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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
April 29, 1998 (April 27, 1998)
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PHYCOR, INC.
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(Exact name of registrant as specified in its charter)
Tennessee 0-19786 62-13344801
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(State or Other (Commission File (I.R.S. Employer
Jurisdiction of Number) Identification
Incorporation) Number)
30 Burton Hills Boulevard
Suite 400
Nashville, Tennessee 37015
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(Address of principal executive offices) (Zip Code)
(615) 665-9066
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(Registrant's telephone number, including area code)
Not applicable
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(Former name or former address, if changed since last report)
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Page 1 of 4 pages
Exhibit Index located on Page 4
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ITEM 5. OTHER EVENTS.
On April 27, 1998, PhyCor, Inc., a Tennessee corporation (the
"Company"), announced that effective April 1, 1998 the Company was adopting a
maximum of 25 years as the useful life for amortization of its intangible
assets, which are primarily comprised of costs of service agreements. If these
shorter amortization periods had been applied as of January 1, 1997, the
Company's diluted earnings per share would have been reduced by $0.10 for the
full year of 1997.
The press release announcing the change in amortization of
intangible assets is attached hereto as Exhibit 99 and is incorporated herein by
reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
(a) Financial Statements of Business Acquired.
None required
(b) Pro Forma Financial Information.
None required
(c) Exhibits.
99 Form of press release issued by the Company
announcing the change in amortization of
intangible assets.
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PHYCOR, INC.
By: /s/ John K. Crawford
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John K. Crawford
Executive Vice President
and Chief Financial Officer
Date: April 29, 1998
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
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<S> <C>
99 -- Form of press release issued by the Company announcing the
change in amortization of intangible assets.
</TABLE>
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MONDAY APRIL 27, 10:11 AM EASTERN TIME
COMPANY PRESS RELEASE
PHYCOR ANNOUNCES CHANGE IN AMORTIZATION OF INTANGIBLE ASSETS
NASHVILLE, Tenn.--(BUSINESS WIRE)--April 27, 1998--PhyCor, Inc. (Nasdaq/NM:PHYC
- - news) today announced that it is changing, effective April 1, 1998, its
policies regarding amortization of its intangible assets in order to recognize
the impact of various events and trends relating to the physician practice
management segment of the health care industry.
The Company is adopting a maximum of 25 years as the useful life for
amortization of its intangible assets, which are primarily comprised of costs
of service agreements. These costs have historically been charged to expense
through amortization using the straight line method over the periods during
which the agreements are effective, generally from 30 to 40 years.
Joseph C. Hutts, president and chief executive officer of PhyCor, said, "This
action does not reflect in any way a change in our estimate of the value and
expected duration of our relationships with physicians in groups and IPAs. In
fact, this is an accounting event that will result in a more conservative and
accelerated recognition of costs associated with forming these relationships."
John K. Crawford, executive vice president and chief financial officer of
PhyCor, said, "This action is being taken at this time in order to address
issues and concerns that have been raised in recent months within our industry
and relates more to overall industry factors as opposed to issues that are
unique to PhyCor. We have been contemplating a potential change to a shorter
term of amortization and, until last Friday, had expected to prospectively
effect a change relating to assets which we expect to acquire in 1998 and
subsequent years. However, taking into account all the current facts and
circumstances, we are obliged to apply the shorter term retrospectively to
all of the Company's intangible assets, including those acquired in prior years.
"This change represents a change in accounting estimate and, accordingly, does
not require the Company to restate reported results for prior years. We expect
this estimate change to increase amortization expense relating to existing
intangible assets at March 31, 1998, by an estimated $3.3 million in each of
the three remaining quarters of 1998. Assuming a tax rate of 37% and projected
diluted shares outstanding, this would result in a reduction in diluted earnings
per share of approximately $0.08 in 1998. It is important to point out that
this represents a reduction in 'accounting earnings' and that this change does
not impact PhyCor's cash flows or negatively impact the Company's operations."
"If we had applied these shorter amortization periods as of January 1, 1997,
amortization expense would
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have increased by approximately $2.8 million in the first quarter of 1997 and
$11.2 million for the full year. Applying the historical tax rate of the
Company, diluted earnings per share would have been reduced by $0.03 in the
first quarter of 1997 and $0.10 for the full year of 1997. On the same basis,
for the first quarter of 1998, amortization expense would have increased by $3.3
million resulting in a decrease in recently announced diluted earnings per share
of $0.03 before the impact of nonrecurring charges."
Mr. Hutts, concluded, "Although we regret any reduction in our earnings, even a
non-cash event, we are very well positioned to accept this change and continue
our rapid growth. We have continued to evolve our affiliation model, mainly
focusing on improving our long-term relationships with physicians and
continuing to align our mutual incentives. We expect these model innovations to
yield numerous benefits to the Company including, potentially, a reduction in
intangible assets associated with an affiliation with physicians. We are
exploring alternative approaches to provide for the capital needs of physician
organizations, and, if we are successful, this change in amortization periods
will have a diminished impact on the Company in the future."
In December 1997, PhyCor announced that it had signed separate agreements to
purchase Atlanta-based First Physician Care, Inc., a provider of practice
management services to approximately 200 physicians, and Seattle-based
CareWise, Inc., a nationally recognized leader in the consumer decision-support
industry. Both transactions, to be accounted for as poolings-of-interest, are
expected to be completed in the second quarter of 1998.
PhyCor, Inc., headquartered in Nashville, Tennessee, is a physician practice
management company that operates multi-specialty clinics and manages independent
practice associations (IPAs). The Company operates 55 clinics with
approximately 3,800 physicians in 28 states and manages IPAs with over 21,500
physicians in 34 markets.
This press release contains forward-looking statements made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. As
such, they involve risk and uncertainty that actual results may differ
materially from those projected in these forward-looking statements. A
discussion of important factors and assumptions regarding these statements and
risks involved is contained in PhyCor's recent fillings with the Securities and
Exchange Commission.
For additional information about the Company, visit PhyCor's web site:
http://www.phycor.com
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Contact:
PhyCor Inc., Nashville
Joseph C. Hutts or John K. Crawford, 615/665-9066
http://www.phycor.com
