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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):
September 23, 1998 (September 22, 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 September 22, 1998, PhyCor, Inc., a Tennessee corporation
(the "Company"), issued a press release announcing a reduction in the Company's
targeted earnings per share for the third and fourth quarters of 1998, an
increase in the previously announced asset impairment charge in the third
quarter of 1998, the adoption of a common stock repurchase program, a change
from the pooling-of-interests method to the purchase method of accounting of two
acquisitions resulting in increased amortization expense and a reduction in
expected earnings growth in 1999. A copy of the press release is attached hereto
as Exhibit 99 and is incorporated 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 on
September 22, 1998.
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/ Joseph C. Hutts
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Joseph C. Hutts
Chairman, Chief Executive Officer
and President
Date: September 23, 1998
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
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99 Form of press release issued by the Company on
September 22, 1998.
4
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EXHIBIT 99
PHYCOR
THE PHYSICIANS' CORPORATION NEWS RELEASE
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Contact: Joseph C. Hutts
President and Chief Executive Officer
or
John K. Crawford
Chief Financial Officer
(615) 665-9066
PHYCOR REVISES EARNINGS EXPECTATIONS
Company Announces Stock Repurchase Program
Nashville, Tennessee (September 22, 1998) - PhyCor, Inc. (Nasdaq/NM:PHYC) today
announced that earnings for the third and fourth quarters of 1998 are expected
to be below analysts' expectations. Earnings per share for the quarter ended
September 30, 1998, before asset impairment charges, and for the fourth quarter
of 1998 are expected to be approximately $0.15 and $0.16, respectively.
As previously announced, PhyCor expects to record a pre-tax asset
impairment charge in the third quarter to address problems at certain of its
"group formation" physician clinic operations. The scope of this charge has been
expanded to incorporate two additional "group formation" markets and is now
expected to be approximately $92 million.
PhyCor has adopted a common stock repurchase program whereby the
Company may repurchase up to $50 million of its common stock, from time to time,
in the open market and in privately negotiated transactions on terms and
conditions acceptable to the Company.
During the third quarter, PhyCor completed its acquisitions of
CareWise, Inc. and First Physician Care, Inc. (FPC) which were expected to be
accounted for as poolings-of-interests. In connection with the common stock
repurchase program, the Company has now determined to account for each of these
using the purchase method of accounting. As a result, PhyCor's third quarter
results will include the results of operations of CareWise from July 1, 1998,
and FPC from July 24, 1998. Further, goodwill of approximately $87 million will
be recorded in connection with these two acquisitions increasing amortization
expense by approximately $340,000 per month.
Joseph C. Hutts, president and chief executive officer of PhyCor, said,
"While our existing operations as a whole are performing generally in line with
our expectations, our recent acquisitions of PrimeCare International, Inc.
(PCI), Morgan Health Group (MHG) and FPC completed in the second and third
quarters are not contributing earnings at expected levels. Lower earnings
contribution
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PHYCOR, Inc. - 80 Burton Hills Blvd. - Suite 400 - Nashville, Tenn. 37215 -
615-665-9066
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PHYC Adjustments Earnings Estimates
Page 2
September 22, 1998
from PCI during the last half of 1998 results from lower revenue than originally
expected because of delays in receipt of its limited Knox-Keene license and
lower enrollment and payor contracting issues. We expect the performance of PCI
to gradually improve over current levels during 1999.
"The earnings contributions of both FPC and MHG are significantly below
target because of lower than expected earnings from MHG's managed care contracts
and a combination of lower revenues and higher costs in FPC's core business. The
combined earnings shortfall plus increased goodwill amortization result in a
decrease in the third and fourth quarter earnings per share of approximately
$0.04 to $0.05 in each quarter. At the current time, it is difficult to
determine whether FPC or MHG will be able to reach targeted earnings levels in
the near future.
"Since late in 1997, we have been intensely focused on addressing
problems with our business operations in our "group formation" markets. We
announced our intentions to resolve these difficult situations in four markets
on July 23, 1998. We have increased our asset impairment charge to provide for
the two remaining "group formation" markets which currently are demonstrating
characteristics or trends which require restructuring efforts. These mistakes
have been very expensive and have consumed significant resources; however, we
believe this increase in our asset impairment charge will bring to resolution
the most difficult problem our company has faced.
"It has been a very difficult year for physician practice management
companies as our industry segment continues to evolve. The fundamentals of
PhyCor are strong, and we have a wonderful family of clinics and IPAs. We will
grow more slowly during this uncertain time in our industry and are currently
targeting approximately 15% earnings growth in 1999, based upon our revised
second half of 1998 expectations with no targeted contribution resulting from
additional clinic affiliations in 1999. We believe that at current valuation
levels, our share repurchase may be our best method of enhancing shareholder
value."
PhyCor, Inc., headquartered in Nashville, Tennessee, is a physician
practice management company that operates multi-specialty clinics, manages
independent practice associations, and provides health care decision-support
services to consumers. Including pending transactions, the Company operates 57
clinics with approximately 3,890 physicians in 28 states, manages IPAs with
approximately 26,000 physicians in 36 markets, and, through CareWise, Inc.,
provides healthcare decision support services to over 2 million consumers.
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 filings 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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