<PAGE>
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
----------------------------
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1998
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 0-26190
AMERICAN ONCOLOGY RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Delaware 84-1213501
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
16825 Northchase Drive, Suite 1300, Houston, Texas 77060
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (281) 873-2674
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock ($.01 par value)
(Title of class)
Series A Preferred Stock Purchase Rights
(Title of class)
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. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulations S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
-----
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 12, 1999 was $239,338,034 (based upon the closing sales
price of the Common Stock on The Nasdaq Stock Market on March 12, 1999 of $8.63
per share). For purposes of this calculation, shares held by non-affiliates
exclude only those shares beneficially owned by officers, directors and
stockholders beneficially owning 10% or more of the outstanding Common Stock.
There were 33,449,681 shares of the Registrant's Common Stock outstanding on
March 12, 1999. In addition, as of March 12, 1999, the Registrant had agreed to
deliver 15,807,578 shares of its Common Stock on certain future dates for no
additional consideration.
DOCUMENTS INCORPORATED BY REFERENCE
None
================================================================================
<PAGE>
The registrant hereby amends the following items of its Annual Report on
Form 10-K for the year ended December 31, 1998, as set forth on the pages
attached hereto:
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS OF THE REGISTRANT
The following sets forth certain information concerning each of the
directors of the Company.
<TABLE>
<CAPTION>
Name Age Director Since
----- --- --------------
<S> <C> <C>
R. Dale Ross.................................. 52 December 1992
Russell L. Carson............................. 55 December 1992
James E. Dalton............................... 56 May 1998
Lloyd K. Everson, M.D. ....................... 56 November 1993
Kyle M. Fink, M.D. ........................... 56 December 1992
Stanley A. Marks, M.D. ....................... 51 May 1998
Richard B. Mayor.............................. 65 February 1993
Magaral S. Murali, M.D. ...................... 55 April 1994
Robert A. Ortenzio............................ 42 December 1992
Edward E. Rogoff, M.D. ....................... 56 July 1995
</TABLE>
R. Dale Ross has been a Chairman of the Board of Directors and Chief
Executive Officer of AOR since December 1992. From April 1990 until joining
AOR, Mr. Ross was self-employed. From December 1982 until April 1990, Mr. Ross
was employed by HMSS, Inc., a home infusion therapy company. Mr. Ross founded
HMSS, Inc. and served as its President and Chief Executive Officer and as a
director.
Russell L. Carson has been a director of AOR since December 1992. Since
1978, Mr. Carson has been a general partner of Welsh, Carson, Anderson &
Stowe, an investment partnership. Mr. Carson is a director of Quorum Health
Group, Inc.
James E. Dalton has served on AOR's Board of Directors since May 1998. Mr.
Dalton has served as President, Chief Executive Officer and a director of Quorum
Health Group, Inc. since 1990. Prior to joining Quorum, Mr. Dalton served as
regional vice president with HealthTrust, Inc., as division vice president of
Hospital Corporation of American ("HCA") and as regional vice president with HCA
Management Company. Prior to joining HCA, he held management positions with
American MediCorp, Inc., Humana, Inc. and hospitals in Virginia and West
Virginia. He serves on the board of directors of the Nashville Branch of the
Federal Reserve Bank of Atlanta, AmSouth Bank, Housecall Medical Resources, Inc.
and the Nashville Health Care Council. Mr. Dalton is a Fellow of the American
College of Healthcare Executives and is on the board of directors and past
chairman of the Federation of American Health Systems.
Lloyd K. Everson, M.D. has served on AOR's Board of Directors since November
1993. Dr. Everson received his medical degree from Harvard Medical School and
his oncology training at Memorial Sloan Kettering National Cancer Institute. He
is board certified in medical oncology. Prior to joining the Company, Dr.
Everson served as the Medical Director for the Indiana Regional Cancer Center
and was President of LKE Consulting Services. Dr. Everson has published
widely in the field of oncology and is a member of numerous professional
associations, including the American Society of Clinical Oncology, Association
of Community Cancer Centers and the American College of Physicians. He also has
served as President of the Association of Community Cancer Centers and as
Associate Chairman for Community Programs for the Eastern Cooperative Oncology
Group.
Kyle M. Fink, M.D. has served on AOR's Board of Directors since December
1992. Dr. Fink obtained his medical degree from Indiana University and his
oncology training at Memorial Sloan Kettering National Cancer Institute. He is
board certified in medical oncology. Since 1975, Dr. Fink has been a practicing
physician and member of Hematology Oncology Associates, an oncology group in
Denver, Colorado that is affiliated with the Company. Dr. Fink has served on
numerous board and professional societies, and has been a member of the Board
of Directors of Presbyterian St. Luke's Medical Center in Denver, Colorado
since 1991.
Stanley A. Marks, M.D. has been a director of AOR since May 1998. Dr. Marks
obtained his medical degree from the University of Pittsburgh School of
Medicine and additional training at Peter Bent Brigham Hospital, Harvard
Medical School and Sidney Farber Cancer Center. Dr. Marks is a member of
numerous professional societies, including the American Society of Hematology
and the American Society of Clinical Oncology. Dr. Marks is a practicing
physician in Pittsburgh, Pennsylvania with Oncology-Hematology Associates, a
<PAGE>
physician group affiliated with AOR since April 1995.
Richard B. Mayor has been a director of AOR since February 1993. Mr. Mayor
was a partner in the Houston law firm of Mayor, Day, Caldwell & Keeton, L.L.P.
from its formation in February 1982 until December 1998. Since January 1999 he
has been Of Counsel to such firm. Mayor, Day, Caldwell & Keeton, L.L.P. serves
as outside legal counsel to AOR.
Magaral S. Murali, M.D. has served on AOR's Board of Directors since April
1994. Dr. Murali obtained his medical degree from Madras Medical College,
Madras, India, and his hematology/oncology training at Long Island
Jewish/Hillside Medical Center and Catholic Medical Center. He is board
certified in hematology and medical oncology. Since 1978, Dr. Murali has been a
practicing physician affiliated with Oncology and Hematology Associates, a
physician group affiliated with the Company in Indianapolis, Indiana.
Robert A. Ortenzio has been a director of AOR since December 1992. Mr.
Ortenzio has been President and Chief Operating Officer of Select Medical
Corporation since February 1997. Prior to that time, Mr. Ortenzio was a co-
founder and president of Continental Medical Systems, Inc., a provider of
comprehensive medical rehabilitation programs and services, and a director of
Horizon/CMS Healthcare Corporation, and served in various capacities at
Continental Medical Systems, Inc. since February 1986. Mr. Ortenzio is
currently a director of Concetra Managed Care, Inc. and Centennial Healthcare
Corp.
Edward E. Rogoff, M.D. has been a director of AOR since July 1995. Dr.
Rogoff obtained his medical degree from the State University of New York,
Downstate Medical School, and his training in radiation oncology from Memorial
Sloan Kettering Cancer Center. He is board certified in radiation oncology.
Since 1978, Dr. Rogoff has been affiliated with Southwest Radiation Oncology,
Ltd., an oncology group in Tucson, Arizona managed by AOR since January 1995.
Dr. Rogoff is a member of numerous professional societies including American
Society of Therapeutic Radiology and Oncology and the American Society of
Clinical Oncology.
Pursuant to General Instruction G (3), certain information concerning the
executive officers of the Company is included in Part I of this Form 10-K under
the caption "Executive Officers."
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the federal securities laws, the Company's directors, executive
officers and any person holding more than ten percent of the outstanding common
stock are required to report their beneficial ownership of AOR common stock to
the Company and the SEC. Specific due dates for these reports have been
established by regulation, and the Company is required to report any failure to
file by these dates during 1998. The Company believes that all directors,
officers and ten percent holders are current in their filings with respect to
1998. In making these statements, the Company has relied on the written
representations of its directors, officers and ten percent holders and copies of
reports that they have filed with the SEC.
ITEM 11. EXECUTIVE COMPENSATION
The following tables set forth (i) the aggregate amount of remuneration paid
by the Company for the three fiscal years ended December 31, 1998 to the Chief
Executive Officer and the four most highly compensated executive officers other
than the Chief Executive Officer, (ii) the number of shares of the Company's
common stock that are subject to options granted to such individuals during the
last fiscal year and the hypothetical value thereof assuming specified annual
rates of AOR common stock price appreciation, and (iii) the amount realized upon
the exercise of stock options during the last fiscal year and the value at the
end of the last fiscal year of all stock options held by such individuals.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Long Term
Compensation Compensation
---------------- ------------
Securities
Fiscal Underlying
Year Salary Bonus Options
Name and Principal Position ------ ------ ------- ------------
- ---------------------------
<S> <C> <C> <C> <C>
R. Dale Ross.............................. 1998 $438,900 $ 0 100,000
Chairman of the Board, Chief Executive
Officer 1997 $399,000 $ 0 200,000
and Director 1996 $350,000 $ 0 0
Lloyd K. Everson, M.D..................... 1998 $368,362 $ 0 75,000
President and Director 1997 $334,875 $ 0 175,000
1996 $293,750 $ 0 0
L. Fred Pounds............................ 1998 $302,485 $ 0 50,000
Vice President of Finance, Treasurer and
Chief 1997 $274,986 $ 0 100,000
Financial Officer 1996 $239,119 $ 0 0
David S. Chernow.......................... 1998 $220,000 $ 0 50,000
Chief Development Officer 1997 $200,000 $ 0 100,000
1996 $135,000 $42,800 60,000
R. Allen Pittman.......................... 1998 $166,676 $40,000 50,000
Vice President of Corporate Services 1997 $151,524 $ 0 5,000
1996 $142,947 $43,565 44,000
</TABLE>
<PAGE>
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term
------------------------------------------- ---------------------------
Number of % of Total Exercise
Securities Options Price
Underlying Granted to Per
Options Employees in Share Expiration
Name Granted Fiscal Year (1) Date 5% 10%
- ------------------------ ---------- ------------ -------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
R. Dale Ross............ 100,000 11.0% $14.61 5/14/08 $ 918,820 $ 2,328,460
Lloyd K. Everson, M.D... 75,000 9.3% $14.61 5/14/08 $ 689,115 $ 1,746,345
L. Fred Pounds.......... 50,000 5.5% $14.61 5/14/08 $ 459,410 $ 1,164,230
David S. Chernow........ 50,000 5.5% $14.61 5/14/08 $ 459,410 $ 1,164,230
R. Allen Pittman........ 50,000 5.5% $14.61 5/14/08 $ 459,410 $ 1,164,230
</TABLE>
- --------
(1) The exercise price per share for each option granted in 1998 is the market
value of the Company's common stock as of the date such option was granted,
as determined in accordance with the applicable stock option plan.
1998 OPTION EXERCISES AND DECEMBER 31, 1998 OPTION VALUE TABLE
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options at Fiscal Year In-the-Money Options at
Acquired End Fiscal Year End(1)
on Value ------------------------- -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
R. Dale Ross............ 400,000 $5,974,953 1,858,428 260,000 $19,766,423 $ 0
Lloyd K. Everson, M.D... 200,000 $2,475,000 332,864 215,000 $ 2,927,120 $ 0
L. Fred Pounds.......... 115,000 $1,381,575 257,973 233,429 $ 2,640,832 $1,107,528
David S. Chernow........ 35,000 $ 319,212 24,242 174,000 $ 118,269 $ 611,510
R. Allen Pittman........ 20,000 $ 283,300 30,600 88,400 $ 230,849 $ 251,904
</TABLE>
- --------
(1) Based upon a closing price of the Company's common stock on December 31,
1998, as reported by The Nasdaq Stock Market, of $14.56 per share.
401(k) Plan
Effective January 1, 1994, the Company adopted a 401(k) plan covering
substantially all employees who have completed at least 1,000 hours of service.
The Company's 401(k) Plan is administered by the Company and permits covered
employees to contribute up to 15% of their annual compensation up to the maximum
legally allowable contribution per year, as adjusted for inflation, through
salary reduction on a pre-tax basis in accordance with Section 401(k) of the
Code. Company contributions to the Company's 401(k) Plan are permitted, but are
not required. No contributions have been made by the Company to date.
Indemnification of Officers and Directors
The Company's certificate of incorporation provides that no director of the
Company shall be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company
or its stockholders, (ii) for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, (iii) in respect
of certain unlawful dividend payments or stock redemptions or repurchases as
provided in Section 174 of the Delaware General Corporation Law or (iv) for any
transaction from which the director derived an improper personal benefit. The
effect of these provisions is to eliminate the rights of the Company and its
stockholders (through stockholders' derivative suits on behalf of the Company)
to recover monetary damages against a director for breach of fiduciary duty as
a director (including breaches resulting from grossly negligent behavior),
except in the situations described above. The SEC has taken the position that
the provision will have no effect on claims arising under federal securities
laws.
The Company's bylaws provide that the Company will indemnify its directors
and officers to the fullest extent permissible under Delaware law. These
indemnification provisions require the Company to indemnify such persons against
certain liabilities and expenses to which they may become subject by reason of
their service as a director or officer of the Company or any of its affiliated
enterprises. The provisions also set forth certain procedures, including the
advancement of expenses, that apply in the event of a claim for indemnification.
Compensation of Directors
For 1998, directors who were not employed by the Company received a fee of
$3,500 per fiscal quarter plus an additional $1,500 per meeting attended. In
addition, each director who was not employed by the Company received a grant of
options to purchase 3,000 shares of AOR common stock, except for James E. Dalton
and Stanley M. Marks, M.D., who were elected as directors of the Company for the
first time during 1998, each of whom was granted options to purchase 5,000
shares of AOR common stock. All such options were granted pursuant to the 1993
Non-Employee Director Stock Option Plan. In addition, each Company director
received an additional grant of options to purchase 1,000 shares of AOR common
stock for each committee to which the director was appointed. The Company also
reimburses directors for their travel and out-of-pocket expenses incurred in
attending board or committee meetings.
Compensation Committee Interlocks and Insider Participation
During 1998, the compensation committee of the Board of Directors was
comprised of Russell L. Carson (Chairman), Robert A. Ortenzio and, starting in
May 1998, James E. Dalton, none of whom has ever been an employee of the
Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of the Company's common stock as of April 28, 1999 (or such other date
indicated below) by (i) each owner of more than 5% of such common stock, (ii)
<PAGE>
each director of the Company, (iii) certain executive officers of the Company,
including the Chief Executive Officer and the four most highly compensated
officers other than the Chief Executive Officer who were serving as officers at
December 31, 1998, and (iv) all executive officers and directors as a group.
Except as otherwise indicated below, each of the entities and persons named in
the table has sole voting and investment power with respect to all shares of
common stock beneficially owned. For purposes of this table, a person or group
of persons is deemed to have "beneficial ownership" of any shares as of a given
date which such person has the right to acquire within 60 days after such date.
For purposes of computing the percentage of outstanding shares held by each
person or group of persons named below on a given date, any security which such
person or persons has the right to acquire within 60 days after such date is
deemed to be outstanding for the purpose of computing the percentage ownership
of such person or persons, but is not deemed to be outstanding for the purpose
of computing the percentage ownership of any other person. Unless otherwise
indicated, the address for each of the individuals or entities named in the
table below is the principal executive offices of the Company.
<TABLE>
<CAPTION>
Number of
Shares Number of AOR
(including options
options currently
included Percentage exercisable or
in column of Beneficial exercisable
Name 3) Ownership within 60 days
---- ---------- --------------------- --------------
<S> <C> <C> <C>
R. Dale Ross............... 1,878,428 5.0% 1,878,428
Lloyd K. Everson, M.D...... 392,166 1.1% 347,864
David S. Chernow........... 60,373 * 58,242
R. Allen Pittman........... 45,600 * 45,600
L. Fred Pounds............. 362,779 1.0 333,492
Russell L. Carson.......... 1,861,157(1) 5.3 7,000
James E. Dalton, Jr........ 7,000 * 7,000
Kyle M. Fink, M.D.......... 509,258 1.4% 7,000
Stanley M. Marks, M.D...... 116,796(2) * 5,000
Richard B. Mayor........... 102,454 * 32,000
Magaral S. Murali, M.D..... 459,574 1.3% 7,000
Robert A. Ortenzio......... 53,007(3) * 7,000
Edward E. Rogoff, M.D...... 133,735(4) * 10,000
Welsh, Carson, Anderson &
Stowe..................... 1,452,154(5) 4.1% 0
T. Rowe Price Associates,
Inc....................... 2,526,071(6) 7.1% 0
100 E. Pratt Street
Baltimore, Maryland 21202
Brown Investment Advisory &
Trust Company............. 2,255,942(7) 6.4% 0
19 South Street
Baltimore, Maryland 21202
Putnam Investments, Inc.... 2,192,900(8) 6.2% 0
One Post Office Square
Boston, Massachusetts
02109
All executive officers and
directors as a group (15
persons).................. 6,223,643 16.3% 2,920,834
</TABLE>
- --------
*Less than one percent.
(1) Includes 1,452,154 shares owned by Welsh, Carson, Anderson & Stowe V, L.P.
Mr. Carson disclaims beneficial ownership of such shares that exceed his
pecuniary interest therein. Includes 4,000 shares held by family trusts.
Mr. Carson disclaims beneficial ownership of such shares.
(2) Does not include 116,326 shares of AOR common stock that Dr. Marks has the
right to receive from AOR for no additional consideration on April 1, 2000.
(3) Excludes 48,588 shares of AOR common stock with respect to which Mr.
Ortenzio has a remainder interest.
(4) Includes 20,000 shares held by the Miked Profit Sharing Plan, of which Dr.
Rogoff is a trustee and beneficiary. Excludes 218,180 shares of AOR common
stock Dr. Rogoff is entitled to receive on January 31, 2000 for no
additional consideration.
(5) Welsh, Carson, Anderson & Stowe's address is: 1 World Financial Center,
Suite 3601, New York, New York 10281. Includes 1,452,154 shares owned by
Welsh, Carson, Anderson & Stowe V, L.P. Mr. Carson disclaims beneficial
ownership of such shares that exceed his pecuniary interest therein.
(6) Ownership as of December 31, 1998, as indicated on a Schedule 13-G filed
with the Securities and Exchange Commission. The Schedule 13-G discloses
that such person has sole voting power with respect to 492,571 of such
shares and sole dispositive power with respect to all such shares and does
not have shared voting or dispositive power with respect to any such
shares.
(7) Ownership as of December 31, 1998, as indicated on a Schedule 13-G filed
with the Securities and Exchange Commission. Includes 1,717,058 shares of
AOR common stock owned by Brown Advisory Incorporated, a wholly owned
subsidiary of Brown Investment Advisory & Trust Company. The Schedule 13-G
discloses that such persons together have sole voting power with respect to
2,193,242 of such shares, and no voting power with respect to any other
shares.
(8) Ownership as of December 31, 1998, as indicated on a Schedule 13-G filed
<PAGE>
with the Securities and Exchange Commission. Includes 1,658,100 shares
beneficially owned by Putnam Investment Management, Inc., and 534,800
shares beneficially owned by The Putnam Advisory Company. The Schedule 13-
G discloses that such persons do not have sole voting or dispositive power
with respect to any such shares, such persons together share dispositive
power with respect to all of such shares and The Putnam Advisory Company
has shared voting power with respect to 426,800 such shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company does not believe that any of the transactions described below
were made on terms less favorable to the Company than those that would have been
available from unaffiliated parties and does not anticipate entering into
transactions with affiliated parties in the future on terms less favorable than
those that would be available from unaffiliated parties.
Dr. Fink, a director of the Company, is a practicing physician with
Hematology Oncology Associates ("HOA"), a physician group affiliated with the
Company since November 1992. During 1998, the Company recognized revenue of
approximately $18,920,000 from HOA. In addition, the Company leases office space
from an entity affiliated with Dr. Fink. Payments under this lease were
approximately $534,000 in 1998.
Dr. Marks, a director of the Company, is a practicing physician with
Oncology-Hematology Associates, a physician group affiliated with the Company
since April 1995. During 1998, the Company recognized revenue of approximately
$30,940,000 from Oncology-Hematology Associates.
Dr. Murali, a director of the Company, is a practicing physician with
Oncology and Hematology Associates, Inc., a physician group affiliated with the
Company since April 1994. During fiscal 1998, the Company recognized revenue of
approximately $16,940,000 from Oncology and Hematology Associates, Inc.
Dr. Rogoff, a director of the Company, is a practicing physician with
Southwestern Radiation Oncology, Ltd., a physician group affiliated with the
Company since January 1995. During fiscal 1998, the Company recognized revenue
of $5,851,000 from Southwestern Radiation Oncology Ltd. In addition, the Company
leases office space from an entity affiliated with Dr. Rogoff. Payments under
this lease were approximately $215,000 in 1998.
Richard B. Mayor, a director of the Company, is Of Counsel to Mayor, Day,
Caldwell & Keeton, L.L.P., the Company's principal outside legal counsel.
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 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, THIS 29TH DAY OF APRIL, 1999.
AMERICAN ONCOLOGY RESOURCES, INC.
By: /s/ L. Fred Pounds
---------------------------------------
L. Fred Pounds
Vice President of Finance,
Chief Financial Officer and Treasurer
41
