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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):
March 21, 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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ITEM 5. OTHER EVENTS.
In connection with the pending mergers of wholly-owned subsidiaries of
PhyCor, Inc., a Tennessee corporation (the "Company"), with CareWise, Inc. and
First Physician Care, Inc., and the acquisition of certain multi-specialty
clinics, the Company plans to offer shares of the Company's Common Stock, no
par value per share. In order to comply with the disclosure requirements of the
Securities and Exchange Commission regarding the financial statements of
businesses acquired or to be acquired, the Company is filing this Current Report
containing pro forma financial statements.
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UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited Pro Forma Combined Balance Sheet as of September
30, 1997 and the related Pro Forma Combined Statements of Operations for the
year ended December 31, 1996 and the nine months ended September 30, 1997 give
effect to all acquisitions completed by PhyCor in 1996 and 1997 and the pending
acquisition by PhyCor of two clinics and the pending mergers with CareWise, Inc.
("CareWise") and First Physicians Care, Inc. ("FPC") as if such transactions had
been completed, with respect to the statements of operations, at the beginning
of each of the periods presented, and, with respect to the balance sheet, as of
September 30, 1997. The clinic acquisitions were or will be accounted for as
purchases. The pending mergers with CareWise and FPC will be accounted for as a
pooling-of-interests.
The unaudited Pro Forma Combined Financial Information does not purport to
present the financial position or results of operations of PhyCor had the
mergers or the acquisitions taken place on the dates specified, nor are they
necessarily indicative of the results of operations that may be achieved in the
future. The information presented does not include certain cost savings that
management believes may be realized following the mergers, currently estimated
to total approximately $4.5 million annually. These savings are expected to be
realized primarily through the elimination of duplicative corporate overhead and
other expected synergies. There can be no assurance as to the amount of cost
savings, if any, that may be realized as a result of the mergers.
The unaudited Pro Forma Combined Financial Information should be read in
conjunction with the separate historical financial statements of PhyCor,
CareWise and FPC and notes thereto contained, or incorporated by reference, in
the Registration Statement on Form S-4 (File No. 333-45017) filed with the
Securities and Exchange Commission (the "Commission") in connection with the
CareWise merger and the Registration Statement on Form S-4 (File No. 333-45209)
filed with the Commission in connection with the FPC merger.
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PHYCOR, INC. AND SUBSIDIARIES
PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
OTHER COMPLETED AND
PENDING TRANSACTIONS
-------------------------
ASSETS
ACQUIRED EFFECTS OF
AND ACQUISITION PRO FORMA
PHYCOR LIABILITIES AND RELATED PRO FORMA CAREWISE COMBINED
HISTORICAL ASSUMED FINANCINGS SUBTOTALS HISTORICAL TOTALS
---------- ----------- ----------- ---------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents......... $ 37,534 $ 3,993 $ -- $ 41,527 $ 6,478 $ 48,005
Accounts receivable, net.......... 373,315 33,049 -- 406,364 1,223 407,587
Other current assets.............. 68,012 4,785 -- 72,797 1,271 74,068
---------- ------- ------- ---------- ------- ----------
Total current assets....... 478,861 41,827 -- 520,688 8,972 529,660
---------- ------- ------- ---------- ------- ----------
Property and equipment, net......... 217,992 19,345 -- 237,337 2,189 239,526
Intangible assets................... 772,858 14,651 72,528 860,037 -- 860,037
Other assets........................ 32,299 2,187 -- 34,486 56 34,542
---------- ------- ------- ---------- ------- ----------
Total assets............... $1,502,010 $78,010 $72,528 $1,652,548 $11,217 $1,663,765
========== ======= ======= ========== ======= ==========
Current liabilities:
Current installments of long-term
debt............................ $ 4,630 $ 3,125 $ -- $ 7,755 $ 562 $ 8,317
Accounts payable.................. 34,084 7,929 -- 42,013 383 42,396
Other current liabilities......... 204,986 13,009 10,000 227,995 4,280 232,275
---------- ------- ------- ---------- ------- ----------
Total current
liabilities.............. 243,700 24,063 10,000 277,763 5,225 282,988
---------- ------- ------- ---------- ------- ----------
Long-term debt, excluding current
installments...................... 141,122 21,297 36,891 199,310 -- 199,310
Other long-term liabilities......... 102,444 1,833 35,619 139,896 729 140,625
Convertible subordinated notes
payable to physician groups....... 70,481 -- 1,749 72,230 -- 72,230
Convertible subordinated
debentures........................ 200,000 -- -- 200,000 -- 200,000
---------- ------- ------- ---------- ------- ----------
Total liabilities.......... 757,747 47,193 84,259 889,199 5,954 895,153
Shareholders' equity................ 744,263 18,961 125 763,349 5,263 768,612
---------- ------- ------- ---------- ------- ----------
Total liabilities and
shareholders' equity..... $1,502,010 $66,154 $84,384 $1,652,548 $11,217 $1,663,765
========== ======= ======= ========== ======= ==========
</TABLE>
See accompanying notes to pro forma financial information.
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PHYCOR, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1997 AND PRO FORMA PRO FORMA
PHYCOR PENDING COMBINED CAREWISE COMBINED
HISTORICAL TRANSACTIONS SUBTOTALS HISTORICAL TOTALS
---------- ------------- ---------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net revenue............................... $ 802,297 $210,368 $1,012,665 $10,715 $1,023,380
Direct clinic expenses.................... 576,480 171,022 747,502 -- 747,502
Non-clinic goods and services............. -- -- -- 7,481 7,481
General corporate expenses................ 19,768 3,439 23,207 3,722 26,929
Rents and lease expense................... 71,376 14,098 85,474 -- 85,474
Depreciation and amortization............. 44,618 9,626 54,244 -- 54,244
---------- -------- ---------- ------- ----------
Net operating expenses.................. 712,242 198,185 910,427 11,203 921,630
---------- -------- ---------- ------- ----------
Earnings from operations................ 90,055 12,183 102,238 (488) 101,750
Interest expense, net..................... 14,334 4,306 18,640 (81) 18,559
Minority interest in earnings of
consolidated partnerships............... 8,739 -- 8,739 -- 8,739
---------- -------- ---------- ------- ----------
Earnings (loss) before income taxes..... 66,982 7,877 74,859 (407) 74,452
Income tax expense........................ 25,929 3,049 28,978 -- 28,978
---------- -------- ---------- ------- ----------
Net earnings (loss)..................... $ 41,053 $ 4,828 $ 45,881 $ (407) 45,474
========== ======== ========== ======= ==========
Earnings (loss) per common share.......... $ 0.61 $ 0.65 $ (0.15) $ 0.62
========== ========== ======= ==========
Weighted average number of shares and
share equivalents outstanding........... 66,853 70,125 2,668 72,793
========== ========== ======= ==========
</TABLE>
See accompanying notes to pro forma financial information.
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PHYCOR, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1996 AND
1997 AND PRO FORMA PRO FORMA
PHYCOR PENDING COMBINED CAREWISE COMBINED
HISTORICAL TRANSACTIONS SUBTOTALS HISTORICAL TOTALS
---------- ------------ ---------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net revenue.................................. $ 766,325 $436,100 $1,202,425 $ 9,175 $1,211,600
Direct clinic expenses....................... 557,719 336,377 894,096 -- 894,096
Non-clinic goods and services................ -- -- -- 7,265 7,265
General corporate expenses................... 21,115 5,095 26,210 5,387 31,597
Rents and lease expense...................... 65,577 39,325 104,902 -- 104,902
Depreciation and amortization................ 40,182 20,914 61,096 -- 61,096
---------- -------- ---------- ------- ----------
Net operating expenses..................... 684,593 401,711 1,086,304 12,652 1,098,956
---------- -------- ---------- ------- ----------
Earnings (loss) from operations............ 81,732 34,389 116,121 (3,477) 112,644
Interest expense, net........................ 12,114 16,104 28,218 417 28,635
Minority interest in earnings of consolidated
partnerships............................... 10,463 -- 10,463 -- 10,463
---------- -------- ---------- ------- ----------
Earnings (loss) before income taxes........ 59,155 18,285 77,440 (3,894) 73,546
Income tax expense........................... 22,775 7,039 29,814 -- 29,814
---------- -------- ---------- ------- ----------
Net earnings (loss)........................ $ 36,380 $ 11,246 $ 47,626 $(3,894) $ 43,732
========== ======== ========== ======= ==========
Earnings (loss) per common share............. $ 0.60 $ .75 $ (1.50) $ 0.66
========== ========== ======= ==========
Weighted average number of shares and share
equivalents outstanding.................... 61,096 63,520 2,590 66,110
========== ========== ======= ==========
</TABLE>
See accompanying notes to pro forma financial information.
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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The unaudited Pro Forma Combined Financial Information does not purport to
present the financial position or results of operations of PhyCor had the
mergers or the acquisitions taken place on the dates specified, nor are they
necessarily indicative of the results of operations that may be achieved in the
future. The unaudited Pro Forma Combined Financial Information has been prepared
under the assumptions set forth in the following notes.
During 1996, PhyCor acquired certain assets of 13 multi-specialty clinics,
an IPA management company and certain assets of an associated IPA. During the
nine months ended September 30, 1997, PhyCor affiliated with seven
multi-specialty clinics and completed its merger with Straub Clinic & Hospital,
Incorporated. Since September 30, 1997, PhyCor has acquired certain assets of
four multi-specialty clinics and has reached agreements in principle to merge
with CareWise and FPC and to acquire two additional clinics.
PRO FORMA COMBINED BALANCE SHEET
The adjustments reflected in the Pro Forma Combined Balance Sheet are to
reflect the value of assets acquired and liabilities assumed in connection with
PhyCor transactions completed after September 30, 1997, and other pending
acquisitions by PhyCor. The adjustments reflect the effects of related
borrowings, the issuance of PhyCor Common Stock and subordinated convertible
notes, and the recording of the intangible assets acquired.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
Certain amounts in the historical columns have been combined and
reclassified in order to conform to the PhyCor presentation. Nonrecurring
expenses expected to be incurred in connection with the pending mergers are not
included in the Pro Forma Combined Statements of Operations. The amount of such
expenses cannot yet be determined but is expected to be typical in relation to
the size of the pending mergers.
Interest on acquisition-related borrowings was calculated at an annual rate
of 6.5%. Intangible assets representing PhyCor's cost of obtaining clinic
service agreements are amortized over a period of 40 years. Estimated federal
and state income taxes are recorded at a combined rate of 38.5% in 1996 and
38.8% in 1997.
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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 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: March 21, 1998
