<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 September 30, 2000
Commission File Number 33-22011-A
ST. JOSEPH'S PHYSICIAN ASSOCIATES, INC.
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(Exact name of Small Business Issuer as specified in its charter)
Florida 59-2858209
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(State of incorporation) (I.R.S. Employer Identification No.)
4900 North Habana Ave., Tampa,FL 33614
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number,
including area code: (813) 854-4668
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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 September 30, 2000
Common stock, par value $1.00 per share 414 shares
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Documents incorporated by reference
NONE
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TABLE OF CONTENTS
FORM 10-QSB QUARTERLY REPORT - September 30, 2000
ST. JOSEPH'S PHYSICIAN ASSOCIATES, INC.
<TABLE>
<CAPTION>
Page
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<S> <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 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>
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ST. JOSEPH'S PHYSICIAN ASSOCIATES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
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(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,105,649 $ 1,115,984
Distribution receivable from limited partnership investments 22,005 14,938
Income taxes receivable 26,665 26,665
Prepaid expenses 10,103 6,375
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Total current assets 1,164,422 1,163,962
Equity investments 209,806 212,207
Other investments 120,000 120,000
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Total assets $ 1,494,228 $ 1,496,169
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses $ 16,899 $ 23,692
Due to related party 1,501 1,953
Income taxes payable 14,533 0
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Total current liabilities 32,933 25,645
Deferred income taxes 76,265 76,265
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Total liabilities 109,198 101,910
Stockholders' equity:
Common stock, $1 par value: 7,500 shares authorized; 402 shares
at Sept. 30, 2000 and 415 shares at December 31, 1999 issued
and outstanding 402 415
Common stock subscribed, 12 shares at Sept. 30, 2000 and
December 31, 1999 12 12
Subscriptions receivable (14,981) (27,097)
Additional paid-in capital 646,105 689,239
Retained earnings 753,492 731,690
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Total stockholders' equity 1,385,030 1,394,259
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Total liabilities and stockholders' equity $ 1,494,228 $ 1,496,169
============= =============
</TABLE>
The accompanying notes
are an integral part of these financial statements.
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ST. JOSEPH'S PHYSICIAN ASSOCIATES, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the nine For the nine For the three For the three
months ended months ended months ended months ended
Sept. 30, 2000 Sept. 30, 1999 Sept. 30, 2000 Sept. 30, 1999
-------------------------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Distribution income $ 80,204 $ 89,625 $ 22,005 $29,875
Equity in net earnings of investees (2,401) 9,056 (9,032) 3,553
-------------------------------------------------------------------------------------
77,803 98,681 12,973 33,428
Expenses:
Salary 30,000 30,000 10,000 10,000
General and administrative 60,445 85,086 21,160 21,598
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90,445 115,086 31,160 31,598
Operating (loss) income (12,642) (16,405) (18,187) 1,830
Interest income 48,977 37,228 18,171 12,604
-------------------------------------------------------------------------------------
Income before income taxes 36,335 20,823 (16) 14,434
Provision for income taxes 14,533 7,495 (7) 4,734
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Net Income $ 21,802 $ 13,328 $ (9) $ 9,700
=====================================================================================
Net income per common share -
basic and diluted $ 52 $ 32 $ (0) $ 23
=====================================================================================
Weighted average shares
outstanding and subscribed 422 418 418 426
</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 nine For the nine
months ended months ended
Sept.30, 2000 Sept.30, 1999
------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 21,802 $ 13,328
Adjustments to reconcile net income to net cash used in
operating activities:
Equity in net earnings of investees 2,401 (9,056)
Distribution income (80,204) (89,625)
Changes in operating assets and liabilities:
Prepaid expenses (3,728) (2,890)
Income taxes receivable 0 (12,500)
Accrued expenses (6,793) (12,754)
Due to related party (453) (7,609)
Income taxes payable 14,533 7,495
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Net cash used in operating activities (52,442) (113,611)
INVESTING ACTIVITIES
Proceeds from sale of equity investment 0 0
Purchase of noncurrent investment 0 (100,000)
Distributions received 73,138 100,065
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Net cash provided by investing activities 73,138 65
FINANCING ACTIVITIES
Payments received of stock subscriptions 12,116 2,300
Proceeds from sale of common stock 0 50,827
Redemption of common stock (43,147) (36,429)
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Net cash provided by (used in) financing activities (31,031) 16,698
Increase (decrease)in cash and cash equivalents (10,335) (96,848)
Cash and cash equivalents at beginning of period 1,115,984 1,202,252
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Cash and cash equivalents at end of period $ 1,105,649 $ 1,105,404
============= =============
</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 September 30, 2000 and December 31, 1999, and the results of its
operations for the three months and nine months ended September 30, 2000 and
1999, and its cash flows for the nine months ended September 30, 2000 and 1999.
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 as 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, also representing 50% of the
outstanding common stock of the PHO, are owned by St. Joseph's Enterprises,
Inc. ("Enterprises"). The PHO was organized for the purpose of engaging directly
or indirectly in managed care arrangements and health care related ventures.
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 amounts reported in the financial statements and accompanying
notes. Actual results could differ from these estimates.
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Equity Investments
The Company accounts for its investment in the PHO on the equity method.
Accordingly, the investment has 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 investment 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.
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 non-current, other investments. The investment is
accounted for at cost because of 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.
On March 3, 1999, the Company purchased 100,000 shares of common stock,
representing approximately 3% of the outstanding common stock, of Entrusted
Health Management Services, Inc. ("EHMS"), a Florida corporation. The balance
of the outstanding common stock of EHMS is owned by several other individuals
and entities, none of which holds a majority interest in EHMS. EHMS is a start
up entity that was organized to manage and administer health benefit
arrangements for self-insured employers. Its services ultimately are planned to
include designing and implementing benefit plans, developing one or more
networks of hospitals, physicians and other health care providers,
administering claims, and collecting and analyzing health care data for those
employers with which it has contracts for the provision of some or all of these
offered services.
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The investment in EHMS is accounted for at cost because of the Company's
limited percentage interest. Revenue derived from the EHMS common stock will
only be recorded by the Company upon declaration of distributions or a gain
upon sale of the stock. No distributions from EHMS were made in 1999, and none
are anticipated in 2000 or the foreseeable future, and there can be no
assurance that the Company ever will receive any distributions from EHMS.
Likewise, although the Company has no present intention to sell the EHMS stock,
there can be no assurance that the Company would be able to realize a gain, or
even recover its investment, on any sale of the stock in the future.
Accordingly, this investment is presented as non-current, other investments.
Subscriptions Receivable
Subscriptions receivable relate to agreements to purchase common stock of the
Company and are being paid in installments during 2000 and 2001.
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 bases 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.
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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. ("Hospital"), which is owned by
St. Joseph's Health Care Center, Inc. ("HCC"), an affiliate of Enterprises.
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 nine months ended September 30, 2000 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>
PHO Total
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<S> <C> <C>
Balance at December 31, 1999 $ 212,207 $ 212,207
Equity in net earnings of investees (2,401) (2,401)
----------- -----------
Balance at September 30, 2000 $ 209,806 $ 209,806
=========== ===========
</TABLE>
The condensed balance sheets and statements of operations of the PHO are as
follows:
<TABLE>
<CAPTION>
Balance Sheets - PHO Sept. 30, 2000 Dec. 31, 1999
------------------------------- -------------- -------------
(unaudited)
<S> <C> <C>
Assets:
Current assets $ 351,409 $ 326,483
Noncurrent assets 192,315 199,549
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Total assets $ 543,724 $ 526,032
========== ==========
Liabilities and stockholders' equity:
Current liabilities $ 124,111 $ 101,617
Long-term liabilities 0 0
Stockholders' equity 419,613 424,415
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Total liabilities and stockholders' equity $ 543,724 $ 526,032
========== ==========
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended
--------------------------------
Sept. 30, Sept. 30,
Statements of Operations - PHO 2000 1999
----------------------------------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C>
Equity in partnership earnings $ 49,025 $ 53,392
Other revenues 16,858 53,241
Expenses 61,860 86,312
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Income before taxes 4,023 20,321
Income tax provision 825 7,212
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Net income $ 3,198 $ 13,109
========= =========
</TABLE>
<TABLE>
<CAPTION>
For the Three Months Ended
--------------------------------
Sept. 30, Sept. 30,
Statements of Operations - PHO 2000 1999
------------------------------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C>
Equity in partnership earnings $ 17,239 $ 22,763
Other revenues 4,157 10,209
Expenses 42,641 28,860
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Income before taxes (21,245) 4,112
Income tax provision (benefit) (3,180) 2,006
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Net income (loss) $ (18,065) $ 2,106
========== =========
</TABLE>
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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
September 30, 2000
Liquidity
Cash resources of the Company decreased by $10,335 during the first nine months
of 2000, as compared to a decrease of $96,848 during the first nine months of
1999. This significant year-to-year difference resulted primarily from the
Company's use of cash to purchase the common stock of EHMS, as described in the
following paragraph. The actual decrease in cash resources in 2000 resulted from
a combination of circumstances. First, the Company redeemed more shares of its
common stock (as a result of retirements and deaths of shareholders) during the
first nine months of 2000 than during the corresponding period of 1999, and the
Company did not sell any shares of its common stock in 2000, while a private
offering was conducted during the first nine months of 1999. Second, quarterly
distributions received by the Company with respect to its five limited
partnership units in SDS decreased during 2000, as compared to the corresponding
period of 1999. However, these reductions in cash resources were offset by an
increase in the Company's interest income and a decrease in the Company's
operating expenses during the first nine months of 2000.
On September 30, 2000, a $22,005 distribution with respect to the Company's five
limited partnership units in SDS was declared, and the Company received the
distribution early in the fourth quarter of 2000.
On March 3, 1999, the Company purchased approximately 3% (100,000 shares) of
the common stock of EHMS, for which it paid $100,000. No distributions from
EHMS were made during 1999 and no distributions are anticipated for 2000 or the
foreseeable future. There can be no assurance that the Company ever will
receive any distributions from EHMS.
St. Joseph's Health Network, Inc. ("SJHN") is a 100%-owned subsidiary of the
PHO. Until December 31, 1999, SJHN, a physician-hospital organization,
negotiated 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. SJHN was not successful in obtaining a sufficient number of
managed care contracts to develop the base of patients needed to spread risk
and make capitation successful. As a result, in 1999, the Board of Directors of
SJHN undertook a review of SJHN's business, its opportunities and its strategic
alternatives. As a result of this review, the Board of Directors of SJHN voted
to terminate the business operations of SJHN. Based upon the advice of legal
and accounting advisors, the Board of Directors determined that the business
should cease as of December 31, 1999.
11
<PAGE> 12
Management believes that current cash reserves and additional distributions
with respect to the five SDS limited partnership units will meet the Company's
cash needs during 2000.
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 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. 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. The decrease in net earnings of investees for the third quarter and
first nine months of 2000, as compared to the corresponding periods during 1999,
resulted from a decrease in the profitability of the PHO. The PHO's
profitability was negatively affected by several circumstances. First, PHO
revenues decreased because of a reduction in the administrative fees paid to the
PHO by the Hospital for the administration of the ProHealth Plus Employee Plan.
Second, PHO expenses increased significantly during the third quarter of 2000
because of a year-to-date adjustment in the allocation of the management fee
expense that is paid to HCC for management and administrative services rendered
to various entities, including the PHO. Notwithstanding this significant
increase in third quarter PHO expenses, overall PHO expenses for the first nine
months of 2000 decreased as a result of the termination of SJHN's operations,
effective on December 31, 1999.
The Company owns five SDS limited partnership units and receives quarterly
distributions on such units. Distribution income decreased for the third quarter
of 2000 and the first nine months of 2000, as compared to the same periods in
1999. This decrease resulted from a reduction in the profitability of the SDS,
which is influenced primarily by managed care and governmental reimbursement
rates. Distributions from SDS are calculated by taking into account anticipated
operating cash needs of SDS, with the intent of maintaining appropriate
reserves.
Interest earnings represent interest on bank and investment deposits. The
increase in the Company's interest earnings between 2000 and 1999 resulted from
an increase in interest rates paid on the Company's investments.
The Company's general and administrative expenses decreased during the third
quarter and first nine months of 2000, as compared to the same periods of 1999.
This decrease resulted primarily from a decrease in legal and consulting fees
during 2000, as compared to the corresponding period of 1999 when the Company
had engaged counsel and a consultant to review the operations of SDS.
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Accounting fees also decreased as a result of a change in auditors. 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 1999.
Expenditures incurred relate to the compensation paid to the Executive
Director.
During the third quarter of 2000, the Company had a net loss of $9. Therefore,
the net income/loss per common share was $0 for the third quarter of 2000. The
net income per common share for the third quarter of 1999 was $23 per share.
The decrease in the net income per common share for the third quarter of 2000
resulted from a decrease in net income, which was attributable to the factors
described above.
Several new laws and regulations affecting the health care business were
considered or adopted, at both the state and federal levels, during the last
several years, including during 1999 and 2000. Additional health care reform
legislation also has been proposed for consideration in 2000 at the federal
level. All of the legislation and regulation could have a dramatically 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.
Forward Looking Statements
This report may contain forward looking statements. Forward looking statements
are statements of the current expectations, estimates, projections and beliefs
of the Company's management, and are based on assumptions made by and
information currently available to the Company's management regarding the
Company and the industry in which the Company operates. Forward-looking
statements describe management's expectations today of what management believes
is most likely to occur or reasonably achievable in the future, but such
statements do not predict or assure any future occurrence and may turn out to be
wrong. Forward-looking statements can be identified by the fact that they do not
relate strictly to historical or current facts. Among others, the words
"believe," "anticipate," "intend," "expect," "estimate," "project," "should,"
variations of such words, and similar expressions are intended to identify
forward-looking statements.
Forward looking statements are subject to potential risks and uncertainties that
could cause actual results to differ materially from historical results or those
currently anticipated. The potential risks and uncertainties that could affect
forward looking statements include, but are not limited to, increased
competition, extent of the market demand for and supply of services of the types
provided by the Company and the businesses in which it has an interest, adequacy
and perception of patient and owner service availability and quality,
governmental regulation, performance of information systems, and the ability of
the Company or the businesses in which it has an interest to hire, train and
retain qualified employees. The Company cautions that undue reliance should not
be placed on these forward-looking statements, which speak only as of the date
of this document. The Company hereby disclaims any obligation to update
information contained in any forward-looking statement. In addition to the
factors noted above, other risks, uncertainties, assumptions, and factors that
could affect the Company's financial results are described in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1999, as previously
filed with the Securities and Exchange Commission. Forward-looking statements
also may be included in other written and oral statements made or released by
the Company.
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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 entities affiliated with the Company, to which the Company or
any of the affiliated entities is a party or of which any of their property is
the subject.
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 1, 2000, 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>
Benedict Maniscalco, M.D. (term expiring 2004) 167 14
William Luria, M.D. (term expiring 2004) 172 9
Carlos Dalence, M.D. (term expiring 2001) 177 4
</TABLE>
Other directors whose term of office continued after the meeting were:
Lane France, M.D. N. Bruce Edgerton, M.D.
Allen Miller, M.D. Angel Docobo, M.D.
Anthony Brannan, M.D. Norman Castellano, 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
November 14, 2000
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: November 14, 2000 /s/ N. Bruce Edgerton, M.D.
---------------------------------------
N. Bruce Edgerton, M.D., President
St. Joseph's Physician Associates, Inc.
Date: November 14, 2000 /s/ Allen Miller, M.D.
---------------------------------------
Allen Miller, M.D., Treasurer and
Principal Financial Officer
St. Joseph's Physician Associates, Inc.
15
