<PAGE>
- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997.
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________.
Commission file number 0-21098.
Physicians Health Services, Inc.
(Exact name of registrant as specified in its charter)
Delaware 06-1116976
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Far Mill Crossing 06484
Shelton, Connecticut (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code (203) 381-6400
120 Hawley Lane
Trumbull, Connecticut 06611
________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
There were 6,163,054 shares of Class A Common Stock ($0.01 par value) and
3,185,671 shares of Class B Common Stock ($0.01 par value outstanding as of
November 11, 1997.
- --------------------------------------------------------------------------------
<PAGE>
PHYSICIANS HEALTH SERVICES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE NO.
--------
PART I. Financial Information
----------------------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at
September 30, 1997 and December 31, 1996 3
Condensed Consolidated Statements of Operations for the
Three and Nine Months Ended September 30, 1997 and 1996 4
Condensed Consolidated Statements of Stockholders' Equity
for the Nine Months Ended September 30, 1997 and 1996 5
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1997 and 1996 6
Notes to Condensed Consolidated Financial Statements 7 - 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 11
PART II. Other Information
------------------
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
Exhibit Index 14
<PAGE>
PHYSICIANS HEALTH SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Assets:
Current Assets
Cash and Cash Equivalents $ 14,144 $ 39,213
Fixed Maturity Securities, Available for Sale-(amortized cost--1997--$84,468
and 1996--$58,643) 85,339 59,115
Accounts Receivable Less Allowances (1997--$1,787 and 1996--$1,781) 45,546 37,152
Other Receivables 58,688 32,157
Advances to Participating Hospitals 51 400
Prepaid Expenses and Other 843 1,154
--------- ---------
Total Current Assets 204,611 169,191
Property, Plant, and Equipment
Land 8,822 8,822
Building and Improvements 28,724 26,938
Furniture and Equipment 54,248 46,559
--------- ---------
91,794 82,319
Less Accumulated Depreciation and Amortization 19,524 15,273
--------- ---------
Total Property, Plant, and Equipment 72,270 67,046
--------- ---------
Other Assets (including restricted investments) 14,295 13,658
--------- ---------
Total Assets $ 291,176 $ 249,895
========= =========
Liabilities and Stockholders' Equity:
Current Liabilities
Accrued Health Care Expenses $ 74,489 $ 51,757
Unearned Premiums 29,253 27,757
Amounts Due to IPA's, Physicians and other Providers 53,852 59,084
Accounts Payable and Accrued Expenses 32,042 13,849
--------- ---------
Total Current Liabilities 189,636 152,447
Excess of Net Assets Over Cost of Company Acquired 1,071 1,162
Stockholders' Equity
Class A Common Stock, Par Value $0.01 per Share--Authorized 59 56
13,000,000 Shares, Issued and Outstanding; 1997--5,887,454
shares; 1996--5,566,023 shares
Class B Common Stock, Par Value $0.01 per Share; 35 38
Non-transferable--Authorized and Issued 1997--3,532,671 shares;
1996--3,829,880 shares; Voting Rights - 10 per share
Additional Paid-In Capital 41,886 41,360
Net Unrealized Gains (Losses) on Fixed Maturity Securities Available for Sale,
Net of Tax 534 279
Retained Earnings 57,956 54,554
--------- ---------
100,470 96,287
Less Cost of Class B Common Stock (86,400) Shares in Treasury 1 1
--------- ---------
Total Stockholders' Equity 100,469 96,286
--------- ---------
Total Liabilities and Stockholders' Equity $ 291,176 $ 249,895
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
-3-
<PAGE>
PHYSICIANS HEALTH SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
1997 1996 1997 1996
------------------- -------------------
<S> <C> <C> <C> <C>
REVENUES:
Premiums $177,289 $123,190 $488,714 $353,442
Investment and Other Income 2,150 1,545 5,872 4,806
-------- -------- -------- --------
179,439 124,735 494,586 358,248
COSTS AND EXPENSES:
Hospital Services 67,904 46,649 172,299 130,435
Physicians and Related Health Care Services 67,297 52,726 195,461 143,284
Other Health Care Services 16,912 10,336 49,301 30,486
Indemnity Costs - - - 7,008
-------- -------- -------- --------
Total Health Care Costs 152,113 109,711 417,061 311,213
-------- -------- -------- --------
Selling, General and Administrative Expenses 24,756 23,196 72,126 62,934
-------- -------- -------- --------
176,869 132,907 489,187 374,147
-------- -------- -------- --------
Interest Expense - 295 - 295
Income (Loss) before Income Taxes 2,570 (8,467) 5,399 (16,194)
Income Tax Expense (Benefit) 951 (3,931) 1,997 (7,519)
-------- -------- -------- --------
NET INCOME (LOSS) $ 1,619 $ (4,536) $ 3,402 $ (8,675)
======== ======== ======== ========
Net Income (Loss) Per Common Share $ 0.17 $ (0.49) $ 0.36 $ (0.93)
======== ======== ======== ========
Weighted Average Number of Common and Common
Equivalent Shares Outstanding 9,588 9,306 9,482 9,298
======== ======== ======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
-4-
<PAGE>
PHYSICIANS HEALTH SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------
1997 1996
-------------------------
<S> <C> <C>
Class A Common Stock
Balance at Beginning of Period $ 56 $ 53
Conversion of Class B Common Stock
into Class A Common Stock 3 2
-------- --------
Balance at End of Period $ 59 $ 55
======== ========
Class B Common Stock
Balance at Beginning of Period $ 38 $ 41
Conversion of Class B Common Stock
into Class A Common Stock (3) (2)
-------- --------
Balance at End of Period $ 35 $ 39
======== ========
Additional Paid-In Capital
Balance at Beginning of Period $ 41,360 $ 40,760
Exercise of Stock Options 526 600
-------- --------
Balance at End of Period $ 41,886 $ 41,360
======== ========
Net Unrealized Gains (Losses)on Fixed Maturity Securities,
Net of Tax
Balance at Beginning of Period $ 279 $ 510
Unrealized Appreciation (Depreciation) 255 (492)
-------- --------
Balance at End of Period $ 534 $ 18
======== ========
Retained Earnings
Balance at Beginning of Period $ 54,554 $ 67,518
Net Income (Loss) 3,402 (8,675)
-------- --------
Balance at End of Period $ 57,956 $ 58,843
======== ========
Treasury Stock
-------- --------
Balance at Beginning and End of Period ($1) ($1)
======== ========
Total Stockholders' Equity
Balance at Beginning of Period $ 96,286 $108,881
Exercise of Stock Options 526 600
Net Income (Loss) 3,402 (8,675)
Net Unrealized Appreciation (Depreciation) on
Fixed Maturity Securities 255 (492)
-------- --------
Balance at End of Period $100,469 $100,314
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
-5-
<PAGE>
PHYSICIANS HEALTH SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------
1997 1996
----------------------
<S> <C> <C>
Operating Activities
Net Income (Loss) $ 3,402 $ (8,675)
Adjustments to Reconcile Net Income to Net Cash
Provided by (Used for) Operating Activities:
Depreciation and Amortization 4,280 3,011
Provision for Doubtful Accounts 492 1,035
Amortization of Excess of Net Assets over Cost
of Company Acquired (91) (90)
Deferred Income Tax Expense (Benefit) 2,700 -
Changes in Assets and Liabilities:
Accounts Receivable 6,057 (7,930)
Other Receivables (41,474) (13,300)
Advances to Participating Hospitals 349 4,649
Prepaid Expenses and Other 311 (979)
Accrued Health Care Expenses 22,732 15,304
Unearned Premiums 1,496 1,743
Due to IPA's, Physicians and Other Providers (5,232) 5,585
Accounts Payable and Accrued Expenses 15,350 (7,802)
--------- ---------
Net Cash Provided by (Used for) Operating Activities 10,372 (7,449)
Investing Activities
Purchases of Property, Plant, and Equipment (9,527) (29,642)
Proceeds from Disposal of Equipment 23 16
Increase in Other Assets (637) (953)
Purchases of Fixed Maturity Securities (281,117) (186,802)
Proceeds from Sales and Maturities of Fixed Maturity Securities 255,291 205,759
--------- ---------
Net Cash Used for Investing Activities (35,967) (11,622)
Financing Activities
Proceeds from Revolving Credit Line - 18,000
Exercise of Stock Options 526 600
--------- ---------
Net Cash Provided by Financing Activities 526 18,600
--------- ---------
Decrease in Cash and Cash Equivalents (25,069) (471)
Cash and Cash Equivalents at Beginning of Period 39,213 7,536
--------- ---------
Cash and Cash Equivalents at End of Period $ 14,144 $ 7,065
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
-6-
<PAGE>
PHYSICIANS HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
solely of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine month period
ended September 30, 1997 are not necessarily indicative of the results that may
be expected for the year ended December 31, 1997. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Physicians Health Services, Inc. and Subsidiaries Annual Report on Form 10-K for
the year ended December 31, 1996.
2. Stockholders' Equity and Per Share Data
Pursuant to the Company's Certificate of Incorporation, upon conversion of Class
B shares to Class A shares, such Class B shares are canceled and cannot be
reissued. Per share data are based upon the weighted average number of common
and common equivalent shares outstanding during the period. Common stock
equivalents are excluded to the extent they have an antidilutive effect on per
share data.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. The impact of Statement 128 on the calculation
of primary and fully diluted earnings per share for the quarter and nine months
ended September 30, 1997 and September 30, 1996 is not expected to be material.
3. New Accounting Pronouncements
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("SFAS 130") and Statement of Financial
Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and
Related Information," ("SFAS 131"). SFAS 130 establishes standards for the
reporting and display of comprehensive income and its components in a full set
of general-purpose financial statements. Comprehensive income is defined as the
change in equity during the financial reporting period of a business enterprise
resulting from non-owner sources. SFAS 131 establishes standards for the
reporting of operating segment information in both annual financial reports and
interim financial reports issued to shareholders. An operating segment is a
component of an entity for which separate financial information is available and
is evaluated regularly by the entity's chief operating management. Both
Statements are effective for fiscal years beginning after December 15, 1997 and
are not expected to have a material impact on the Company.
-7-
<PAGE>
PHYSICIANS HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(unaudited)
4. Tax Provision
The Company is currently under examination by the Internal Revenue Service (IRS)
for certain prior tax years. Management does not expect any proposed adjustments
which may result from the IRS' audit to have a material adverse impact on the
Company's financial position or results of operations.
The Company's effective tax rate is lower than the statutory rate due primarily
to tax exempt interest generated from much of the Company's investment
portfolio.
5. Reclassifications
Certain reclassifications were made to conform the 1996 amounts to current
presentations in 1997.
6. Non-monetary Exchange
On May 2, 1997, the Company acquired 200 shares of Physicians Health Services of
New Jersey, Inc. ("PHS NJ") from MasterCare Companies, Inc. ("MasterCare"). In
exchange for the receipt of the shares of PHS NJ the Company gave up 1,250,000
shares of Series B Convertible Preferred Stock of MasterCare Companies, Inc. and
190 shares of Common Stock of MasterCare of Connecticut, Inc. Since the common
stock of MasterCare and PHS NJ are not publicly traded, fair values of the
shares exchanged were estimated. MasterCare shares were valued based on prices
obtained in a recent private placement while the fair value of PHS NJ shares
were derived from a valuation of membership. The purchase price paid (fair value
of MasterCare's shares held by the Company) exceeded the fair value of
MasterCare's proportionate interest in the net assets of PHS NJ acquired from
MasterCare by approximately $1.8 million. Such excess will be amortized over 10
years. As a result of this transaction, PHS NJ became a wholly-owned subsidiary
of the Company. This transaction resulted in a net gain of $348 thousand which
is reflected in selling, general and administrative expenses.
7. Merger Agreement
On May 8, 1997, the Company and Foundation Health Systems, Inc. ("FHS") executed
a merger agreement pursuant to which FHS would acquire all of the shares of
common stock of the Company for $29.25 per share in cash, or a total
consideration to the Company's stockholders of approximately $280 million. On
October 19, 1997, the Company and FHS agreed to a new acquisition price of
$28.25 per share in cash or a total consideration of approximately $271 million
and eliminated as a condition of the consummation of the merger the obtaining of
certain waivers and consents from The Guardian Life Insurance Company of
America ("The Guardian") in connection with the Company's joint marketing
arrangements with The Guardian. Should the Company obtain such waivers and
consents prior to consumation of the merger, the price would return to $29.25
per share. FHS announced that it intends to finance the purchase with a
combination of cash and bank debt. As part of the transaction, the Company has
entered into a voting trust agreement with the Greater Bridgeport Individual
Practice Association ("GBIPA"), which owns shares constituting approximately 61%
of the voting power of the Company. The agreement stipulates that such shares
will be voted in favor of the transaction by GBIPA. The transaction is subject
to certain closing conditions, including receipt of regulatory approvals.
-8-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULT OF OPERATIONS
Results of Operations
- ---------------------
Quarter Ended September 30, 1997 Versus September 30, 1996
Nine Months Ended September 30, 1997 Versus September 30, 1996
Premium revenue increased 43.9% to $177.3 million in the third quarter of 1997
from $123.2 million for the comparable 1996 quarter. For the nine months ended
September 30, 1997, premium revenue increased 38.3% to $488.7 million from
$353.4 million for the comparable 1996 period. Enrollment at September 30,1997
was 496,502, an increase of 39.7% from enrollment of 355,402 at September 30,
1996. As of September 30, 1997, fully insured enrollees increased 49.5% to
426,152 members up from 285,059 members as of September 30, 1996, while self-
funded enrollees remained essentially unchanged at 70,350 members as of
September 30, 1997. The aggregate premium revenue increase lagged the fully
insured membership growth due primarily to the growth of membership in the
Healthcare Solutions product where 50% of all the premium revenue and related
health care costs related to this business for 1997 are ceded to The Guardian
pursuant to reinsurance agreements with the Company's subsidiaries. Until
October 1, 1996, the Healthcare Solutions activity in Connecticut was reported
under a profit sharing arrangement. According to the provisions of the profit
sharing arrangement, the Company recorded 100% of the premium revenue from
Connecticut Healthcare Solutions activity until October 1, 1996. After October
1, 1996, the profit sharing agreement was replaced by the reinsurance agreement
as in effect for 1997. The effect was to reduce the percentage premium increase
as compared to what such increase would have been if the reinsurance agreement
had been in effect throughout 1996. This effect was offset by an increase in
revenue from Medicare products resulting from a shift in membership from cost to
risk products which carry higher revenue yields and an increase in the pricing
of some of the commercial products.
Investment and other income increased 39.2% to $2.2 million for the third
quarter of 1997 from $1.5 million for the third quarter of 1996. On a year-to-
date basis, investment and other income increased 22.2% to $5.9 million from
$4.8 million for the nine months ended September 30, 1996. The increase is due
primarily to an increase in investable assets.
Health care expenses as a percentage of premium revenues (medical loss ratio)
declined to 86.6% for the third quarter of 1997 as compared to 90.3% for the
third quarter of 1996. For the nine months ended September 30, 1997, the medical
loss ratio was 86.2% down from 89.4% for the first nine months of 1996. Total
health care expenses increased 38.6% to $152.1 million in the third quarter of
1997 from $109.7 million for the comparable 1996 quarter. On a year-to-date
basis, total health care expenses increased 34.0% to $417.1 million for the
first nine months of 1997 from $311.2 million for the same 1996 period. The
improvement in the medical loss ratios for both the quarter and year-to-date
periods is the result of an increase in fully insured revenue that exceeded the
rise in total medical expenses.
Hospital services expenses increased 45.6% to $67.9 million in the third quarter
of 1997 from $46.7 million for the third quarter of 1996. Hospital services
expenses for the first nine months of 1997 totaled $172.3 million up 32.1% from
$130.4 million in the first nine months of 1996. The rise in hospital services
expenses was due, in part, to the 49.5% increase in fully insured enrollees.
Additionally, an overall reduction in commercial hospital rates for both
inpatient and outpatient services was somewhat mitigated by a new claims
assessment in New York from the implementation of the Hospital Care Reform Act
of 1996 ("HCRA"), which became effective on January 1, 1997. The New York State
legislature enacted HCRA, which requires the Company to make payments to state
funding pools to finance hospital bad debt and charity care, graduate medical
education, and other state programs. The claims assessment under HCRA is equal
to 8.18% of qualified New York hospital costs and is expected to continue to
increase the Company's hospital costs in the future.
-9-
<PAGE>
Results of Operations (con't)
- -----------------------------
Commercial inpatient utilization for the third quarter of 1997 decreased 8.4%
from the third quarter of 1996 with commercial bed days per thousand members at
251 days for the third quarter of 1997 versus 274 days for the same 1996 period.
On a year-to-date basis, commercial bed days per thousand members decreased 6.5%
from 277 days per thousand members for the nine months ended September 30, 1996
to 259 days per thousand members for the nine months ended September 30, 1997.
The improvement in the commercial product line was offset by a 182% and 138%
increase in the per member per month hospital expenses for government products
for the quarter and nine months ended September 30, 1997, respectively. The
increase is primarily due to the introduction of the Medicare risk products and
the resulting shift in membership from the Medicare cost product (for which the
Company does not carry full risk on hospital services) to the Medicare risk
products for which the Company carries substantially more of the hospital risk.
The Company expects hospital costs for the Medicare products to continue to rise
as membership (and related revenue) in this product increases.
Physician and related health care expenses increased by 27.6% from $52.7 million
for the third quarter of 1996 to $67.3 million for the third quarter of 1997.
For the nine months ended September 30, 1997, physician and related health care
expenses increased 36.4% to $195.5 million from $143.3 million for the same 1996
period. The increase in physician and related health care expenses is primarily
due to the increase in fully insured membership and increases in certain
non-capitated services. Additionally, the introduction of the Medicare risk
products have contributed to the rise in physician costs.
Other health care expenses increased by $6.6 million or 63.6% in the third
quarter of 1997 and by $18.8 million or 61.7% on a year-to-date basis. The
increase is primarily due to the increase in fully insured membership and due to
the inclusion of the covered lives assessment in New York as a result of HCRA.
This assessment is expected to continue to increase other health care expenses
in the future. Additionally, prescription drug expenses continue to increase
across all product lines.
Indemnity costs reflect the medical costs associated with the indemnity revenue
assumed in connection with The Guardian reinsurance arrangement in New York
under which the Company shared risk for indemnity business with The Guardian
until June 30, 1996.
Selling, general and administrative expenses increased 6.7% or $1.6 million in
the third quarter of 1997 from the comparable 1996 period. For the nine months
ended September 30, 1997, selling, general and administrative expenses rose
14.6% or $9.2 million over the prior year. The increase is due primarily to
increased personnel and facilities expenses needed to support the enrollment
growth and product diversity. The increase was partially offset by increases in
the recovery of operating expenses from The Guardian under the terms of the
reinsurance agreements related to the Healthcare Solutions product. The selling,
general and administrative expenses as a percentage of premium revenues improved
to 14.0% for the third quarter of 1997 down from 18.8% for the third quarter of
1996. On a year-to-date basis, selling, general and administrative expenses as a
percentage of premium revenues totaled 14.8% down from 17.8% for the comparable
1996 period.
Liquidity and Capital Resources
- -------------------------------
PHS has historically financed its operations primarily through internally
generated funds. The Company's primary capital requirements are for working
capital, principally to fund geographic and product expansion, and to maintain
necessary regulatory capital. The Company's HMO and insurance subsidiaries are
subject to statutory regulations that restrict the payment of dividends.
Cash and cash equivalents decreased $25.1 million to $14.1 million at September
30, 1997 from $39.2 million at December 31, 1996.
-10-
<PAGE>
Liquidity and Capital Resources
- -------------------------------
Cash provided by operations increased primarily due to a combination of growth
in business, a return to profitability, and timing of claims payments and other
disbursements in the ordinary cause of business. Cash provided by operations
also includes a federal tax refund related to prior tax years.
The Company expects to require additional capital, over the next several years,
principally for computer and technology system enhancements and to maintain
necessary regulatory capital. The Company's spending on the computer and
technology system enhancements has been temporarily suspended pending the
merger. Therefore, the additional capital requirements may be less than
originally estimated. If the system enhancements are reinstated, the capital
requirements will be restored and could be in excess of amounts originally
anticipated. The Company believes that in addition to its current capital
resources and internally generated funds, it will be able to obtain financing,
if necessary, sufficient for its continued operations, although it can provide
no assurances in this regard.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" includes certain forward looking statements (including statements
identified by the use of such words as "expects", "believes" or similar
expressions). Actual results could differ materially from those discussed.
Additional information concerning factors that could cause actual results to
differ materially from those in forward looking statements is contained in Item
7 of the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1996 under the caption "Cautionary Statement".
-11-
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
---------------------------------
(a) Exhibit Number Description of Exhibit
-------------- ----------------------
27 Financial data schedule
(b) Reports on Form 8-K
There were no reports filed on Form 8-K for the quarter ended September
30, 1997.
-12-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Physicians Health Services, Inc.
--------------------------------
(Registrant)
Date: November 13, 1997 /s/ James L. Elrod, Jr.
------------------------------ -----------------------------
James L. Elrod, Jr.
Chief Financial Officer
Date: November 13, 1997 /s/ Robert L. Natt
------------------------------ -----------------------------
Robert L. Natt
President
-13-
<PAGE>
EXHIBIT INDEX
Exhibit Number Description of Exhibit
-------------- ----------------------
27 Financial data schedule.
-14-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 14144
<SECURITIES> 85339
<RECEIVABLES> 45546
<ALLOWANCES> 1787
<INVENTORY> 0
<CURRENT-ASSETS> 204611
<PP&E> 91794
<DEPRECIATION> 19524
<TOTAL-ASSETS> 291176
<CURRENT-LIABILITIES> 189636
<BONDS> 0
0
0
<COMMON> 59
<OTHER-SE> 100410
<TOTAL-LIABILITY-AND-EQUITY> 291176
<SALES> 488714
<TOTAL-REVENUES> 494586
<CGS> 417061
<TOTAL-COSTS> 417061
<OTHER-EXPENSES> 72126
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5399
<INCOME-TAX> 1997
<INCOME-CONTINUING> 3402
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3402
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
</TABLE>
