<PAGE> 1
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, 1998
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, 1998
Common stock, par value $1.00 per share 430 shares
- --------------------------------------- ----------
Documents incorporated by reference
NONE
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TABLE OF CONTENTS
FORM 10-QSB QUARTERLY REPORT - March 31, 1998
ST. JOSEPH'S PHYSICIAN ASSOCIATES, INC.
<TABLE>
<CAPTION>
Page
-----------
<S> <C> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 3 - 10
Item 2. Management's Discussion and Analysis or
Plan of Operation 11 - 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security
Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
</TABLE>
2
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ST. JOSEPH'S PHYSICIAN ASSOCIATES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,238,316 $ 1,150,633
Distribution receivable from
limited partnership investments 24,705 36,640
Income taxes receivable 3,058 --
Prepaid expenses 4,500 6,375
----------- -----------
Total current assets 1,270,579 1,193,648
Equity investments 96,113 195,220
Other investments 20,000 20,000
----------- -----------
Total assets $ 1,386,692 $ 1,408,868
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses $ 24,208 $ 21,398
Income taxes payable -- 28,340
----------- -----------
Total current liabilities 24,208 49,738
Deferred income taxes 21,988 21,988
----------- -----------
Total liabilities 46,196 71,726
Stockholders' equity:
Common stock, $1 par value: 7,500 shares
authorized; 427 shares at March 31, 1998
and 428 shares at December 31, 1997
issued and outstanding 427 428
Common stock subscribed, 3 shares at
March 31, 1998 and December 31, 1997 3 3
Subscriptions receivable (4,500) (4,500)
Additional paid-in capital 695,053 698,101
Retained earnings 649,513 643,110
----------- -----------
Total stockholders' equity 1,340,496 1,337,142
----------- -----------
Total liabilities and stockholders' equity $ 1,386,692 $ 1,408,868
=========== ===========
</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, 1998 March 31, 1997
-------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C>
Equity in net earnings of investees $ 893 $ 9,173
Distribution income 24,705 23,380
-------- --------
25,598 32,553
Expenses:
Salary 10,000 10,000
General and administrative 19,324 15,024
-------- --------
29,324 25,024
Operating (loss) income (3,726) 7,529
Interest income 13,731 6,534
-------- --------
Income before income taxes 10,005 14,063
Provision for income taxes 3,602 5,063
-------- --------
Net Income $ 6,403 $ 9,000
======== ========
Net income per common share -
basic and diluted $ 15 $ 21
======== ========
Weighted average shares outstanding 430 433
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, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 6,403 $ 9,000
Adjustments to reconcile net income to
net cash used in operating activities:
Equity in net earnings of investees (893) (9,173)
Distribution income (24,705) (23,380)
Changes in operating assets and liabilities:
Prepaid expenses 1,875 2,220
Income taxes receivable (3,058) (72,500)
Accrued expenses 2,809 (3,732)
Income taxes payable (28,340) 5,063
----------- -----------
Net cash used in operating activities (45,909) (92,502)
INVESTING ACTIVITIES
Proceeds from sale of equity investment 100,000 -
Distributions received 36,640 38,520
----------- -----------
Net cash provided by investing activities 136,640 38,520
FINANCING ACTIVITIES
Redemption of common stock (3,048) -
----------- -----------
Net cash used in financing activities (3,048) -
Increase(decrease)in cash and cash equivalents 87,683 (53,982)
Cash and cash equivalents at beginning of quarter 1,150,633 769,570
----------- -----------
Cash and cash equivalents at end of quarter $ 1,238,316 $ 715,588
=========== ===========
</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, 1998 and December 31, 1997, and the results of its operations and
its cash flows for the three months ended March 31, 1998 and 1997.
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 ("SJHHS") for $10 per share. The 4,000 shares represented 50% of
the outstanding common stock of SJHHS. On January 5, 1998, the Company sold all
of its ownership interest in SJHHS to St. Joseph's Ancillary Services, Inc. for
$100,000. The investment in SJHHS was sold for a price that was
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lower than the carrying amount of the equity investment in SJHHS. In
contemplation of the sale, the equity investment in SJHHS was written down in
December 1997 by $200,410, to properly reflect its fair value at December 31,
1997. No effect of the write down of the SJHHS equity investment is included in
the statement of income for the quarter ended March 31, 1997.
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (con't):
Equity Investments
The Company accounts for its investments in the PHO and SJHHS (through January
5, 1998) on the equity method. Accordingly, the 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 Company's net earnings/losses resulting from its proportionate share of the
investees' revenues and expenses are included in the statements of income. The
excess of the cost of acquisition of the investment in SJHHS over the Company's
interest in the underlying net liabilities at the date of acquisition was
$84,264 and being amortized as a component of equity in net earnings of
investees over 40 years. The unamortized portion of the excess of $62,362 was
included in the write down of the SJHHS equity investment of $200,410, recorded
in December 1997, in contemplation of the sale of the Company's ownership
interest in SJHHS.
Other Investments
The Company owns five limited partnership units in St. Joseph's Same-Day Surgery
Center, Ltd. ("SDS"). Management has not actively marketed these partnership
units and intends to hold them beyond one year. Accordingly, this investment is
presented as noncurrent, other investments. 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 1998.
7
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Cash Equivalents
The Company considers all highly liquid investments with original maturities of
three months or less when purchased to be cash equivalents.
Income Taxes
The Company accounts for income taxes under FASB Statement No. 109, Accounting
for Income Taxes. Deferred income tax assets and liabilities are determined
based upon differences between financial reporting and tax basis of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
Income Per Common Share
Income per common share is based upon the weighted average number of common
shares outstanding and subscribed during the period.
Adoption of Accounting Standard
During 1997, the Company adopted FASB Statement 128, "Earnings per Share." The
adoption of this statement had no effect on the computation of income per common
share of the Company.
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.("HCC"), an affiliate of Enterprises. Until January 31,
1997, HCC provided administrative support to the Company at no charge. Beginning
February 1, 1997, HCC began to charge the Company for administrative support and
direct costs (i.e., food, printing).
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 and agreed to pay a salary to 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, and he continues to be a shareholder in the Company. The
Company's payment of compensation to the executive director for the three months
ended March 31, 1998 is presented as salary expense.
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NOTE 3 - EQUITY INVESTMENTS:
- ----------------------------------------------
A summary of the changes in equity investments is presented below:
<TABLE>
<CAPTION>
SJHHS PHO Total
--------- --------- ---------
<S> <C> <C> <C>
Balance at December 31, 1997 $ 100,000 $ 95,220 $ 195,220
Proceeds from sale of investment (100,000) 0 (100,000)
Equity in net earnings of investees -- 893 893
--------- --------- ---------
Balance at March 31, 1998 $ -- $ 96,113 $ 96,113
========= ========= =========
</TABLE>
The condensed balance sheets and statements of operations of the PHO are as
follows:
<TABLE>
<CAPTION>
Balance Sheets - PHO March 31, 1998 December 31, 1997
- ------------------------------- -------------- -----------------
(unaudited)
<S> <C> <C>
Assets:
Currents assets $333,413 $309,443
Noncurrent assets 270,414 231,749
-------- --------
Total assets $603,827 $541,192
======== ========
Liabilities and stockholders'
equity:
Current liabilities $188,448 $130,226
Long-term liabilities 0 0
Stockholders' equity 415,379 410,966
-------- --------
Total liabilities and
stockholders' equity $603,827 $541,192
======== ========
</TABLE>
<TABLE>
<CAPTION>
For the Three Months Ended
-------------------------------
March 31, March 31,
Statements of Operations - PHO 1998 1997
- ------------------------------- --------- --------
(unaudited) (unaudited)
<S> <C> <C>
Equity in partnership earnings $ 25,885 $ 23,694
Other revenues 41,775 9,540
Expenses 65,032 53,876
-------- --------
Income (loss) before taxes 2,628 (20,642)
Income tax (benefit) provision 842 (3,929)
-------- --------
Net income (loss) $ 1,786 ($16,713)
======== ========
</TABLE>
9
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NOTE 3 - EQUITY INVESTMENTS (cont'd):
- --------------------------------------------------------
The condensed balance sheet and statement of income of SJHHS are as follows:
<TABLE>
<CAPTION>
December 31,
Balance Sheet - SJHHS 1997
-------------------------------------- -------------
(unaudited)
<S> <C>
Assets:
Currents assets $1,516,114
Noncurrent assets 2,374
----------
Total assets $1,518,488
==========
Liabilities and stockholders' equity:
Current liabilities $801,591
Long-term liabilities 248,799
Stockholders' equity 468,098
----------
Total liabilities and stockholders' equity $1,518,488
==========
</TABLE>
<TABLE>
<CAPTION>
For the Three
Months Ended
Statement of Income - SJHHS March 31, 1997
-------------------------------------- --------------
(unaudited)
<S> <C>
Revenues $767,387
Expenses 725,815
--------
Income before taxes 41,572
Income tax provision 8,569
--------
Net income $ 33,003
========
</TABLE>
10
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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, 1998
Liquidity
Cash resources of the Company increased by $87,683 during the first three months
of 1998, as compared to a decrease in cash resources of $53,982 during the first
three-month period in 1997. Cash resoources resulted from the sale of SJHHS
stock, an increase in interest income, and 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.
On January 5, 1998, the Company sold its 4,000 shares of the common stock in
SJHHS to St. Joseph's Ancillary Services, Inc., which owned the other 50% of the
common stock, for $100,000. Although the sale of the equity investment in SJHHS
had the impact of increasing current cash resources, it also eliminated a future
income source and thus will have the impact of reducing cash flow from
operations of the Company in 1998 and future years. It is anticipated that the
Company will be reporting net losses from operations for the foreseeable future
and that net cash used in operating activities will increase.
St. Joseph's Health Network, Inc. ("SJHN") is a 100%-owned subsidiary of the
PHO. SJHN, a physician-hospital organization, negotiates at-risk products (i.e.,
capitation 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. At the present time, SJHN is not
generating sufficient revenues to offset its operating expenses. Accordingly, 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
11
<PAGE> 12
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, 1998, a $24,705 distribution with respect to the five SDS limited
partnership units was declared and will be received during the second quarter of
1998.
Management believes that current cash reserves and additional distributions with
respect to the five SDS limited partnership units will provide adequate
short-term funding of the Company's on-going operations. However, the Company
recognizes that its current revenues likely will not be sufficient to fund its
expenses as they currently exist. A review of expenses and strategic planning
for additional revenue sources is currently underway.
Capital Resources
The Company does not anticipate the need for any significant capital
expenditures in connection with its current operations for the foreseeable
future. If, as a result of the strategic planning that currently is underway,
the Company determines that capital expenditures are necessary or appropriate,
it is anticipated that the Company's current cash reserves would be used for
this purpose. Any additional funds would then come from additional sales of the
Company's common stock, although there currently are no plans for a sale of
common stock. While 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 SJHHS (through January 5, 1998). The equity in net earnings
decreased during the first three months of 1998, as compared to the first
quarter of 1997, primarily because of the Company's sale of its SJHHS stock on
January 5, 1998. In addition, the PHO has suffered a decrease in its revenues,
resulting primarily from a decline in the revenues of the PHO's subsidiary,
SJHN, and an increase in the expenses of SJHN.
12
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The Company owns five SDS limited partnership units and receives quarterly
distributions on such units. Distribution income for the first quarter of 1998
was slightly higher than for the same period in 1997. 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 1998
and 1997 resulted from higher cash balances in 1998 than during the same period
of 1997.
General and administrative expenses increased during the first quarter compared
to the same period of 1997. The increase in expenses resulted primarily from the
addition of bookkeeping fees (which previously were provided to the Company
without charge by HCC) and from an increase in legal fees which related to a
review of strategic planning options for the Company. It is anticipated that
over the near term, general and administrative expenses will continue to be
incurred at comparable levels.
Salary expense remained consistent with the same time period of 1997.
Expenditures incurred relate to the compensation paid to the executive director.
During the first quarter of 1998, the Company had net income of $6,403.
Therefore, the net income per common share was $15 for the first quarter of
1998. The net income per common share for the first quarter of 1997 was $21 per
share. The decrease in the net income per common share for the first quarter of
1998 resulted from a decrease in net income, which was attributable to the
factors described above.
Several new laws and regulations affecting the healthcare industry were adopted,
at both the state and federal levels, during the last several years, including
1996 and 1997. Additional healthcare reform was adopted by the Florida
Legislature during its recently ended Session and is awaiting action by the
Governor. Additional healthcare reform legislation also is being considered at
the federal level. All 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.
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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.
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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 April 29, 1998, 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>
Anthony Brannan, M.D. (term expiring 2002) 188 0
Norman Castellano, M.D. (term expiring 2002) 187 1
Michael Westbury, M.D. (term expiring 1999) 188 0
</TABLE>
Other directors whose term of office continued after the meeting were:
Lane France, M.D. William Luria, M.D.
Allen Miller, 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
15
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SIGNATURES
May 13, 1998
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, 1998 /s/ Anthony Brannan, M.D.
---------------------------------------
Anthony Brannan, M.D., President
St. Joseph's Physician Associates, Inc.
Date: May 13, 1998 /s/ William Luria, M.D.
---------------------------------------
William Luria, M.D., Treasurer and
Principal Financial Officer
St. Joseph's Physician Associates, Inc.
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ST. JOSEPH'S
PHYSICIAN ASSOCIATES, INC. 3/31/98 BALANCE SHEET AND INCOME STATEMENT FOR THE
THREE MONTHS ENDED 3/31/98 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FORM 10-QSB FOR THE QUARTERLY PERIOD ENDED 3/31/98.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,238,316
<SECURITIES> 0
<RECEIVABLES> 24,705
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,270,579
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,386,692
<CURRENT-LIABILITIES> 24,208
<BONDS> 0
0
0
<COMMON> 690,983
<OTHER-SE> 649,513
<TOTAL-LIABILITY-AND-EQUITY> 1,386,692
<SALES> 0
<TOTAL-REVENUES> 39,329
<CGS> 0
<TOTAL-COSTS> 29,324
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 10,005
<INCOME-TAX> 3,602
<INCOME-CONTINUING> 6,403
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,403
<EPS-PRIMARY> 15.00
<EPS-DILUTED> 0
</TABLE>
