, bearing the same exhibit number, which is
incorporated herein by reference.
*** Document filed as an exhibit to the Company's 8-K/A Report (File No. 0-
16235) on January 20, 1998, bearing the same exhibit number, which is
incorporated herein by reference.
3
<PAGE>
PHP HEALTHCARE CORPORATION AND SUBSIDIARIES
Pro Forma Combined Financial Statements
Upon further review the Company has revised its accounting treatment for two
contracts entered into during fiscal years 1994 and 1995. The two contracts, a
construction contract and a management contract, which were with the same party,
were previously combined for purposes of revenue recognition. The Company has
restated previously issued financial statements to account for these two
contracts separately. The Company has also revised its accounting treatment for
a 17 year lease of primary care facilities. Beginning in August 1997 the Company
accounted for the lease as an operating lease. The Company has restated
previously issued interim financial statements to account for this lease as a
financing. Accordingly, the Company has restated the October 31, 1997 balance
sheet and the statements of operations for the year ended April 30, 1997 and six
months ended October 31, 1997, included in the pro forma combined financial
statements.
Effective October 31, 1997, PHP Healthcare Corporation ("PHP" or the "Company")
acquired eighteen health centers located throughout the state of New Jersey from
HIP of New Jersey, Inc. ("HIPNJ"), a health maintenance organization. The total
purchase price of approximately $80 million, including transaction costs and
other consideration, was paid through a combination of cash on hand and bank
financing under a senior credit facility. The Company may be required to pay HIP
additional amounts based upon membership growth through the year 2000, up to a
total of $15 million. In conjunction with the purchase agreement, the Company
and HIPNJ entered into a twenty year Health Services Agreement pursuant to which
the Company will arrange for the provision of certain health care services to
enrolled HIPNJ beneficiaries in return for global capitation payments. To enable
the Company to provide health care services as promptly as possible, the Company
and HIPNJ also entered into a Network Access Transition Agreement, whereby HIPNJ
will pay the Company $5.4 million to perform various transition functions, and
provide HIPNJ members access to the Company's health care network during the
transition period.
On December 30, 1997, PHP announced the completion of a private placement of
shares of its Series B Convertible Preferred Stock at a purchase price of $1,000
per share, resulting in gross proceeds to the Company of $70 million. The
proceeds of the offering were used to repay outstanding borrowings under a
senior credit facility, to pay related expenses and for working capital. The
senior credit facility was established to temporarily finance the Company's
acquisition of 18 health centers from HIP, although the Company intended to
obtain permanent financing through the issuance of bank debt or equity
securities. The issuance cost under this temporary financing was approximately
$13 million.
The transaction was accounted for using the purchase method of accounting and
accordingly, the purchase price was allocated, on an estimated basis, to the
acquired tangible ($15 million) and identifiable intangible ($65 million) assets
and assumed liabilities based on their respective estimated fair values. The
identifiable intangible assets will be amortized on a straight-line basis over
periods up to 20 years. The $65 million of intangible assets is a preliminary
valuation. In management's opinion the preliminary valuation is not expected to
materially differ from the final valuation. Due to the uncertainty of the
contingent payments based on membership growth, the Company has not included any
of these amounts in the determination of the purchase price nor has any
liability been recognized. If these additional amounts are required, the
additional consideration will be accounted for as an increase to the purchase
price resulting in increased goodwill.
Pursuant to the Health Services Agreement certain administrative functions such
as marketing, regulatory relations and certain member services will be retained
by HIPNJ. The costs associated with services have been included in the
historical HIPNJ Statement of Operations and therefore these costs have been
removed through the pro forma adjustments.
The transaction was recorded in the Company's historical balance sheet on
October 31, 1997. The pro forma adjustments in the accompanying Pro Forma
Combined Balance Sheet as of October 31, 1997 gives effect to the issuance of
the $70 million Series B Convertible Preferred Stock and the repayment of the
temporary bank financing under a senior credit facility.
The accompanying Pro Forma Combined Statements of Operations for the year ended
April 30, 1997 and the six months ended October 31, 1997, give effect to the
transaction with HIPNJ completed on October 31, 1997 as if HIPNJ and the effects
of the Health Services Agreement occurred on May 1, 1996.
The pro forma financial information is not necessarily indicative of the results
of operations which would have been attained had the transaction been
consummated on the date indicated or that which may be attained in the future.
The unaudited pro forma financial information should be read in conjunction with
the historical consolidated financial statements of PHP and HIPNJ.
4
<PAGE>
PHP HEALTHCARE CORPORATION
Pro Forma Combined Balance Sheet
As of October 31, 1997 (unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
October 31,
1997 Pro Pro
----------
Restated Forma Forma
(Unaudited) Adjustments Notes Combined
----------- ----- --------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................................... $10,981 $15,075 1 $26,056
Accounts receivable, net........................................................ 55,700 55,700
Pharmaceutical and medical supplies............................................. 671 671
Receivables from officers....................................................... 3,031 3,031
Income tax receivable........................................................... 895 895
Deferred income taxes........................................................... 3,322 1,838 2 5,160
Other current assets............................................................ 5,372 5,372
------- ------- -------
Total current assets............................................................ 79,972 16,913 96,885
Property and equipment, net....................................................... 72,501 72,501
Intangible assets, net of accumulated amortization of $1,690...................... 71,812 71,812
Receivables from officers......................................................... 498 498
Note receivable................................................................... 2,000 2,000
Other assets...................................................................... 10,023 1,600 3 11,623
-------- ------- --------
Total assets................................................................... $236,806 $18,513 $255,319
======== ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Note payable to bank............................................................ $ 3,000 $ (3,000) 4 $ ---
Amounts due in connection with acquisition...................................... 12,902 (12,902) 4 ---
Current maturities of notes payable - other..................................... 2,057 2,057
Finance lease obligation........................................................ 346 346
Accounts payable................................................................ 18,525 18,525
Claims payable - medical services............................................... 6,080 6,080
Accrued salaries and benefits................................................... 10,605 10,605
Income taxes payable............................................................ 1,168 1,168
Deferred revenue................................................................ 24,568 24,568
-------- ------- --------
Total current liabilities......................................................... 79,251 (15,902) 63,349
Amounts due in connection with acquisition........................................ 25,710 (25,710) 4 ---
Notes payable - other, net of current maturities.................................. 5,488 5,488
Finance lease obligation.......................................................... 17,726 17,726
Convertible subordinated debentures............................................... 66,290 66,290
Deferred income taxes............................................................. 1,274 1,274
Deferred gain on sale of building................................................. 873 873
Other liabilities................................................................. 871 871
-------- --------
Total liabilities.............................................................. 197,483 (41,612) 155,871
-------- ------- --------
Minority interest................................................................. 1,282 1,282
-------- --------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Stockholders equity:
Preferred stock, Series B Convertible Preferred Stock, $1,000 par value;
80,800 shares authorized, 70,000 shares issued and outstanding (net of
value of beneficial conversion feature at date of issue of $6,300)............ 63,700 5 63,700
Preferred stock, $.01 par value, 9,919,200 shares authorized, none issued
Common stock, $.01 par value, 100,000,000 shares authorized, 14,818,415
shares.......................................................................... 148 148
Additional paid-in capital....................................................... 44,666 (6,463) 5 44,503
Note receivable from sale of stock............................................... (900) 6,300 5 (900)
Retained earnings................................................................ 699 (3,412) 6 (2,713)
Treasury stock, 3,258,485 common shares, at cost................................. (6,572) (6,572)
-------- ------- --------
Total stockholders' equity..................................................... 38,041 60,125 98,166
-------- ------- --------
Contingencies..................................................................... $236,806 $18,513 $255,319
======== ======= ========
</TABLE>
The accompanying notes are an integral part of this pro forma statement.
5
<PAGE>
PHP HEALTHCARE CORPORATION
Pro Forma Combined Statements of Operations
Year ended April 30, 1997(unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Historical
----------
Pro Forma Forma
PHP HIPNJ Subtotal Adjustments Notes Combined
--- ----- -------- ----------- ----- --------
RESTATED
<S> <C> <C> <C> <C> <C> <C>
Revenue...................................... $232,369 $385,540 $617,909 $(35,870) 7 $582,039
7,238 8
(6,250) 8
3,226 11
Direct Costs................................. (189,477) (351,037) (540,514) 12,211 9 (524,089)
-------- --------- --------- ------- ---------
Gross Profit................................. 42,892 34,503 77,395 (19,445) 57,950
General and administrative costs............. (30,846) (43,155) (74,001) 27,920 10 (46,081)
Reserve for Medicaid receivables............. (9,822) (9,822) (9,822)
Retirement charges........................... (2,275) (2,275) (2,275)
Restructuring charges........................ (2,550) (2,550) (2,550)
-------- --------- --------- ------- ---------
Operating income (loss)................. (2,601) (8,652) (11,253) 8,475 (2,778)
Other income (expenses):
Interest expense............................ (5,577) (1,525) (7,102) 1,525 12 (5,577)
Interest income............................. 2,060 2,060 2,060
Miscellaneous income (expense).............. (222) (222) (222)
Minority interest in earnings............... (196) (196) (196)
-------- --------- --------- ------- ---------
Earnings (loss) before income tax....... (6,536) (10,177) (16,713) 10,000 (6,713)
Income tax benefit........................... 2,486 2,486 65 13 (2,551)
-------- --------- --------- ------- ---------
Net earnings (loss)......................... (4,049) (10,177) (14,226) 10,065 (4,161)
Deemed dividend on Series B Preferred Stock.. (6,300) 14 (6,300)
------- ---------
Net loss applicable to common shareholders.. $ (4,049) $ (10,177) $ (14,226) $ 3,765 $ (10,461)
======== ========= ========= ======= =========
Primary earnings per common share:
Net loss.................................... $ (.37) $ (.38)
--------
Deemed dividend............................. (.57)
---------
Net loss applicable to common shareholders.. $ (.37) $ (.95)
======== =========
Fully diluted earnings per common share..... $ (.37) $ (.95)
======== =========
Weighted average number of common
shares outstanding:
Primary..................................... 11,038 11,038
======== =========
Fully diluted............................... 11,038 11,038
======== =========
</TABLE>
The accompanying notes are an integral part of this pro forma statement.
6
<PAGE>
PHP HEALTHCARE CORPORATION
Pro Forma Combined Statements of Operations
for the Six Months ended October 31, 1997 (Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Historical
----------
Pro Forma Pro Forma
PHP HIP Subtotal Adjustments Notes Combined
--- --- -------- ----------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
Revenue........................................... $111,495 $ 188,391 $ 299,886 $(16,904) 7 $ 282,982
6,395 8
(3,125) 8
1,768 11
Direct Costs...................................... (89,575) (187,272) (276,847) 6,106 9 (265,703)
-------- --------- --------- -------- ---------
Gross Profit...................................... 21,920 1,119 23,039 (5,760) 17,279
General and administrative costs.................. (14,730) (21,361) (36,091) 18,246 10 (17,845)
-------- --------- --------- -------- ---------
Operating income (loss)..................... 7,190 (20,242) (13,052) 12,486 (566)
Other income (expenses):
Interest expense............................... (3,405) (987) (4,392) 987 12 (3,405)
Interest income................................ 658 658 658
Miscellaneous income (expense)................. (584) (584) (584)
Minority interest in earnings.................. (522) (522) (522)
-------- --------- --------- -------- ---------
Earnings (loss) before income tax........... 3,337 (21,229) (17,892) 13,473 (4,419)
Income tax (expense) benefit...................... (1,168) (1,168) 2,715 13 1,547
-------- --------- --------- -------- ---------
Net earnings (loss)......................... $ 2,169 $ (21,229) $ (19,060) $ 16,188 $ (2,872)
======== ========= ========= ======== =========
Net earnings (loss) per common share:
Primary........................................ $ 0.16 $ (0.21)
======== =========
Fully diluted.................................. $ 0.16 $ (0.21)
======== =========
Weighted average number of common
shares outstanding:
Primary........................................ 13,679 13,679
======== =========
Fully diluted.................................. 13,790 13,790
======== =========
</TABLE>
The accompanying notes are an integral part of this pro forma statement.
7
<PAGE>
PHP HEALTHCARE CORPORATION AND SUBSIDIARIES
Notes to Pro Forma Combined Financial Statements
for the Year Ended April 30, 1997 (unaudited) and
the Six Months Ended October 31, 1997 (unaudited)
(1) The pro forma adjustment reflects the net effect of cash received in
conjunction with the issuance of the Series B Convertible Preferred Stock of
approximately $63.5 million and the extinguishment of debt assumed during the
HIPNJ acquisition of approximately $48.5 million (see Note 4).
(2) The pro forma adjustment reflects the tax effect of the value of the
warrants ($3.6 million) and debt issuance fees ($1.6 million) assigned to the
term loan, which was extinguished using the proceeds from the issuance of the
Series B Convertible Preferred Stock (see Note 4), using the applicable
effective tax rate of 35%.
(3) The pro forma adjustment reflects the reclassification of the value of the
warrants assigned to the revolving credit facility of $3.2 million from debt to
other assets which will be amortized over the life of the facility and a
decrease of $1.6 million related to debt issuance fees assigned to the term loan
which were expensed with the extinguishment of the term note.
(4) The purchase price of HIPNJ was financed through a combination of cash on
hand and bank financing under a senior credit facility. Under the credit
agreement, the Company had available up to $75 million in the form of (i) a term
facility in the principal amount of $40 million maturing in two years, and (ii)
a revolving credit facility in an aggregate principal amount of up to $35
million. In connection with the Credit Agreement, the Company paid $3 million in
fees and issued warrants to its primary bank to acquire 1,421,000 shares of
common stock of the Company at no cost to exercise. Effective October 31, 1997,
500,150 of the warrants became immediately exercisable and were recorded as
additional paid-in capital using the market price on that day of $13.69 per
share, for a total of $6.85 million. The fees and warrants were assigned
proportionately to the term and revolving credit facility based upon the
principal amounts. (See Note 5).
(5) On December 30, 1997, the Company completed a private placement of 70,000
shares of its Series B Convertible Preferred Stock at a purchase price and par
value of $1,000 per share resulting in gross proceeds to the Company of $70
million. The proceeds of the offering were used to repay amounts outstanding due
to the bank and in connection with the acquisition of approximately $48.5
million and related equity issuance costs of approximately $6.5 million.
The holders of the Series B Preferred Stock are not entitled to receive
dividends and, except as provided for by law, have no voting rights. Each share
of Series B Preferred Stock is convertible into that number of shares of common
stock equal to the quotient of (i) $1,000 divided by (ii) the Conversion Price.
Through May 31, 1998, the Conversion Price will be $25. Thereafter, subject to
the maximum Conversion Price specified below, the Conversion Price will be equal
to the lowest trading price of the common stock for the 22 trading days
immediately preceding the conversion date, less a discount ranging from 5%
(beginning June 1, 1998) to 9% (on or after December 1, 1998). The maximum
Conversion Price is the lesser of (i) $30, (ii) 91% of the average of the daily
low trading prices of the common stock for all trading days in March, 1999, or
(iii) 91% of the average of the daily low trading prices for all trading days in
September, 1999; provided, however, that the maximum, Conversion Price shall not
be less than $25.
The Company has recorded the potential 9% discount on the $70 million Series B
Convertible Preferred Stock issuance, or $6.3 million, as a reduction to
Preferred Stock, to be amortized over the applicable twelve month period, and an
increase to additional paid-in-capital.
(6) The pro forma adjustment to retained earnings reflects the expensing of the
value of the warrants of $3 million and fees of $1.6 million assigned to the
term loan which was extinguished net of the tax affect of $1.838 million (see
Note 2).
(7) Revenue - Global Capitation
In conjunction with the purchase agreement, PHP and HIPNJ entered into a twenty
year Health Services Agreement pursuant to which PHP will provide certain health
care services to enrolled HIPNJ beneficiaries in return for a global capitation
payment to PHP. Pursuant to the Health Services Agreement, PHP will receive
premium revenue, 100% of revenues generated in the health centers, including
optical and pharmacy revenues, and a portion of all Administrative Services Only
fees. This pro forma adjustment is to eliminate the HIPNJ retained revenues.
(8) Direct costs - Depreciation
The pro forma adjustments to direct costs represents a decrease to eliminate the
depreciation expense for the acquired leasehold improvements that HIPNJ
recognized and to eliminate goodwill amortization that will be retained by HIPNJ
($7,238 and $6,395 for
<PAGE>
the year ended April 30, 1997 and the six months ended October 31, 1997,
respectively). Additionally, the pro forma adjustment to direct costs represents
an increase in the deprecation expense that would have been recognized by PHP,
using the straight-line depreciation method over the five-year estimated useful
lives of the acquired asset ($15 million), and amortization expense that would
have been recognized by PHP, using the straight-line depreciation method for the
20-year estimated period of benefit of the recorded goodwill ($65 million)
($6,250 and $3,125 for the year ended April 30, 1997 and the six months ended
October 31, 1997, respectively). The identified intangible assets include the
network agreement, physician contracts, assembled workforce and goodwill. The
assigned values and useful lives of each component are currently being valued.
In management's opinion, the preliminary valuation is not expected to materially
differ from the final valuation.
(9) Direct Costs - Labor Savings
The pro forma adjustment to direct costs represent eliminations of HIPNJ labor
cost which will not be incurred by PHP under the Health Services Agreement as a
result of a reduction in the workforce.
8
<PAGE>
PHP HEALTHCARE CORPORATION AND SUBSIDIARIES
Notes to Pro Forma Combined Financial Statements
for the Year Ended April 30, 1997 (unaudited) and
the Six Months Ended October 31, 1997 (unaudited) (continued)
(10) General and Administrative - HIPNJ Retained Costs
Pursuant to the Health Services Agreement, HIPNJ will retain certain
administrative activities, including but not limited to marketing, regulatory
relations, plan finance and certain member services. This pro forma adjustment
to general and administrative costs represents the elimination of these
administrative activities.
(11) Health Center Closings
Two of the eighteen health centers acquired by PHP from HIPNJ were located in
close proximity to health centers currently owned and operated by PHP.
Therefore, PHP has made the decision to close the centers previously owned and
operated by HIPNJ. The pro forma adjustment to direct costs represent the
elimination of certain fixed costs which would not be incurred due to the two
health center closings.
(12) Interest Expense
The pro forma adjustment to interest expense represent the elimination of
certain interest costs which will be retained by HIPNJ.
(13) Income Tax
The pro forma adjustment to income taxes represents effective tax rates of 38%
and 35% for the year ended April 30, 1997 and the six months ended October 31,
1997, respectively, which represent the combined federal and state income tax
rates adjusted as necessary.
(14) Deemed Dividend
The deemed dividend represents accretion of value of the beneficial conversion
feature (9% discount in twelfth month after issuance) on Series B Preferred
Stock.
(15) Additional Cost Reductions
There are additional cost reductions in connection with the transaction relating
to recontracting provider agreements on a unit price basis which are not
reflected in the pro forma statements. The Company has estimated that if these
cost reductions were included, the reduction to medical expense (included in
direct costs) would be approximately $20 million and $24.4 million on an annual
basis. Additional cost reductions are anticipated resulting from more effective
utilization efforts.
9
<PAGE>
PHP HEALTHCARE CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PHP HEALTHCARE CORPORATION
---------------------------
(Registrant)
By: /s/ Anthony M. Picini
---------------------
ANTHONY M. PICINI
Executive Vice President and
Chief Financial Officer
Date: June 3, 1998
- ------------------
10
<PAGE>
PHP HEALTHCARE CORPORATION
EXHIBIT INDEX
-------------
99.3 HIP of New Jersey, Inc. and Subsidiary Interim (unaudited) Financial
Statements and Additional Information as of and for the Period ended
September 30, 1997.
<PAGE>
EXHIBIT 99.3
------------
HIP of New Jersey, Inc. and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Nine Months
Ended
September 30,
1997
----
(In thousands)
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 622
Marketable securities 22,645
Premiums receivable 11,368
Due from HIP of Pennsylvania, Inc. 925
Due from Health Insurance Plan of Greater New York 8,515
Other current assets 20,197
-------
Total other assets 64,272
Building, leasehold improvements and equipment, net 43,298
Intangible assets, net 615
Assets whose use is limited 1,030
Other assets 10,223
Total assets $119,438
========
LIABILITIES AND NET ASSETS
Current liabilities:
Claims payable $55,743
Accounts payable and other accrued expenses 24,417
Premiums received in advance 1,507
Current maturities of long-term debt 8,474
-------
Total current liabilities 90,141
Other long-term liabilities 675
Deferred remuneration liability 3,809
Long-term debt 4,509
Surplus notes due to Health Insurance Plan of Greater
New York 40,175
Net assets - unrestricted (19,871)
--------
Total liabilities and net assets $119,438
========
</TABLE>
See accompanying notes.
<PAGE>
HIP of New Jersey, Inc. and Subsidiary
Consolidated Statements of Operations and
Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
1997
----
(In thousands)
<S> <C>
REVENUE
Premiums earned $276,474
Investment and other income 6,801
--------
Total revenue 283,275
--------
EXPENSES
Subscriber's benefits 276,820
General and administrative 28,610
Depreciation and amortization 2,859
Interest 1,143
--------
Total expenses 309,432
--------
(Loss) income from operations (26,157)
=========
</TABLE>
See accompanying notes.
<PAGE>
HIP of New Jersey, Inc. and Subsidiary
Consolidated Statements of Operations and
Changes in Net Assets (Unaudited) (continued)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
1997
----
(In thousands)
<S> <C>
(Decrease) increase in unrestricted net assets $(26,157)
Unrestricted net assets at beginning of year 6,286
--------
Unrestricted net assets at end of year $(19,871)
=========
</TABLE>
See accompanying notes.
<PAGE>
HIP of New Jersey, Inc. and Subsidiary
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1997
------------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Change in net assets $(26,157)
Adjustments to reconcile change in net assets to net cash (used in)
provided by operating activities:
Depreciation and amortization 3,883
Change in:
Premiums receivable 878
Due from HIP of Pennsylvania, Inc. (235)
Due from Health Insurance Plan of Greater New York 370
Other current assets (575)
Other assets 2,596
Claims payable (3,901)
Accounts payable and other accrued expenses 264
Premiums received in advance (3,582)
Other long-term liabilities (3,681)
-------
Net cash (used in) provided by operating activities (30,140)
-------
CASH FLOWS FROM INVESTING ACTIVITIES
Net sales (purchase) of marketable securities 31,494
Purchase of building, leasehold improvements and equipment, net (1,097)
-------
Net cash provided by (used in) investing activities 30,397
-------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt (1,562)
-------
Net cash used in financing activities (1,562)
-------
Net decrease in cash and cash equivalents (1,304)
Cash and cash equivalents at beginning of year 1,926
=====
Cash and cash equivalents at end of year $ 622
===
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for interest 811
===
</TABLE>
See accompanying notes.
<PAGE>
HIP of New Jersey, Inc. and Subsidiary
Notes to Condensed Consolidated Financial Statements
Nine Months ended September 30, 1997
(Unaudited)
(1) Summary of Significant Accounting Policies
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 December
31, 1996 and 1995 audited consolidated financial statements. The interim
operating results are not necessarily indicative of the operating results for
the full fiscal year.
(2) Investments
The composition of investments in marketable securities and assets whose use is
limited and scheduled are summarized as follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1997
------------------
<S> <C>
(In thousands)
U.S. Government and Agencies $12,153
Corporate Securities 10,913
------
$23,066
=======
</TABLE>
Investment income and gains and losses on marketable securities and assets whose
use is limited are composed of the following for the nine months ended September
30, 1997:
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1997
------------------
<S> <C>
(In thousands)
Interest income $1,848
Net realized capital gains (losses) on sale of securities 250
---
$2,098
======
</TABLE>
The fair value generally represents estimates based on quoted market prices for
securities traded in the public market place.
Proceeds from the sale of investments in marketable securities were $62.8
million; gross gains of $.2 million and gross losses of $0.6 million were
realized on sales for the nine months ended September 30, 1997.
