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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
===============
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
Commission File Number 33-22011-A
ST. JOSEPH'S PHYSICIAN ASSOCIATES, INC.
---------------------------------------
(Exact name of Small Business Issuer as specified in its charter)
Florida 59-2858209
------- ----------
(State of incorporation) (I.R.S. Employer Identification No.)
4900 North Habana Ave., Tampa,FL 33614
- -------------------------------- -----
(Address of principal executive offices) (Zip Code)
Issuer's telephone number,
including area code: (813) 854-4668
---------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
--- ---
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Class Outstanding at March 31, 1997
Common stock, par value $1.00 per share 433 shares
- --------------------------------------- ----------
Documents incorporated by reference
NONE
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TABLE OF CONTENTS
FORM 10-QSB QUARTERLY REPORT - March 31, 1997
ST. JOSEPH'S PHYSICIAN ASSOCIATES, INC.
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 3 - 9
--------------------
Item 2. Management's Discussion and Analysis or
Plan of Operation 10 - 12
-----------------
PART II -OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security
Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
2
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ST. JOSEPH'S PHYSICIAN ASSOCIATES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 715,588 $ 769,570
Distribution receivable from
limited partnership investments 23,380 38,520
Income taxes receivable 78,879 6,379
Prepaid expenses 4,446 6,666
----------- -----------
Total current assets 822,293 821,135
Equity investments 752,040 742,867
Other investments 20,000 20,000
----------- -----------
Total assets $ 1,594,333 $ 1,584,002
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses $ 20,246 $ 23,978
Income taxes payable 5,063 0
----------- -----------
Total current liabilities 25,309 23,978
Deferred income taxes 78,326 78,326
----------- -----------
Total liabilities 103,635 102,304
Stockholders' equity:
Common stock, $1 par value: 7,500 shares
authorized; 426 shares at March 31, 1997
and 426 shares at December 31, 1996 issued
and outstanding 426 426
Common stock subscribed, 7 shares at
March 31, 1997 and 7 shares at
December 31, 1996 7 7
Subscriptions receivable (11,600) (11,600)
Additional paid-in capital 704,975 704,975
Retained earnings 796,890 787,890
----------- -----------
Total stockholders' equity 1,490,698 1,481,698
----------- -----------
Total liabilities and stockholders' equity $ 1,594,333 $ 1,584,002
=========== ===========
</TABLE>
The accompanying notes
are an integral part of these financial statements.
3
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ST. JOSEPH'S PHYSICIAN ASSOCIATES, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the For the
quarter ended quarter ended
March 31, 1997 March 31, 1996
-------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C>
Equity in net earnings of investees $ 9,173 $ 30,851
Distribution income 23,380 38,520
----------- -----------
32,553 69,371
Expenses:
Salary 10,000 10,000
General and administrative 15,024 12,270
----------- -----------
25,024 22,270
Operating income 7,529 47,101
Interest income 6,534 6,157
----------- -----------
Income before income taxes 14,063 53,258
Income taxes 5,063 18,640
----------- -----------
Net Income $ 9,000 $ 34,618
=========== ===========
Net income per common share $ 21 $ 81
=========== ===========
Weighted average shares outstanding 433 427
and subscribed =========== ===========
</TABLE>
The accompanying notes
are an integral part of these financial statements.
4
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ST. JOSEPH'S PHYSICIAN ASSOCIATES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the For the
quarter ended quarter ended
March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Operating activities
Net income $ 9,000 $ 34,618
Adjustments to reconcile net income to net cash
used in operating activities:
Equity in net earnings of investees (9,173) (30,851)
Distribution income (23,380) (38,520)
Changes in operating assets and liabilities:
Prepaid expenses 2,220 2,677
Income taxes receivable (72,500) 0
Accrued expenses (3,732) 4,384
Income taxes payable 5,063 (16,360)
---------- ----------
Net cash used in operating activities (92,502) (44,052)
Investing activities
Distributions received 38,520 44,000
---------- ----------
Net cash provided by investing activities 38,520 44,000
Financing activities
Proceeds from sale of common stock 0 0
Redemption of common stock 0 0
---------- ----------
Net cash provided by financing activities 0 0
Decrease in cash and cash equivalents (53,982) (52)
Cash and cash equivalents at beginning of quarter 769,570 643,988
---------- ----------
Cash and cash equivalents at end of quarter $ 715,588 $ 643,936
========== ==========
</TABLE>
The accompanying notes
are an integral part of these financial statements.
5
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ST. JOSEPH'S PHYSICIAN ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
The financial statements included herein have been prepared by St. Joseph's
Physician Associates, Inc. (the "Company"), without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. In the opinion
of management, the accompanying unaudited financial statements contain all
adjustments necessary to present fairly the financial position of the Company
as of March 31, 1997 and December 31, 1996, and the results of its operations
and its cash flows for the three months ended March 31, 1997 and 1996.
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
Organization
The Company was organized on November 20, 1987 as a Florida corporation. The
Company was organized to establish and operate an association of qualified
physicians for the purpose of engaging directly or indirectly in health care
related ventures.
In February 1989, the Company acquired 2,500 shares of the common stock of St.
Joseph's Physicians-Healthcenter Organization, Inc. (the "PHO") for $20 per
share. The 2,500 shares represent 50% of the outstanding common stock of the
PHO. The remaining 2,500 common shares of the PHO are owned by St. Joseph's
Enterprises, Inc.("Enterprises") The PHO also had 6,250 preferred shares
outstanding as of December 31, 1996. Prior to January 31, 1997, the Company
earned equity in the net earnings of the PHO at 22.22% of the PHO's earnings
after deducting a 6% cumulative dividend for the 6,250 preferred shares. The
PHO's preferred shares were redeemed effective January 31, 1997 for $184,375.
As a result of this redemption, the Company and Enterprises now each own a 50%
interest in the PHO. The PHO was organized for the purpose of engaging directly
or indirectly in managed care arrangements and health care related ventures.
In June 1989, the Company acquired 4,000 shares of the common stock in
Hospitals' Home Health Care of Hillsborough County, Inc. d/b/a St. Joseph's
Home Health Services ("HHC") for $10 per share. The 4,000 shares represent 50%
of the outstanding common stock of HHC. HHC was organized for the purpose of
providing medical services to patients in the home environment.
6
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NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (con't):
Equity Investments
The Company accounts for its investments in the PHO and HHC on the equity
method. Accordingly, these investments have been stated in the accompanying
balance sheets at the cost of acquisition plus the Company's equity in the
undistributed earnings/losses since acquisition, less distributions to the
Company. None of the assets or liabilities of the investments are included in
the balance sheets except to the extent of the Company's interests in the
underlying net assets included in equity investments. The excess of the cost of
acquisition of the investment in HHC over the Company's interest in the
underlying net liabilities at the date of acquisition was $84,264 and is being
amortized as a component of equity in net earnings of investees over forty
years. As of March 31, 1997, the unamortized excess cost of acquisition of the
investment in HHC was $67,942. The Company's net earnings/losses resulting from
its proportionate share of the investees' revenues and expenses are included in
the statements of income.
Other Investments
The Company owns five limited partnership units in St. Joseph's
Same-Day Surgery Center, Ltd. ("SDS"). The investment is accounted
for at cost due to the Company's limited percentage interest in the
partnership and inability to exercise significant influence over
the partnership. Distributions are recorded as income when
declared and reported as distribution income.
Subscriptions Receivable
Subscriptions receivable relate to agreements to purchase common stock of the
Company and are to be paid in installments during 1997 and 1998.
Cash Equivalents
The Company considers all highly liquid investments with original maturities of
three months or less when purchased to be cash equivalents.
Income Per Common Share
Income per common share is based upon the weighted average number of common
shares outstanding during the period.
7
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NOTE 2 - RELATED PARTIES:
The members of the Board of Directors of the Company are also members of the
medical staff of St. Joseph's Hospital, Inc., which is owned by St. Joseph's
Health Care Center, Inc("SJHC"). Until January 31, 1997, SJHC provided
administrative support to the Company at no charge. Beginning February 1, 1997,
SJHC began to charge the Company for administrative support and direct costs
(i.e., supplies, food charges, printing, etc.).
All limited partner investors in the PHO's ventures are investors in the
Company. In addition, all physicians who hold provider contracts with a
subsidiary of the PHO are investors in the Company.
On October 1, 1991, the Company hired an executive director to provide and
facilitate the efficient operations of the Company. Prior to April 29, 1996,
the executive director was a member of the Company's Board of Directors. Under
the terms of a funding agreement dated October 1, 1991, the PHO agreed to
reimburse the Company for compensation paid to the executive director up to the
limits set forth in the Executive Director Agreement. The funding agreement was
terminated by the PHO effective January 1, 1996. Accordingly, the Company
currently is responsible for paying the compensation of the executive director
without reimbursement from the PHO. The Company's payment of compensation to
the executive director for the three months ended March 31, 1997 is presented
as salary expense.
8
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NOTE 3 - EQUITY INVESTMENTS:
A summary of the changes in equity investments is presented below:
<TABLE>
<CAPTION>
HHC PHO TOTAL
-------- --------- --------
<S> <C> <C> <C>
Balance at December 31, 1996 $605,100 $ 137,767 $742,867
Equity in net earnings (loss) of investees 15,975 (6,802) 9,173
-------- --------- --------
Balance at March 31, 1997 $621,075 $ 130,965 $752,040
======== ========= ========
</TABLE>
The condensed balance sheets of the equity investees are as follows:
<TABLE>
<CAPTION>
Balance Sheets March 31, 1997 December 31, 1996
- -------------- ----------------------- -----------------------
HHC PHO HHC PHO
---------- -------- ---------- --------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Assets:
Currents assets $2,581,195 $307,608 $2,128,418 $529,474
Noncurrent assets 3,901 267,134 4,902 259,025
---------- -------- ---------- --------
Total assets $2,585,096 $574,742 $2,133,320 $788,499
========== ======== ========== ========
Liabilities and stockholders'
equity:
Current liabilities $1,246,177 $ 97,715 $ 827,404 $163,323
Long-term liabilities 232,654 0 232,654 0
Stockholders' equity 1,106,265 477,027 1,073,262 625,176
---------- -------- ---------- --------
Total liabilities and
stockholders' equity $2,585,096 $574,742 $2,133,320 $788,499
========== ======== ========== ========
</TABLE>
The condensed statements of income of the equity investees are as follows:
<TABLE>
<CAPTION>
For the 3 Months Ended
-------------------------
March 31, March 31,
1997 1996
---------- ---------
(unaudited) (unaudited)
<S> <C> <C>
Statement of Income - HHC
- ---------------------------------
Revenues $ 767,387 $ 642,863
Expenses 725,815 574,729
--------- ---------
41,572 68,134
Income tax provision (8,569) (10,219)
--------- ---------
Net income $ 33,003 $ 57,915
========= =========
Statement of Income - PHO
- ---------------------------------
Equity in partnership earnings $ 23,694 $ 22,275
Other revenues 9,540 9,398
Expenses 53,876 13,234
--------- ---------
(20,642) 18,439
Income tax benefit (provision) 3,929 (3,780)
--------- ---------
Net income (loss) ($ 16,713) $ 14,659
========= =========
</TABLE>
9
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ST. JOSEPH'S PHYSICIAN ASSOCIATES, INC.
PART I - FINANCIAL INFORMATION
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
March 31, 1997
Liquidity
Cash resources of the Company decreased by $53,982 during the first three
months of 1997 and $52 during the same time period in 1996. Cash resources
resulted from the quarterly distributions received with respect to the five
limited partnership units in St. Joseph's Same-Day Surgery Center, Ltd.
("SDS"), offset by expenditures for operating expenses and estimated tax
payments. The first quarter tax payment made in 1997 was high because it
included the balance due for the 1996 tax liability as well as the estimated
payment for the first quarter of 1997. The balance due for the 1996 tax
liability was higher than the prior year because of an increase in the
Company's net income during 1996.
On May 26, 1995, St. Joseph's Health Network, Inc. ("SJHN"), a 100%-owned
subsidiary of the PHO, was incorporated. SJHN, a physician-hospital
organization, is negotiating at-risk products with managed care organizations
on behalf of its membership to provide high quality, competitively priced
health care services for persons residing or employed in the Tampa area. In the
near future, the Company might find it appropriate to assist the PHO with
providing additional capitalization for SJHN. The amount of funding, if any,
has not been determined at this time. However, the Company's contribution to
such funding would be determined by taking into account the Company's available
liquidity and its other anticipated cash needs. Additional liquidity for SJHN
is expected to be received from other sources, including provider credentialing
fees, additional equity contributions from the PHO and/or borrowings.
On March 31, 1997, a $23,380 distribution with respect to the five SDS limited
partnership units was declared and will be received during the second quarter
of 1997.
Management believes that current cash reserves, additional distributions with
respect to the five SDS limited partnership units, as well as the proceeds of
additional sales of its common stock will provide adequate short-term funding
of the Company's on-
10
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going operations. However, because of the Company's decision to use its cash
flows to compensate its Executive Director, and to fund its other regular
operating expenses, it is possible that the Company will not be in a position
to fund new projects that could arise in the future.
Capital Resources
The Company expects to commence a private offering of its common stock in May
1997 at $3,450 per share. Although there can be no assurance, the Company does
not anticipate substantial difficulty in raising additional funds, should the
need arise.
Results of Operations
Equity in net earnings of investees is the result of the Company's investment
in the PHO and HHC. The equity in net earnings has decreased compared to the
first quarter of 1996 as a result of a decrease in the profitability of the PHO
and HHC. The decrease in the profitability of the PHO is a result of an
increase in expenses relating to compensation and benefit costs incurred with
respect to newly hired staff. Although revenues increased for HHC, overall
profitability during the first quarter of 1997 was lower than the same period
of 1996 because the volume of Medicaid patients (for whom reimbursements are
lower than for patients covered by commercial HMO's and insurers) increased
significantly.
The Company owns five SDS limited partnership units and receives quarterly
distributions on such units. Distribution income for the first quarter of 1997
was lower than for the same period in 1996. The distribution was calculated by
taking into account anticipated operating cash needs of SDS, with the intent of
maintaining appropriate reserves.
Interest earnings represent interest on bank deposits. The increase between
1997 and 1996 resulted from higher cash balances in 1997 than during the same
period of 1996.
General and administrative expenses increased during the first quarter compared
to the same time period of 1996. Expenditures incurred in the first quarter of
1997 relating to bookkeeping and administrative services were previously
provided without charge by SJHC. It is anticipated that over the near term,
general and administrative expenses will continue to be incurred at comparable
levels.
11
<PAGE> 12
Salary expense remained consistent with the same time period of 1996.
Expenditures incurred relate to the compensation paid to the executive
director.
During the first quarter of 1997, the Company had net income of $9,000.
Therefore, the net income per common share was $21 for the first quarter of
1997. The net income per common share for the same quarter last year was $81
per share. The decrease in the net income per common share for the first
quarter of 1997 resulted from a decrease in net income and a greater number of
shares outstanding.
Several new laws and regulations affecting the healthcare industry were adopted
at both the state and federal levels during 1992, 1993, 1994, 1995, 1996, and
1997. Healthcare reform legislation may have been passed by the Florida
Legislature during its Session that ended on May 2, 1997. However, owing to the
absence of any effective legislative reporting services in Florida, it is not
yet possible for the Company to know with certainty as of this date whether any
such legislation may have been passed into law or, if passed, may have been
vetoed by the Governor. Additional healthcare reform is being considered in
1997 at the federal level. Some of the legislation and regulation could have a
significant adverse impact on the Company, its related investments, and the
stockholders of the Company. The Company is continuing to monitor and evaluate
the impact of such changes in laws and regulations.
12
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ST. JOSEPH'S PHYSICIAN ASSOCIATES, INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
To the knowledge of the Company's management, there are no material pending
legal proceedings, other than ordinary routine litigation incidental to the
business of the Company, or its Partially Owned Operations, to which the
Company or any of its Partially Owned Operations is a party or of which any of
their property is the subject.
13
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ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 5, 1997, the annual stockholders meeting of the Company was held.
Directors elected at the meeting were:
<TABLE>
<CAPTION>
Number of Votes
---------------
For Withheld
--- --------
<S> <C> <C>
Lane France, M.D. (term expiring 2001) 176 17
Allen Miller, M.D. (term expiring 2001) 190 3
John Rasmussen, M.D. (term expiring 1998) 187 6
</TABLE>
Other directors whose term of office continued after the meeting were:
Anthony Brannan, M.D. William Luria, M.D.
Norman Castellano, M.D. Benedict Maniscalco, M.D.
N. Bruce Edgerton, M.D. Michael Wasylik, M.D.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
27 - Financial Data Schedule (for SEC use only)
b. Reports on Form 8-K
None
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ST. JOSEPH'S PHYSICIAN ASSOCIATES, INC.
--------------------------------------------
(Registrant)
Date: May 13, 1997 /s/ Anthony Brannan, M.D.
----------------------------------------
Anthony Brannan, M.D., President
St. Joseph's Physician Associates, Inc.
Date: May 13, 1997 /s/ William Luria, M.D.
-------------------------------------
William Luria, M.D., Treasurer and
Principal Financial Officer
St. Joseph's Physician Associates, Inc.
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ST. JOSEPH'S
PHYSICIAN ASSOCIATES, INC. MARCH 31, 1997 BALANCE SHEET AND INCOME STATEMENT FOR
THE THREE MONTHS PERIOD ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-QSB FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 715,588
<SECURITIES> 0
<RECEIVABLES> 23,380
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 822,294
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,594,333
<CURRENT-LIABILITIES> 25,310
<BONDS> 0
0
0
<COMMON> 693,808
<OTHER-SE> 796,889
<TOTAL-LIABILITY-AND-EQUITY> 1,594,333
<SALES> 0
<TOTAL-REVENUES> 39,087
<CGS> 0
<TOTAL-COSTS> 25,024
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 14,063
<INCOME-TAX> 5,063
<INCOME-CONTINUING> 9,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,000
<EPS-PRIMARY> 21.00
<EPS-DILUTED> 0
</TABLE>
