<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 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 33-80731
--------------------
PHYSICIAN SUPPORT SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction 13-3624081
of incorporation or (I.R.S. Employer
organization) Identification No.)
ROUTE 230 AND EBY-CHIQUES ROAD
MT. JOY, PENNSYLVANIA 17552
(Address of principal executive offices) (Zip Code)
(717) 653-5340
--------------
Registrant's telephone number, including area code
----------------
Indicated 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.
Yes X No
------ ------
Indicate the number of shares outstanding of each of issuer's classes of common
stock, as of the latest practicable date.
Common Stock, par value $.001 per share 9,720,033 Shares
- --------------------------------------- ----------------
Class Outstanding at
May 10, 1997
<PAGE>
PHYSICIAN SUPPORT SYSTEMS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
March 31, 1997 and December 31, 1996 2
Condensed Consolidated Statements of Operations -
Three Months Ended
March 31, 1997 and 1996 3
Condensed Consolidated Statements of Cash Flows -
Three Months Ended
March 31, 1997 and 1996 4
Notes to Condensed Consolidated
Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7
PART II. OTHER INFORMATION
Item 2. Changes in Securities 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
Exhibit Index 12
</TABLE>
1
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
PHYSICIAN SUPPORT SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---- ----
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................................. $ 1,044,541 $ 3,826,018
Accounts receivable........................................................ 20,439,936 17,458,338
Accounts receivable - unbilled ............................................ 13,995,582 11,149,811
Prepaid expenses and other current assets.................................. 2,719,660 1,991,689
-------------- -------------
Total current assets.................................................. 38,199,719 34,425,856
Property and equipment.......................................................... 9,270,563 9,092,630
Intangible assets - net......................................................... 59,970,203 44,556,022
Due from related parties........................................................ 859,602 1,054,038
Other assets ................................................................. 2,797,546 2,776,902
-------------- --------------
Total................................................................. $ 111,097,633 $ 91,905,448
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................................... $ 2,878,923 $ 2,135,924
Accrued expenses........................................................... 16,384,806 16,805,042
Current portion of other long-term liabilities............................. 1,016,559 969,623
Current portion of due to related parties.................................. 315,000 463,736
Deferred income taxes...................................................... 31,347 31,347
-------------- -------------
Total current liabilities............................................. 20,626,635 20,405,672
-------------- -------------
Long-term debt ................................................................. 35,547,027 20,017,027
-------------- -------------
Other long-term liabilities..................................................... 3,435,904 3,676,052
-------------- -------------
Due to related parties.......................................................... 873,488 771,695
-------------- -------------
Deferred income taxes........................................................... 1,322,263 1,322,263
-------------- -------------
Commitments and contingencies................................................... --- ---
-------------- -------------
Stockholders' equity:
Preferred stock, par value $.01 per share: authorized
10,000,000 shares: none outstanding
Common stock, par value $.001 per share:
authorized 100,000,000 shares: outstanding 9,720,033
and 9,156,101 shares at March 31, 1997 and
December 31, 1996 respectively........................................ 9,720 9,156
Additional paid-in capital...................................................... 58,740,799 55,194,229
Retained earnings (accumulated deficit)......................................... (9,458,203) (9,490,646)
------------- ----------
Total stockholders' equity............................................ 49,292,316 45,712,739
------------- ----------
Total................................................................. $ 111,097,633 $ 91,905,448
============= ============
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
PHYSICIAN SUPPORT SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues......................................................... $ 25,399,324 $16,730,387
------------ -----------
Operating expenses:
Salaries and wages.......................................... 13,173,393 8,832,715
General and administrative.................................. 9,474,740 6,085,227
Depreciation and amortization............................... 1,447,219 1,262,961
Interest income............................................. (31,980) (189,309)
Interest expense............................................ 529,034 275,373
Other (income) expense...................................... -- (9,424)
Restructuring charge........................................ 750,000 --
------------ -----------
Income before income taxes
(benefit)................................................... 56,918 472,844
Income taxes (benefit)........................................... 24,475 (26,000)
------------ -----------
Net income ...................................................... 32,443 498,844
Pro forma income taxes (benefit)................................. -- 213,198
------------ -----------
Pro forma net income ............................................ 32,443 285,646
Preferred stock dividends........................................ -- 36,320
------------ -----------
Pro forma net income applicable
to common stock............................................. $ 32,443 $ 249,326
============ ===========
Pro forma earnings per share..................................... $ 0.00 $ 0.04
============ ===========
Weighted average shares outstanding............................. 9,434,010 6,684,900
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
PHYSICIAN SUPPORT SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income .................................................... $32,443 $498,844
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization......................... 1,477,219 1,262,961
Deferred income taxes................................. -- 100,155
Other long-term liabilities........................... 370,517 322,776
Changes in operating assets and liabilities:
Accounts receivable.............................. (2,232,081) (1,300,360)
Accounts receivable - unbilled................... (857,818) (317,868)
Prepaid expenses and other current assets and
other assets............................ (293,871) (809,165)
Accounts payable................................. (67,382) (1,377,285)
Accrued expenses................................. (872,528) (606,362)
------------ ------------
Net cash used in operating activities..................... (2,443,501) (2,226,304)
------------ ------------
Cash flows from investing activities:
Acquisitions, net of cash acquired.............................. (14,139,183) (10,657,190)
Deferred purchase price......................................... (365,833) (166,666)
Capital expenditures............................................ (721,778) (389,083)
------------ ------------
Net cash used in investing activities.................... (15,226,794) (11,212,939)
------------ ------------
Cash flows from financing activities:
Net proceeds from sale of common stock......................... -- 43,556,217
Proceeds from long-term borrowings............................. 15,530,000 319,997
Repayment of short-term borrowings............................. -- (500,000)
Principal payments on long-term debt........................... (586,274) (10,464,567)
Principal payments on capital lease obligations................ (202,401) (79,902)
Due to/from related parties.................................... 147,493 1,416,291
Common stock dividends......................................... -- (70,677)
Redemption of preferred stock.................................. -- (2,932,032)
Redeemable preferred stock distributions....................... (36,320)
------------ ------------
Net cash provided by financing activities 14,888,818 31,209,007
------------ ------------
Net increase (decrease) in cash and cash equivalents................. (2,781,477) 17,769,764
Cash and cash equivalents, beginning of period....................... 3,826,018 1,691,758
------------ ------------
Cash and cash equivalents, end of period............................. $1,044,541 $19,461,522
============ ============
Supplemental investing activity:
Fair value of assets acquired................................. $20,155,912 $13,850,820
Stock issued in acquisitions.................................. (3,547,132) --
Cash acquired................................................. -- (193,261)
Liabilities assumed........................................... (2,274,597) (1,088,369)
Deferred purchase price....................................... (195,000) (1,912,000)
------------ ------------
Net cash paid for acquisitions......................... $14,139,183 $10,657,190
============ ============
Supplemental disclosure of cash flow information:
Cash paid for interest........................................ $514,868 $510,519
============ ============
Capital lease obligations incurred in acquisition of
equipment.............................................. $ ---- $ ----
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
PHYSICIAN SUPPORT SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 1997 And 1996
1. Basis Of Presentation
The unaudited condensed consolidated financial statements included
herein have been prepared by the Company in accordance with the rules and
regulations of the Securities and Exchange Commission and consequently do not
include all of the disclosures normally required by generally accepted
accounting principles. These unaudited condensed consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements and related notes thereto included in the Company's Annual Report on
Form 10-K.
The unaudited financial information contained herein reflects all
adjustments (consisting of only normal recurring accruals) which, in the opinion
of management, are necessary for a fair presentation of the results of
operations for the three month periods ended March 31, 1997 and 1996.
2. Sale of Common Stock
On February 12, 1996, the Company authorized the issuance of up to
10,000,000 shares of preferred stock, increased the number of authorized shares
of common stock from 5,000 to 100,000,000, changed the par value of its common
stock from $.01 to $.001 per share and effected a 1,400-for-one stock split. In
addition, on February 12, 1996, the Company sold 4,025,000 shares of common
stock for $12 per share in its initial public offering of common stock. The net
proceeds of such offering of approximately $43,556,000 were used to repay all
outstanding short and long-term debt except for The Spring Anesthesia Group,
Inc. ("Spring") acquisition subordinated note, redeem all outstanding shares of
preferred stock and acquire three businesses.
3. Business Combinations
During 1996, the Company acquired either 100 percent of the
outstanding common stock or substantially all of the assets and liabilities of
seven businesses in transactions accounted for under the purchase method of
accounting, and merged with three businesses in transactions accounted for as
poolings of interests.
On February 5, 1997, the Company acquired 100 percent of the
outstanding common stock of Physerv Solutions, Inc. ("Physerv") for
approximately $10,109,000 in cash plus 563,934 shares of common stock. The
Company intends to merge the operations of Spring into Physerv as soon as is
practicable (see Note 5).
The unaudited consolidated results of operations of the Company on a
pro forma basis as if the Company had consummated on January 1, 1996 the
acquisitions of the businesses it acquired and accounted for under the purchase
method of accounting since January 1, 1996 are as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
---- ----
<S> <C> <C>
Revenue $26,167,629 $24,901,013
Net income (loss) $104,810 $160,638
Earnings (loss) per share $0.01 $0.02
Weighted average shares 9,720,033 9,720,033
========= ==========
</TABLE>
5
<PAGE>
4. Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---- ----
<S> <C> <C>
Loan Agreement Acquisition Line borrowings, Overnight Market Rate
(6.43% at March 31, 1997)....................................................... $ 27,351,027 $12,017,027
Loan Agreement Working Capital Line borrowings, Intermediate Market
Rate (7.08% at March 31, 1997).................................................. 2,696,000 2,500,000
Spring acquisition subordinated note, 7.6%, payable on
August 12, 2003................................................................. 5,500,000 5,500,000
------------- -----------
$ 35,547,027 $20,017,027
============ ==========
</TABLE>
5. Restructuring Charge
As previously reported, results at the Company's Spring subsidiary
located in Stockton, California in the three months ended June 30, 1996 were
adversely affected by operating inefficiencies in the processing of physician
charges which resulted in lower revenues during that period. In addition, the
Company incurred increased salary and general and administrative expenses in an
attempt to increase production. To address these operating inefficiencies, among
other actions, the Company decided to replace certain computer hardware and
software at Spring with other operating software. The Company recorded a
restructuring charge in the three months ended June 30, 1996 of approximately
$1,600,000 related to the write-off of certain computer hardware and software,
and costs associated with the introduction of a new management team, some
limited severance activity and other transition items. During the three months
ended December 31, 1996, the Spring operating inefficiencies led to client
dissatisfaction. The Company incurred increased salary and general and
administrative costs in an attempt to increase client satisfaction. However,
these efforts were unsuccessful, and led to the loss of clients and loss of
related revenues. As a result, in accordance with Statement of Financial
Accounting Standards No. 121, the Company determined that certain identifiable
intangible assets (primarily customer contracts), and goodwill, were not
recoverable from future cash flows of Spring, and accordingly, an impairment
loss of approximately $6,578,000 was recorded in the year ended December 31,
1996. In addition, in conjunction with the Company's acquisition on February 5,
1997 of Physerv, which like Spring, serves only anesthesiologists, the Company
decided to fold the remaining Spring business into Physerv, in order to develop
a profitable, national approach to the anesthesia market. This will entail
exiting the processing of physician charges in remote Spring locations and
performing such processing activities at more efficient central anesthesia
processing locations. As a result of this assimilation, the Company recorded a
charge of $750,000 in the three months ended March 31, 1997, primarily for
severance and lease terminations related to exiting processing activities at
Spring.
6. Pro Forma Income Taxes
The Company has acquired certain entities in merger transactions
accounted for as poolings of interests, which prior to the mergers had elected
"S" corporation status for income tax purposes. As a result of the mergers,
these acquired entities terminated their "S" corporation elections. Pro forma
income taxes represent the income tax provision (benefit) that would have been
recognized for periods prior to the mergers had the acquired entities been taxed
as "C" corporations.
7. Related Party Transactions
Legal services provided by related parties were approximately
$762,000 and $838,000 for the three months ended March 31, 1997 and 1996,
respectively.
Rent paid to related parties was approximately $80,000 and $0 for
the three months ended March 31, 1997 and 1996, respectively.
6
<PAGE>
Item 2. Management's Discussion And Analysis Of Financial Condition And
Results Of Operations
OVERVIEW
The Company is a leading provider of business management services to
hospitals and hospital-affiliated physicians. The Company's services include
preparation and follow-up on bills for medical services provided, assisting
providers in qualifying patients for state medicaid eligibility, collecting past
due accounts, and providing other business management services on an outsource
basis. The Company is generally compensated with a management fee based upon net
receipts of its clients.
On February 12, 1996, the Company sold 4,025,000 shares of common stock for
$12 per share in its initial public offering of common stock. The net proceeds
of such offering of approximately $43,556,000 were used to repay all outstanding
short and long-term debt except for the Spring acquisition subordinated note,
redeem all outstanding shares of preferred stock and acquire three businesses.
See "ACQUISITIONS."
This Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the Company's latest
Annual Report on Form 10-K.
ACQUISITIONS
During 1996, the Company acquired either 100 percent of the outstanding
common stock or substantially all the assets and liabilities of seven businesses
in transactions accounted for under the purchase method of accounting, and
merged with three businesses in transactions accounted for as poolings of
interests.
On February 5, 1997, the Company acquired 100 percent of the outstanding
common stock of Physerv for approximately $10,109,000 in cash plus 563,934
shares of common stock. The Company intends to merge the operations of Spring
into Physerv as soon as is practicable.
RESULT OF OPERATIONS
The following table sets forth, for the periods presented, the percentages
of net revenue represented by certain items reflected in the Company's statement
of operations.
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
---- ----
<S> <C> <C>
Revenues 100.0% 100.0%
------ ------
Salaries and wages 51.9% 52.8%
General and administrative 37.3% 36.4%
Depreciation and amortization 5.6% 7.5%
Interest expense (income), net 2.0% 0.5%
Other expense (income), net 0.0% 0.0%
Restructuring charge 3.0% 0.0%
---- ----
Income before income taxes 0.2% 2.8%
Income taxes (benefit) 0.1% (0.2%)
---- ----
Net income 0.1% 3.0%
Pro forma income taxes 0.0% 1.3%
---- ----
Pro forma net income 0.1% 1.7%
==== ====
</TABLE>
7
<PAGE>
Revenues
Revenues increased approximately 51.8% from $16,730,000 for the three
months ended March 31, 1996 to $25,399,000 for the three months ended March 31,
1997. Such increase resulted primarily from businesses acquired during 1996 and
1997 plus increased revenues from the addition of new clients, offset, in part,
by decreased revenues from lost clients. In addition, the Company's revenues
during the three months ended March 31, 1997 were adversely affected by
operating inefficiencies in the processing of physician charges at Spring, the
Company's subsidiary located in Stockton, California. See "Restructuring
Charge."
Salaries and Wages
Salaries and wages increased approximately 49.1% from $8,833,000 for the
three months ended March 31, 1996 to $13,173,000 for the three months ended
March 31, 1997. Such increase resulted primarily from businesses acquired during
1996 and 1997 and increases in the number of clients served by the Company. As a
percentage of revenues, salaries and wages were lower in the three months ended
March 31, 1997 compared to the three months ended March 31, 1996 primarily due
to efficiencies at businesses acquired in mergers accounted for as poolings of
interest subsequent to March 31, 1996 but prior to December 31, 1996.
General and Administrative Expenses
General and administrative expenses increased approximately 55.7% from
$6,085,000 for the three months ended March 31, 1996 to $9,475,000 for the three
months ended March 31, 1997. Such increases resulted primarily from businesses
acquired during 1996 and 1997 and increases in the number of clients served by
the Company. As a percentage of revenues, general and administrative expenses
were higher in the three months ended March 31, 1997 compared to the three
months ended March 31, 1996 primarily due to increased administrative costs
associated with being a publicly traded company.
Depreciation and Amortization
Depreciation and amortization increased approximately 14.6% from
$1,263,000 for the three months ended March 31, 1996 to $1,447,000 for the three
months ended March 31, 1997. Such increase resulted primarily from businesses
acquired during 1996 and 1997, offset in part, by reductions in depreciation and
amortization expense due to the write off of Spring fixed and intangible assets.
See Restructuring Charge.
Interest Income
Interest income decreased from $189,000 for the three months ended March
31, 1996 to $32,000 for the three months ended March 31, 1997 primarily as a
result of lower levels of excess cash invested in 1997 compared to 1996.
Interest Expense
Interest expense increased approximately 92.1% from $275,000 for the three
months ended March 31, 1996 to $529,000 for the three months ended March 31,
1997. Such increase resulted primarily from increased levels of borrowings in
1997 resulting from businesses acquired during 1996 and 1997.
Restructuring Charge
As previously reported, results at the Company's Spring subsidiary located
in Stockton, California in the three months ended June 30, 1996 were adversely
affected by operating inefficiencies in the processing of physician charges
which resulted in lower revenues during that period. In addition, the Company
incurred increased salary and general and administrative expenses in an attempt
to increase production. To address these operating inefficiencies, among other
actions, the Company decided to replace certain computer hardware and software
at Spring with other operating software. The Company recorded a restructuring
charge in the three months ended June 30, 1996 of approximately $1,600,000
related to the write-off of certain computer hardware and software, and costs
associated with the introduction of a new management team, some limited
severance activity and other transition items. During the three months ended
December 31, 1996, the Spring operating inefficiencies led to client
dissatisfaction. The Company incurred increased salary and general and
administrative costs in an attempt to increase client satisfaction. However,
these efforts were unsuccessful, and led to the loss of clients and loss of
related revenues. As a result, in accordance with Statement of Financial
Accounting Standards No. 121, the Company determined that certain identifiable
intangible assets (primarily customer contracts) and goodwill were not
recoverable from future cash flows of Spring, and accordingly, an impairment
loss of approximately $6,578,000 was recorded in the year ended December 31,
1996.
8
<PAGE>
In addition, in conjunction with the Company's acquisition on February 5, 1997
of Physerv, which like Spring, serves only anesthesiologists, the Company
decided to fold the remaining Spring business into Physerv, in order to develop
a profitable, national approach to the anesthesia market. This will entail
exiting the processing of physician charges in remote Spring locations and
performing such processing activities at more efficient central anesthesia
processing locations. As a result of this assimilation, the Company recorded a
charge of $750,000 in the three months ended March 31, 1997, primarily for
severance and lease terminations related to exiting processing activities at
Spring.
Income Taxes (Benefit) and Pro Forma Income Taxes
The Company's historical effective rates for income taxes (benefit)
changed from (5.5%) for the three months ended March 31, 1996 to 43.0% for the
three months ended March 31, 1997. Such change was primarily attributable to
mergers with two companies subsequent to the three months ended March 31, 1996
but prior to December 31, 1996 that were accounted for as poolings of interests.
Both companies had been taxed as "S" Corporations, and their historical
financial statements, which are now included in the Company's consolidated
financial statements, did not include provisions for income taxes. Pro forma
income taxes are presented for the three months ended March 31, 1996 to show
what income taxes would have been had these two companies been taxed as "C"
Corporations at that time. In addition, changes in the effective income tax rate
also resulted from differing levels in each year of projected annual pretax
income and the effect on such projected levels of items not deductible for
Federal and State income tax purposes.
Pro Forma Net Income and Pro Forma Earnings Per Share
Pro forma net income and pro forma earnings per share result from the
accumulation of the items described above and the increase in the weighted
average number of shares outstanding in the three months ended March 31, 1997
compared to the three months ended March 31, 1996 resulting from shares issued
in the Company's initial public offering of common stock and additional shares
of common stock issued as consideration in acquisitions accounted for as
purchases in 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital and cash and cash equivalents were
$17,573,000 and $1,044,000, respectively, at March 31, 1997 compared to
$14,020,000 and $3,826,000, respectively, at December 31, 1996.
The Company's total long-term debt, including current portion and amounts
due to related parties was $36,736,000 at March 31, 1997 compared to $21,252,000
at December 31, 1996. Such increase at March 31, 1997 was primarily attributable
to increased borrowings resulting from the acquisition of PhyServ on February 5,
1997, plus borrowings during the three months ended March 31, 1997 to pay
transaction fees associated with the PhyServ acquisition and other acquisitions
that were consummated in the second half of 1996.
The Company believes anticipated cash flow from operations, cash and cash
equivalents on hand and borrowing capacity from its Loan Agreement are adequate
for its anticipated operating needs. The Company is currently discussing
additional financing alternatives with its bank in order to support its future
acquisition program.
9
<PAGE>
Part II. Other Information
Item 2. Changes in Securities
In connection with its acquisition of PhyServ, between February 5,
1997 and February 28, 1997 the Company issued an aggregate of 563,934 shares of
its Common Stock to the former stockholders of PhyServ. The securities issued
were exempt from registration pursuant to Section 4(2) of the Securities Act of
1933, as amended.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
------ -----------
2.1 Stock Purchase Agreement dated February 3,
1997 among Physician Support Systems, Inc.,
PSI Acquisition Corp., Hamid Mirafzali,
Shadan Mirafzali, Nader J. Samii, as
independent trustee of the Neda Mirafzali
Family Trust dated November 4, 1996 and
Nadir J. Samii, as independent trustee of
the Leala Mirafzali Family Trust dated
November 4, 1996 (incorporated herein by
reference to the Company's Current Report
on Form 8-K dated February 18, 1997, as
amended by Amendment No. 1 thereto dated
April 14, 1997).
10.1 Amendment No. 1 to Loan Agreement dated May
9, 1997 between Physician Support Systems,
Inc. and its subsidiaries and CoreStates
Bank, N.A.
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed the following reports on Form 8-K during the quarter
ended March 31, 1997:
1. Current Report dated January 8, 1997, as amended by Amendment No. 1
thereto dated March 14, 1997, reporting the Company's acquisition on
December 31, 1996 of the capital stock outstanding of Revenue Production
Management, Inc. ("RPM"). Said report, as amended, includes (i) the
balance sheets of RPM as of December 31, 1995 and September 30, 1996 and
the related statements of income, stockholders' equity, and cash flows
for the year ended December 31, 1995 and for the nine months ended
September 30, 1995 and 1996 and (ii) the pro forma financial statements
of the Company, giving effect to the acquisition of RPM as of September
30, 1996 and for the year ended December 31, 1995 and the nine months
ended September 30, 1996.
2. Current Report dated February 18, 1997, as amended by Amendment No. 1
thereto dated April 14, 1997 reporting the Company's acquisition on
February 5, 1997 of the capital stock outstanding of PhyServ Solutions,
Inc.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on May 15, 1997.
PHYSICIAN SUPPORT SYSTEMS, INC.
By: /s/ DAVID S. GELLER
------------------------------
DAVID S. GELLER
SENIOR VICE PRESIDENT
CHIEF FINANCIAL OFFICER
(Duly Authorized Officer and
Principal Financial Officer)
11
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
2.1 Stock Purchase Agreement dated February
3, 1997 among Physician Support
Systems, Inc., PSI Acquisition Corp.,
Hamid Mirafzali, Shadan Mirafzali,
Nader J. Samii, as independent trustee
of the Neda Mirafzali Family Trust
dated November 4, 1996 and Nadir J.
Samii, as independent trustee of the
Leala Mirafzali Family Trust dated
November 4, 1996 (incorporated herein
by reference to the Company's Current
Report on Form 8-K dated February 18,
1997, as amended by Amendment No. 1
thereto dated April 14, 1997).
10.1 Amendment No. 1 to Loan Agreement dated
May 9, 1997 between Physician Support
Systems, Inc. and its subsidiaries and
CoreStates Bank, N.A.
27 Financial Data Schedule
12
<PAGE>
Exhibit 10.1
AMENDMENT NO. 1 dated May 9, 1997 between Physician Support Systems,
Inc. and its subsidiaries identified on the signature pages hereto and
Corestates Bank, N.A., as a lender and as Agent for the several lenders.
Introduction
------------
Physician Support Systems, Inc. and its subsidiaries identified on the
signature pages hereto (collectively, the "Borrowers") entered into a Loan
Agreement dated December 13, 1996 (the "Loan Agreement") with Corestates Bank,
N.A., as a lender and as Agent for the several lenders referred to therein
("Corestates"). Capitalized terms used and not otherwise defined herein shall
have the meaning set forth in the Loan Agreement.
The Borrowers and Corestates desire to amend the Loan Agreement as set
forth in this Amendment.
Now, therefore, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrowers and Corestates agree
as follows:
1. Amendment to Defined Terms.
--------------------------
(a) Subsection 1.2 of the Loan Agreement is hereby amended by
deleting the definition of the defined term set forth below and replacing it
with the definition set forth below opposite such defined term.
"Line of Credit Termination Date" shall mean January 1, 1999, unless
extended in writing by the Agent.
2. Amendment of Section 2.17. Section 2.17 of the Loan Agreement is
-------------------------
hereby amended by deleting such subsection in its entirety and replacing it with
the following:
"2.17 Limitations on Revolving Credit Advances. Except for the
----------------------------------------
repayment on the Closing Date of certain obligations owed to the Bank of
New York, Revolving Credit Advances may only be used to finance
acquisitions by the Borrowers or their wholly-owned Subsidiaries of
companies engaged in businesses with lines of business similar to the lines
of business in which Borrowers are currently engaged. Provided, however,
that Borrowers may borrow on a one-time basis, an amount not exceeding
$2,648,973.00 for the purpose of reducing the balance then outstanding on
the Line of Credit, subject to paragraph 2.1(a) of this Loan Agreement.
If, in connection with any such acquisition, (a) a Borrower requests a
Revolving Credit Advance, and (b) the sum of (i) the aggregate amount of
all Revolving Credit Advances outstanding at such time and (ii) such
requested
<PAGE>
Revolving Credit Advance exceeds $10,000,000, then such acquisition must be
approved by the Agent, which approval shall not be unreasonably withheld or
delayed."
3. Amendment to Sections 5.10 and 5.11. Sections 5.10 and 5.11 of
-----------------------------------
the Loan Agreement are hereby amended by deleting such subsections in their
entirety and replacing them with the following:
"5.10. Funded Debt to Cash Flow. PSS will maintain on a consolidated
------------------------
basis at each fiscal quarter end beginning March 31, 1997, a ratio of
Funded Debt to Net Cash flow of not greater than the following:
<TABLE>
<CAPTION>
Quarter Ending Maximum Ratio
-------------- -------------
<S> <C>
March 31, 1997 3.5 to 1.0
June 30, 1997 3.75 to 1.0
September 30, 1997 3.5 to 1.0
</TABLE>
Thereafter, PSS will maintain, on a consolidated basis at each fiscal
quarter end, a ratio of Funded Debt to Net Cash Flow of not greater than
the following ratios based on the aggregate outstanding Revolving Credit
Advances and Term Loans:
<TABLE>
<CAPTION>
Outstanding Revolving Credit
Advances and Term Loans Maximum Ratio
----------------------- -------------
<S> <C>
$10,000,000 or less 2.00 to 1.0
$10,000,001 to $20,000,000 2.50 to 1.0
$20,000,001 to $30,000,000 2.75 to 1.0"
</TABLE>
"5.11 Fixed Charge Coverage Ratio. PSS will maintain on a
---------------------------
consolidated basis at each fiscal quarter end beginning March 31, 1997, a
ratio of Net Cash Flow to Fixed Charges of not less than the following:
<TABLE>
<CAPTION>
Quarter Ending Minimum Ratio
-------------- -------------
<S> <C>
March 31, 1997 3.5 to 1.0
June 30, 1997 3.5 to 1.0
September 30, 1997 3.5 to 1.0
December 31, 1997 and 3.0 to 1.0"
each quarter end thereafter
</TABLE>
4. Effect on Loan Agreement. Except as amended by this Amendment,
------------------------
the Loan Agreement shall remain unchanged, and the Loan Agreement, as amended
2
<PAGE>
hereby, shall remain in full force and effect. The Borrowers hereby ratify and
confirm all of the terms of the Loan Agreement as amended hereto.
5. Miscellaneous. This Amendment may be signed in any number of
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counterparts with the same effect as if the signatures thereto and hereto were
upon the same instrument, but all of such counterparts taken together shall be
deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
PHYSICIAN SUPPORT SYSTEMS, INC. PSS PBS NORTHWEST, INC.
By /s/ David S. Geller By /s/ David S. Geller
------------------------- ------------------------
SPRING ANESTHESIA GROUP, INC. PSS ALM, INC.
By /s/ David S. Geller By /s/ David S. Geller
-------------------------- ------------------------
INDEPENDENT ANESTHESIA IPA OF SYNERGISTIC SYSTEMS, INC.
CALIFORNIA, INC.
By /s/ David S. Geller By /s/ David S. Geller
-------------------------- ------------------------
INDEPENDENT ANESTHESIA IPA OF EE&C FINANCIAL SERVICES,
ARIZONA, INC. INC.
By /s/ David S. Geller By /s/ David S. Geller
-------------------------- -------------------------
NORTH COAST HEALTH CARE PSS EE&C HEALTH SERVICES,
MANAGEMENT, INC. INC.
By /s/ David S. Geller By /s/ David S. Geller
-------------------------- --------------------------
NORTH COAST ACCOUNT SYSTEMS, INC. MED-DATA INTERFACE
SYSTEMS, INC.
By /s/ David S. Geller By /s/ David S. Geller
-------------------------- --------------------------
3
<PAGE>
MEDICAL MANAGEMENT SUPPORT, MEDICAL INTERCEPT
INC. SYSTEMS, INC.
By /s/ David S. Geller By /s/ David S. Geller
------------------------- --------------------------
DATA PROCESSING SYSTEMS, INC. PSS C-CARE, INC.
By /s/ David S. Geller By /s/ David S. Geller
------------------------- --------------------------
C-CARE, INC. H.O.P.E. ENTERPRISES GROUP,
INC.
By /s/ David S. Geller By /s/ David S. Geller
------------------------- --------------------------
PROFESSIONAL MEDICAL RECOVERY PHYSERV SOLUTIONS, INC.
SERVICE, INC.
By /s/ David S. Geller By /s/ David S. Geller
------------------------- --------------------------
REVENUE PRODUCTION MANAGEMENT, PSS REVENUE PRODUCTION
INC. MANAGEMENT, INC.
By /s/ David S. Geller By /s/ David S. Geller
-------------------------- --------------------------
CORESTATES BANK, N.A., as Agent CORESTATES BANK, N.A., as
Lender
By /s/ Gary R. Johnson By /s/ Gary R. Johnson
------------------------- -------------------------
4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,044,541
<SECURITIES> 0
<RECEIVABLES> 36,909,238
<ALLOWANCES> (2,473,720)
<INVENTORY> 0
<CURRENT-ASSETS> 38,199,719
<PP&E> 9,270,563
<DEPRECIATION> 0
<TOTAL-ASSETS> 111,097,633
<CURRENT-LIABILITIES> 20,626,635
<BONDS> 0
0
0
<COMMON> 9,720
<OTHER-SE> 49,282,596
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 25,399,324
<CGS> 0
<TOTAL-COSTS> 24,813,372
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 529,034
<INCOME-PRETAX> 56,918
<INCOME-TAX> 24,475
<INCOME-CONTINUING> 32,443
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,443
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0
</TABLE>
