UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Form 10-Q
{X} Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended JUNE 30, 1997
OR
{ } 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 001-13460
COASTAL PHYSICIAN GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 56-1379244
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2828 CROASDAILE DRIVE, DURHAM, NC 27705
Address of principal executive offices) (Zip Code)
(919) 383-0355
(Registrant's telephone number including area code)
NONE
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by 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.
{X} Yes { } No
As of July 31, 1997 there were outstanding 24,412,334 shares
of common stock, par value $.01 per share.
COASTAL PHYSICIAN GROUP, INC.
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at December
31, 1996 and June 30, 1997 (Unaudited)
Unaudited Consolidated Statements of
Operations
Unaudited Consolidated Condensed
Statements of Cash Flows
Notes to Consolidated Financial Statements
(Unaudited)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES
COASTAL PHYSICIAN GROUP, INC.
Consolidated Balance Sheets
(In thousands, except per share data)
June 30, December
1997 31,
1996
Assets (unaudite
d)
Current assets:
Cash and cash equivalents 16,913 10,239
Marketable securities 6,651 7,020
Trade accounts receivable, net 32,580 87,410
Accounts receivable, other 15,011 11,187
Refundable income taxes --- 2,498
Prepaid expenses and other current 10,926 10,923
assets
Total current assets 82,081 129,277
Property and equipment, at cost, less
accumulated depreciation 15,324 19,041
Excess of cost over fair value of net
assets acquired, net 14,734 19,305
Other assets 13,605 14,218
Total assets 125,744 181,841
Liabilities and Shareholders' Equity
(Deficit)
Current liabilities:
Current maturities and other short-term
borrowings 2,452 71,130
Accounts payable 36,436 46,307
Deferred revenue 50,224 ---
Income taxes payable 4,296 2,211
Accrued physicians fees and medical 23,755 33,709
costs
Accrued expenses 18,592 20,182
Total current liabilities 135,755 173,539
Long-term debt, excluding current 3,904 4,799
maturities
Total liabilities 139,659 178,338
Shareholders' equity (deficit):
Preferred stock $.01 par value; shares
authorized 10,000; issued and
outstanding
1,164 and 0, respectively
Series A convertible preferred stock
shares authorized 48; shares
issued 1 ---
and outstanding 46 and 0,
respectively
Series B convertible preferred stock
shares authorized 33; shares
issued --- ---
and outstanding 33 and 0,
respectively
Series C convertible preferred stock
shares authorized 1,200; shares
issued 11 ---
and outstanding 1,085 and 0,
respectively
Common stock $.01 par value; shares
authorized
100,000; shares issued and 244 241
outstanding
24,412 and 24,126, respectively
Additional paid-in capital 158,063 144,070
Common stock warrants 2,828 987
Retained earnings (accumulated deficit) (175,124) (141,931)
Unrealized appreciation of available-
for-sale securities 62 136
Total shareholders' equity (13,915) 3,503
(deficit)
Total liabilities and shareholders'
equity (deficit) 125,744 181,841
See accompanying notes to consolidated financial statements.
COASTAL PHYSICIAN GROUP, INC.
Unaudited Consolidated Statements of Operations
(In thousands, except per share data)
Three months ended
June 30,
1997 1996
Operating revenue, net 111,496 146,038
Costs and expenses:
Physician and other provider services 88,277 114,127
Medical support services 10,813 23,094
Selling, general and administrative 28,421 30,615
Total costs and expenses 127,511 167,836
Operating loss (16,015) (21,798)
Other income (expense):
Interest expense (5,911) (2,724)
Interest income 136 77
Other, net 163 (415)
Total other expense (5,612) (3,062)
Loss before income taxes (21,627) (24,860)
Benefit for income taxes --- ---
Net loss (21,627) (24,860)
Net loss per share (0.89) (1.04)
Weighted average number of shares
outstanding 24,385 23,839
See accompanying notes to consolidated financial statements.
COASTAL PHYSICIAN GROUP, INC.
Unaudited Consolidated Statements of Operations
(In thousands, except per share data)
Six months ended
June 30,
1997 1996
Operating revenue, net 236,210 298,772
Costs and expenses:
Physician and other provider services 182,921 227,692
Medical support services 24,154 47,271
Selling, general and administrative 53,450 55,388
Total costs and expenses 260,525 330,351
Operating loss (24,315) (31,579)
Other income (expense):
Interest expense (9,754) (4,955)
Interest income 462 202
Other, net 414 (258)
Total other expense (8,878) (5,011)
Loss before income taxes (33,193) (36,590)
Benefit for income taxes --- ---
Net loss (33,193) (36,590)
Net loss per share (1.37) (1.54)
Weighted average number of shares
outstanding 24,258 23,815
See accompanying notes to consolidated financial statements.
COASTAL PHYSICIAN GROUP, INC.
Unaudited Consolidated Condensed Statements of Cash Flows
(In thousands)
Six months ended
June 30,
1997 1996
Net cash provided by (used in)
operating activities 13,793 (27,417)
Cash flows from investing activities:
Sales of marketable securities and
investments, net 234 5,660
Sales (purchases) of property and
equipment, net (37) 4,208
Disposition of subsidiaries, net of
cash disposed 1,402 (82)
Net cash provided by
investing activities 1,599 9,786
Cash flows from financing activities:
Repayments of long-term debt (91,321) (8,786)
Borrowings on long-term debt 22,101 30,704
Deferred revenue 50,224 ---
Cash payments for debt issue costs --- (1,558)
Proceeds from issuances of preferred 10,000 ---
stock
Proceeds from issuances of common 278 579
stock
Net cash provided by
financing activities (8,718) 20,939
Net increase in cash and cash
equivalents 6,674 3,308
Cash and cash equivalents at beginning
of period 10,239 8,147
Cash and cash equivalents at end of
period 16,913 11,455
Supplemental disclosures of cash flow
information:
Cash payments (refunds) during
the period for:
Interest 4,631 4,586
Income taxes (4,581) (12,993)
See accompanying notes to consolidated financial statements.
COASTAL PHYSICIAN GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) Basis Of Presentation
The accompanying consolidated financial statements of
Coastal Physician Group, Inc. and its subsidiaries (the
"Company" or "Coastal") are unaudited and, in the opinion of
management, include all adjustments which are necessary for
a fair presentation. The unaudited consolidated financial
statements should be read in conjunction with the Company's
audited consolidated financial statements and the notes
thereto included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1996. Operating results for
the interim periods presented are not necessarily indicative
of the results that may be expected for the fiscal year
ending December 31, 1997.
(2) Debt Refinancing
On June 6, 1997, the Company entered into a series of sale
and subservicing agreements (the "Sale Agreements") with
various subsidiaries of National Century Financial
Enterprises, Inc. ("NCFE"). The Sale Agreements provide for
accounts receivable purchase commitments totaling $151
million for the purchase of the Company's healthcare
receivables from third party payors that meet specified
eligibility requirements.
Also on June 6, 1997, pursuant to a separate loan and
security agreement, an affiliate of NCFE agreed to provide
the Company with a revolving line of credit of up to $15
million.
On June 10, 1997, the Company used proceeds of approximately
$82 million from sales of its existing receivables and
rights to future receivables to repay outstanding balances
under its previous credit facilities which terminated on
that date. All collateral held by the lenders under those
facilities was released. The existing receivables and
rights to future receivables sold were purchased at their
current book value, and therefore no gain or loss was
recorded on the sale. A gain or loss may be recognized in
future periods, depending upon cash collections. The cash
received for the rights to future receivables is recorded as
deferred revenue in the accompanying consolidated balance
sheets.
COASTAL PHYSICIAN GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(3) Capital
On June 9, 1997, in connection with the refinancing of the
Company's bank indebtedness, Dr. Steven M. Scott, Coastal's
Chief Executive Officer, a director, and largest
shareholder, invested $10 million in cash in the Company and
received 1,000,000 shares of Series C Convertible Preferred
Stock. In addition, Dr. Scott received 84,983 shares of
Series C Convertible Preferred Stock and 240,000 shares of
Common Stock in satisfaction of certain obligations owed to
him by the Company of approximately $1.1 million. The
Series C Convertible Preferred Stock is convertible into
10,849,830 shares of Common Stock, subject to approval by
the Company's common stockholders.
(4) Goodwill Impairment
During the second quarter of 1997, the Company recognized an
impairment loss (included in Selling, general and
administrative expenses in the accompanying statements of
operations) of $4,200,000 related to goodwill associated
with certain long-lived assets of Better Health Plan, Inc.
("BHP"), a subsidiary which was subsequently sold on August
19, 1997.
In accordance with Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of,
the carrying amount of the long-lived assets and
identifiable intangibles associated with assets specifically
identified for sale was compared to the estimated fair value
of the assets, less estimated costs to sell. Fair value was
based on the estimated amount at which the assets could be
sold in a current transaction based on management's
evaluations and discussions with the Company's outside
financial advisors. This reevaluation resulted in an
impairment loss recognized in the second quarter of 1997 of
$4,200,000 for BHP.
The $4,200,000 impairment loss is in addition to impairment
losses totaling $13,562,000 recorded in 1996. The primary
reason for the additional impairment loss recorded in the
second quarter of 1997 is the continued decline in the
estimated amount at which the assets could be sold.
COASTAL PHYSICIAN GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(5) Sale of Better Health Plan, Inc.
On August 19, 1997, the Company sold certain assets of
Better Health Plan, Inc. to the New York State Catholic
Health Plan, Inc. for approximately $7,750,000 in cash. Due
to the $4,200,000 goodwill impairment adjustment recorded in
the second quarter of 1997, (see Note 4 above) the gain or
loss on this transaction is expected to be minimal.
(6) Reclassifications
Certain reclassifications have been made to the unaudited
consolidated statements of operations for the three months
ended June 30, 1996 and the six months ended June 30, 1996
to conform to the 1997 presentation for the same periods.
Such reclassifications had no impact on the net loss for the
periods presented.
COASTAL PHYSICIAN GROUP, INC.
Management's Discussion And Analysis Of
Financial Condition And Results Of Operations
INTRODUCTION
The following discussion provides an assessment of the
Company's results of operations, liquidity and capital
resources, and trends and uncertainties and should be read
in conjunction with the consolidated financial statements of
the Company and notes thereto included elsewhere in this
document.
RESULTS OF OPERATIONS
Second Quarter Ended June 30, 1997 Compared to the Second
Quarter Ended June 30, 1996.
Net operating revenue ("operating revenue") decreased 23.7%
for the second quarter of 1997 to $111,496,000 from
$146,038,000 in the second quarter of 1996. The decrease in
operating revenue due to dispositions completed since the
first quarter of 1996 for which prior periods' results were
not restated was approximately $13,634,000 or 9.4%. This
decrease was primarily due to the sale of certain assets of
Physicians Planning Group, Inc. ("PPG") and the Common Stock
of Healthcare Automation, Inc. ("HCA") effective September
30, 1996, the sale of MedCost, Inc. ("MedCost") effective
November 22, 1996 as well as the sale of the HealthNet
Medical Group division of Physicians Planning Group, Inc.
("HealthNet") effective November 30, 1996. Operating
revenue not related to disposed entities decreased
approximately $20,908,000 or 14.3%. Contract attrition and
less new business development throughout 1996 and the first
half of 1997 in the Company's hospital-based contract
management division were significant factors that reduced
operating revenue in the second quarter of 1997 as compared
to the second quarter of 1996 when disposition-related
revenues are excluded. These declines in operating revenue
were partially offset by increased operating revenue
associated with the growth in the number of enrollees in
each of the Company's health plans in New York, North
Carolina and Florida. This decline in operating revenue is
likely to continue during 1997 given the Company's strategy
to divest certain non-core assets that the Company has
identified.
Operating expenses decreased 24.0% to $127,511,000 in the
second quarter of 1997 from $167,836,000 in the second
quarter of 1996. The decrease in operating expenses due to
dispositions completed since the first quarter of 1996 for
which prior periods' results were not restated was
approximately $12,125,000 or 7.2%. This decrease was
primarily due to the sale of certain assets mentioned above.
Operating expenses not related to disposed entities
decreased approximately $28,200,000 or 16.8%. This change
was a function of decreases due to contract attrition and
lower new business development throughout 1996 and the first
half of 1997 (as discussed above), offset by increased
expenses associated with the growth in the number of
enrollees in each of the Company's health plans in New York,
North Carolina and Florida.
The changes in operating revenue and operating expenses
described above resulted in an operating loss of $16,015,000
for the second quarter of 1997, compared to an operating
loss of $21,798,000 for the second quarter of 1996. In
addition to the factors noted above, contributing to the
operating loss was the increase in physician compensation
expense as a percentage of net revenues in the Company's
hospital-based contract management division.
The Company experienced a slight improvement in operating
margins during the second quarter of 1997 compared to the
second quarter of 1996. The operating margin for the three
months ended June 30, 1997 was negative 14.4% versus a
negative 14.9% for the same period in the prior year. These
operating margins are expected to improve to the extent the
Company achieves the objectives of its comprehensive
strategic and financial plan.
Other expenses increased $2,550,000 for the second quarter
of 1997 to $5,612,000 from $3,062,000 in the second quarter
of 1996. The increase is primarily due to additional
amortization expense related to debt issuance costs.
There was no provision for income taxes recorded for the
first quarter of 1997 or 1996. The Company expects to
record no tax expense or benefit, other than as a result of
future asset dispositions, until the Company returns to
profitability in the future.
Overall, the Company incurred a net loss of $21,627,000 in
the second quarter of 1997 as compared to a net loss of
$24,860,000 in the second quarter of 1996 for the reasons
discussed above.
Weighted average shares outstanding increased 2.3% from
23,839,000 shares in the second quarter of 1996 to
24,385,000 shares in the second quarter of 1997, primarily
as a result of shares issued to Dr. Scott in satisfaction of
the Company's obligation to reimburse him for certain rental
obligations and proxy solicitation expenses, as well as
shares issued in connection with Company's employee stock
purchase plan.
Six Months Ended June 30, 1997 Compared to the Six Months
Ended June 30, 1996.
Operating revenue decreased 20.9% for the six months ended
June 30, 1997 to $236,210,000 from $298,772,000 for the six
months ended June 30, 1996. The decrease in operating
revenue due to dispositions completed in 1996 for which
prior periods' results were not restated was approximately
$28,024,000 or 9.4%. This decrease was primarily due to the
sale of certain assets of PPG and the Common Stock of HCA
effective September 30, 1996, the sale of MedCost effective
November 22, 1996 as well as the sale of HealthNet effective
November 30, 1996. Operating revenue not related to
disposed entities decreased approximately $34,538,000 or
11.5%. Contract attrition and less new business
development throughout 1996 and the first half of 1997 in
the Company's hospital-based contract management division
were significant factors that reduced operating revenue in
the first six months of 1997 as compared to the first six
months of 1996 when disposition-related revenues are
excluded. These declines in operating revenue were
partially offset by increased operating revenue associated
with the growth in the number of enrollees in each of the
Company's health plans in New York, North Carolina and
Florida. This net decline in operating revenue is likely to
continue during the balance of 1997 due to the Company's
strategy to divest certain non-core assets.
Operating expenses decreased 21.1% to $260,525,000 for the
six months ended June 30, 1997 from $330,351,000 for the six
months ended June 30, 1996. The decrease in operating
expenses due to dispositions completed since the first
quarter of 1996 for which prior periods' results were not
restated was approximately $25,370,000 or 7.7%. This
decrease was primarily due to the sale of certain assets
mentioned above. Operating expenses not related to disposed
entities decreased approximately $44,456,000 or 13.4%. This
change was a function of decreases due to contract attrition
and lower new business development throughout 1996 and the
first half of 1997 (as discussed above), partially offset by
increased expenses associated with the growth in the number
of enrollees in each of the Company's health plans in New
York, North Carolina and Florida.
The changes in operating revenue and operating expenses
described above resulted in an operating loss of $24,315,000
for the six months ended June 30, 1997, compared to an
operating loss of $31,579,000 for the six months ended June
30, 1996. In addition to the factors noted above,
contributing to the operating loss was the increase in
physician compensation expense as a percentage of net
revenues in the Company's hospital-based contract management
division.
Other expenses increased $3,867,000 for the six months ended
June 30, 1997 to $8,878,000 from $5,011,000 for the six
months ended June 30, 1996. The increase is primarily due
to additional amortization expense related to debt issuance
costs.
There was no benefit for income taxes for the six months
ended June 30, 1997 or for the six months ended June 30,
1996. The Company expects to record no tax expense or
benefit, other than as a result of future asset
dispositions, until the Company returns to profitability in
the future.
Overall, for the reasons discussed above, the Company
incurred a net loss of $33,193,000 for the six months ended
June 30, 1997 as compared to a net loss of $36,590,000 for
the six months ended June 30, 1996.
Weighted average shares outstanding increased 1.9% from
23,815,000 shares for the six months ended June 30, 1996 to
24,258,000 shares for the six months ended June 30, 1997,
primarily as a result of shares issued to Dr. Scott in
satisfaction of the Company's obligation to reimburse him
for certain rental obligations and proxy solicitation
expenses, as well as shares issued in connection with
Company's employee stock purchase plan.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the six months
ended June 30, 1997 was $13,793,000 as compared to net cash
used in operating activities of $27,417,000 for the six
months ended June 30, 1996. The net cash provided by
operating activities for the six months ended June 30, 1997
was primarily due to the sale of accounts receivable to
various subsidiaries of National Century Financial
Enterprises, Inc. ("NCFE") during the month of June, as
explained below, partially offset by the net loss for the
period.
On May 29, 1996, the Company entered into credit agreements
which restructured its existing credit facilities and
provided the Company with up to $40 million of additional
borrowing availability. The facilities required total
principal payments of at least $40 million by January 2,
1997, which were made by the Company, at which time the
availability of borrowings under the facilities declined to
$10 million. The facilities also required an amendment to
be finalized by January 15, 1997 which would have
established financial covenants for the period subsequent to
February 1997. This amendment did not occur by January 15,
1997 and therefore outstanding amounts, originally due on
July 1, 1997, became due on February 28, 1997. From
February 28, 1997 through June 10, 1997, the Company was in
default on these obligations, but accelerated payment was
not required by the lenders. From May 29, 1996 through June
10, 1997, interest on loans under the facilities accrued at
rates ranging from 1.5% to 4.5% over a designated prime
rate. Borrowings outstanding under these facilities as of
March 31, 1997 were $77.6 million.
On June 6, 1997, the Company entered into a series of sale
and subservicing agreements (the "Sale Agreements") with
NCFE. The Sale Agreements provide for accounts receivable
purchase commitments totaling $151 million for the purchase
of the Company's healthcare receivables from third party
payors that meet specified eligibility requirements. Certain
Sale Agreements create facilities for the purchase of up to
$36 million of receivables and terminate on July 1, 1998.
Another Sale Agreement creates a facility for the purchase
of up to $115 million of receivables and terminates on June
1, 2000. After taking into account required reserves and
administrative fees, the maximum amount of funding available
under the Sale Agreements at any one time is approximately
$125 million. Pursuant to the Sale Agreement, the Company
pays a program fee ranging from approximately 10.97% to
approximately 12.50% per annum on the outstanding amount of
uncollected purchased receivables.
Also on June 6, 1997, pursuant to a separate loan and
security agreement, an affiliate of NCFE agreed to provide
the Company with a revolving line of credit of up to $15
million. Interest on outstanding amounts under this line of
credit is payable monthly at prime plus 4%. The
availability under the line of credit declines based on the
Company's receipt of net proceeds in excess of $10 million
from the sale of specified assets, and the line of credit
expires June 15, 1998. The line of credit is secured by
substantially all of the assets of Coastal Physician Group,
Inc., including pledges of the Common Stock of each of its
subsidiaries.
On June 10, 1997, the Company used proceeds of approximately
$82 million from sales of its existing receivables and
rights to future receivables to repay outstanding balances
under its previous credit facilities which terminated on
that date. All collateral held by the lenders under those
facilities was released. After repayment, the Company had
access to approximately $40 million of cash from potential
additional sales of its existing receivables and rights to
future receivables and borrowing availability under the line
of credit. The Company continues to generate and sell its
receivables to NCFE for working capital purposes.
On June 9, 1997, in connection with the refinancing of the
Company's bank indebtedness, Dr. Steven M. Scott, Coastal's
Chief Executive Officer, a director, and largest
shareholder, invested $10 million in cash in the Company and
received 1,000,000 shares of Series C Convertible Preferred
Stock. In addition, Dr. Scott received 84,983 shares of
Series C Convertible Preferred Stock and 240,000 shares of
Common Stock in satisfaction of certain obligations owed to
him by the Company of approximately $1.1 million. The
Series C Convertible Preferred Stock is convertible into
10,849,830 shares of Common Stock, subject to approval by
the Company's common stockholders. Such conversion is being
voted upon by the Company's stockholders at the 1997 Annual
Meeting of Stockholders scheduled to be held on August 29,
1997.
The Company's strategic business plan provides for ongoing
reviews of the non-core businesses, improving the
profitability of its core businesses, reducing contract
attrition rates and cutting overhead costs. The Company has
taken the following actions in accordance with that plan.
As a result of the reviews of its business units, the
Company completed the sale of Better Health Plan, Inc. in
August 1997. Also, the Company successfully migrated its
information technology hardware operations to a lower cost
vendor and renegotiated its telecommunications contract
providing additional savings throughout 1997 and future
years.
Coastal Physician Services, Inc. (CPS) is implementing
physician educational programs to increase billings through
better documentation of procedures performed in emergency
departments. Using its Corporate Compliance Program as a
pattern, Healthcare Business Resources, Inc. is inservicing
CPS' employees and independent contractor physicians on
compliance with Medicare, Medicaid and CHAMPUS laws and
regulations to ensure accurate billing for CPS' services.
Also, a physician partnering program is being implemented
which more closely ties revenue with physician compensation.
These programs are expected to improve CPS' operating
margins. CPS is devoting significant management resources
to contract retention efforts and margin improvement on less
profitable contracts. Management has also completed a
reorganization of the corporate headquarters resulting in
headcount reductions and lower consulting fees.
Although these actions are expected to have a positive
effect on the Company's financial performance, there are no
assurances that each of these actions will be successful and
that improved financial results will be achieved without
additional asset sales, revenue and margin improvements and
cost reductions.
The Company expects to satisfy its anticipated demands and
commitments for cash in the next twelve months from the
additional cash received from the sale of stock discussed
above, amounts available under the various agreements with
NCFE discussed above, the sale of certain non-core assets,
as well as a reduction in cash used in operations.
Forward-looking Information or Statements: Except for
statements of historical fact, statements made herein are
forward-looking in nature and are inherently subject to
uncertainties. The actual results of the Company may differ
materially from those reflected in the forward-looking
statements based on a number of important risk factors,
including, but not limited to: receipt of sufficient
proceeds from divested assets, and the timing of any
divestitures; the level and timing of improvements in
operating results and cash flow; the possibility of poor
accounts receivable generation, collection and/or
reimbursement experience; the possibility of increased
medical expenses due to increased utilization; the
possibility that the Company may not be able to improve
operations or execute its divestiture strategy as planned;
and other important factors disclosed from time to time in
the Company's Form 10-K, Form 10-Q and other Securities and
Exchange Commission filings.
PART II - OTHER INFORMATION
Item 2. - Changes in Securities
On June 9, 1997, in connection with the refinancing of the
Company's bank indebtedness, Dr. Scott invested $10 million
in cash in the Company and received 1,000,000 shares of
Series C Convertible Preferred Stock. In addition, Dr.
Scott received 84,983 shares of Series C Convertible
Preferred Stock and 240,000 shares of Common Stock in
satisfaction of certain obligations owed to him by the
Company of approximately $1.1 million. The Series C
Convertible Preferred Stock is convertible into 10,849,830
shares of Common Stock, subject to approval by the Company's
common stockholders. Such conversion is being voted upon by
the Company's stockholders at the 1997 Annual Meeting of
Stockholders scheduled to be held on August 29, 1997.
These transactions were not registered under the Securities
Act pursuant to the exemption provided by Section 4(2)
thereof for transactions not involving any public offering.
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
One report on Form 8-K was filed during the quarter for
which this report is filed:
1. On June 25, 1997, the Company filed a report on Form 8-
K, filing under Items 1 and 2 thereof. Under Item 1, the
report disclosed that on June 9, 1997, to facilitate the
closing of the refinancing transaction (described below),
Dr. Scott invested $10 million of his personal funds in the
Company and received 1,000,000 shares of the Company's
Series C Convertible Preferred Stock, par value $.01 per
share (the "Series C Shares"). On the same day, Dr. Scott
received an additional 84,983 Series C Shares and 240,000
shares of Common Stock from the Company in satisfaction of
obligations owed to him for assuming certain rental and
related obligations totaling $1,089,831.07 owed to certain
entities, some of which are affiliated with Dr. Scott.
Through the issuance of 240,000 shares of Common Stock and
1,084,983 Series C Shares by the Company to Dr. Scott on
June 9, 1997, Dr. Scott may be deemed to be the beneficial
owner of 18,417,653 shares, or 52.3% of the Company's Common
Stock. Accordingly, the Company believes that Dr. Scott
controls the Company.
Under Item 2, the report disclosed that on June 6, 1997, the
Company, in order to refinance its existing bank
indebtedness and provide the Company with additional working
capital, entered into a series of receivables sales and
other financing agreements with subsidiaries of National
Century Financial Enterprises, Inc. ("NCFE") providing for
commitments to purchase accounts receivable of certain
subsidiaries of the Company (the "A/R Facilities") and a
revolving line of credit of up to $15 million (the "Line of
Credit"). On June 10, 1997, the Company used approximately
$82 million of funding from the sale of receivables to
satisfy in full the Company's outstanding indebtedness under
its credit facilities with its previous lenders.
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.
COASTAL PHYSICIAN GROUP, INC.
(Registrant)
Date: August 21, 1997 By: /S/STEVEN M. SCOTT, M.D.
Steven M. Scott, M.D.
President and Chief
Executive Officer
Date: August 21, 1997 By: /S/W. RANDALL DICKERSON
W. Randall Dickerson
Executive Vice President
and Chief Financial
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING BALANCE SHEET AS OF JUNE 30, 1997 AND STATEMENT OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED JUNE 30, 1997, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 16,913,000
<SECURITIES> 6,651,000
<RECEIVABLES> 32,580,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 82,081,000
<PP&E> 15,324,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 125,744,000
<CURRENT-LIABILITIES> 135,755,000
<BONDS> 0
0
12,000
<COMMON> 244,000
<OTHER-SE> (13,659,000)
<TOTAL-LIABILITY-AND-EQUITY> 125,744,000
<SALES> 111,496,000
<TOTAL-REVENUES> 111,496,000
<CGS> 0
<TOTAL-COSTS> 127,511,000
<OTHER-EXPENSES> (299,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,911,000
<INCOME-PRETAX> (21,627,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (21,627,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,627,000)
<EPS-PRIMARY> (0.89)
<EPS-DILUTED> 0
</TABLE>
