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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(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, 2001
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 No. 1-13772
PLANVISTA CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3787901
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4010 Boy Scout Boulevard 33607
Tampa, Florida
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (813) 353-2300
Securities registered pursuant to Section 12(b) of the Act:
Title of Name of Exchange
Each Class On Which Registered
---------- -------------------
Common Stock $.01 par value............................ NYSE
Securities registered pursuant to Section 12(g) of the Act: None
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 ninety (90) days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of the 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 registrant's Common Stock, $.01 par
value, held by non-affiliates of the registrant, computed by reference to the
last reported price at which the stock was sold on April 12, 2002, was
$6.11.
The number of shares of the registrant's Common Stock, $.01 par value,
outstanding as of April 12, 2002 was 16,720,759.
PART I
Forward-Looking Statements
The statements contained in this report or incorporated by reference herein that
are not purely historical, including statements regarding our objectives,
expectations, hopes, intentions, beliefs, or strategies, are "forward-looking"
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Act of 1934. Forward-looking statements are
necessarily based on estimates and assumptions that are inherently subject to
significant business, economic, and competitive uncertainties and contingencies,
many of which, with respect to future business decisions, are subject to change.
These uncertainties and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any forward-looking
statements made by, or on behalf of, us.
In particular, the words "expect," "estimate," "plan," "anticipate," "predict,"
"intend," "believe," and similar expressions are intended to identify forward-
looking statements. It is important to note that actual results could differ
materially from those in such forward-looking statements, and undue reliance
should not be placed on such statements. Stockholders and prospective investors
should exercise caution since these statements involve known and unknown risks,
uncertainties, and other factors which are, in some cases, beyond PlanVista's
control and could adversely affect our actual results, performance, or
achievements. Numerous factors could cause such actual results to differ
materially from those in the forward-looking statements, including our ability
to expand our client base; the success of our new products and services; our
ability to maintain our current PPO network arrangements; our ability to manage
costs; our failure to comply with financial covenants of our restructured debt
agreements; changes in law; risk of material adverse outcome in litigation;
fluctuations in business conditions and the economy; our ability to attract and
retain key management personnel; changes in accounting and reporting practices;
and our ability to obtain additional debt or equity financing on terms favorable
to us to facilitate our long-term growth.
The factors above should not be construed as exhaustive. We undertake no
obligation to release publicly the results of any future revisions we may make
to forward-looking statements to reflect events or circumstances after the date
of this prospectus or to reflect the occurrence of unanticipated events.
Item 1. Business
General
PlanVista Corporation is a leading provider of technology-enabled medical
cost management solutions for the healthcare industry. We provide integrated
national Preferred Provider Organization (sometimes called PPO) network access,
electronic claims repricing, and claims and data management services. Our
customers are (1) healthcare payers, such as self-insured employers, medical
insurance carriers, health maintenance organizations (sometimes called HMOs),
third party administrators, and other entities that pay claims on behalf of
health plans, and (2) participating health care services providers, which
include individual providers and provider networks. A typical customer in our
core business is an insurance carrier payer whose insured members use the
physician providers in our PPO network. By generating increased volume for these
providers, the payers receive discounts for services to their insureds under our
network contracts. When the costs of such services are billed to our payer
customer, we electronically review the bill and reprice it to conform to the
network pricing agreement, and forward it to the payer. The payer pays us a
percentage of the savings realized from the repricing discounts.
Our PPO network, known as the National Preferred Provider Network or NPPN,
is comprised of regional and local networks with whom we contract and includes
over 400,000 physicians, 4,000 acute care hospitals, and 55,000 ancillary care
providers. It is one of the largest PPO networks in the United States based upon
the number of its participating healthcare providers. We processed 2.9 million
claims in 2001, which compares with 800,000, 1.4 million, and 2.1 million
processed claims in 1998, 1999, and 2000, respectively.
We create savings by managing healthcare costs for our payer clients while
generating patient flow and prompt payment for our participating providers. We
provide our payer clients a variety of value added services, including
electronic claims repricing and claims and network data management services. We
believe that we have a competitive advantage in today's cost management market
by virtue of our position as one of the nation's largest PPO networks and our
leading technology solutions, which deliver fast repricing speed, reduce
processing costs, and
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improve accuracy. We believe that the continued industry migration of PPO claims
repricing from traditional methods, such as paper and fax, to Electronic Data
Interchange, or EDI, and the Internet, should allow us to continue to maintain
or improve our operating margins on a per claim basis by improving the
efficiency of our personnel.
On April 2, 2001, we changed our name from HealthPlan Services Corporation
to PlanVista Corporation. We also changed our New York Stock Exchange symbol
from HPS to PVC.
Strategy
Our objective is to leverage our established NPPN and PlanVista Solutions
brands as a leading national PPO network and offer a broad array of technology-
based services to existing and new clients using the following strategies:
Focused Penetration of Payer Market
We plan to increase revenue and profitability of our core PPO network
access business by increasing our installed payer client base and leveraging our
innovative repricing technology. We believe we can increase market share by
marketing our claims repricing technology (capturing the shift in covered
members from HMOs to PPOs), the attractiveness to payer clients of our
percentage of savings (POS) vs. per employee per month (PEPM) revenue model, and
our demonstrated ability to discount a much larger percentage of claims due to
the scale of our national PPO network.
Leverage Superior Technology
We intend to differentiate ourselves as the PPO industry's technology
leader by continuing the rollout of our newly developed electronic claims
repricing application. In addition, we plan to continually enhance our
technology-enabled services and improve the speed and accuracy of our existing
technology. In March 2001, we released ClaimPassXL, the fifth version of our
Internet claim repricing system. By shifting claim repricing submission from
paper or fax to the Internet via the ClaimPassXL system, we reduced our claim
processing costs and improved turnaround time to payers. For the year ended
December 31, 2001, 150 clients were actively using ClaimPassXL with over 315,000
claims processed.
Diversify Service Offerings and Target Markets
We plan to increase both the breadth of services we provide and the number
of clients we serve by marketing newly established services not only to existing
payer clients and network providers, but also to other payers and providers.
Beginning in 2001, we launched our PlanServ and PayerServ business units, which
are marketing solutions specifically addressing the needs of the payer market
and healthcare provider market, respectively. We believe the per claim pricing
model of PlanServ and PayerServ differentiates us from our competition, which
requires their clients to invest in significant upfront network loading and
implementation fees.
Divestiture Plan, Bank Restructure, and Reorganization
In June 2000, we commenced a strategic plan to sell all of our third party
administration ("TPA") and managing general underwriter businesses ("MGU"),
restructure our senior and subordinated credit facilities, and focus on growing
our higher margin PlanVista Solutions business.
During 2000, we sold several units of our TPA business. On July 5, 2000, we
sold our unemployment compensation and workers' compensation units for
approximately $19.1 million in cash. On September 15, 2000, we sold our Ohio
workers' compensation managed care organization unit for approximately $3.5
million in cash. Our unemployment compensation business operated under the name
R.E. Harrington, and our workers' compensation units conducted business as
Harrington Benefit Services Workers' Compensation Division. On October 26, 2000,
we sold our self-funded business unit for approximately $13.6 million,
consisting of $12.1 million
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cash and the assumption of additional current liabilities in the amount of $1.5
million. The unit was headquartered in Columbus, Ohio and operated primarily
under the names Harrington Benefit Services and CENTRA HealthPlan.
On June 18, 2001 we completed the sale of our TPA and MGU business units to
HealthPlan Holdings, Inc. ("HPHI"), an affiliate of Sun Capital Partners, Inc.
The third party administration business included the small group business
operations and its associated data processing facilities based in Tampa,
Florida, as well as the Taft-Hartley businesses that operated under the names
ABPA and SNA, based in El Monte, California and Las Vegas Nevada, respectively.
The MGU business was the Philadelphia based Montgomery Management Corporation.
In connection with this non-cash transaction, HPHI assumed approximately
$40 million in working capital deficit of the acquired businesses, $5 million of
which was offset by a long-term convertible subordinated note that was converted
to common stock on April 12, 2002 in connection with the restructuring of our
credit facilities, as described below. In addition, at the closing of the sale
to HPHI, the Company issued 709,757 shares of the Company's common stock to
offset an additional $5 million of the assumed deficit. An additional 101,969
shares were issued as penalty shares pursuant to the terms of a letter
agreement settling certain post closing disputes. The purchase agreement
contains customary representations, warranties, and cross indemnity provisions.
In connection with the issuance of these shares, the Company entered into a
Registration Rights Agreement in favor of HPHI for the registration of such
shares and any shares issuable under the terms of the note. Because the
registration statement we filed with the Securities and Exchange Commission
covering such shares has not been declared effective, pursuant to the terms of
the Registration Rights Agreement, HPHI had the right to redeem for cash a
number of the shares covered by such registration statement equal to one hundred
thousand dollars ($100,000.00) divided by the average closing price of the
Company's Common Stock on the New York Stock Exchange during the ten (10)
trading days immediately preceding the last trading day prior to October 1,
2001. Pursuant to the Registration Rights Agreement, HPHI made demand for
redemption after the Company failed to get the required registration statement
effective. The Company, however, was not permitted to redeem the shares under
the terms of the Credit Agreement with its lenders. As a result, under the terms
of the Registration Rights Agreement, the Company was required to issue 100,000
shares of the Company's Common Stock during 2001, 98,345 of which were issued as
of December 31, 2001, with the remainder issued on January 2, 2002, the value of
which was charged to loss on sale of discontinued operations. Such issuances
were in lieu of HPHI's right of redemption. In addition to these issuances, if
the shares were not registered pursuant to an effective registration statement
by December 31, 2001, then upon such date and each fifteenth day thereafter
until such shares become registered, the Company was required to deliver to HPHI
10,000 shares of its Common Stock according to the terms of the Registration
Rights Agreement. The total issuable shares as a result of such issuances is
limited to 100,000. As of April 1, 2002, the Company has issued 70,000 shares of
common stock pursuant to this provision, the value of which will be reflected as
interest expense.
We are currently in discussions with Sun Capital Partners to finalize any
purchase price adjustments associated with this sale. These adjustments relate
primarily to the amount of accrued liabilities and trade accounts receivable
reserves, and the classification of investments at the transaction date. Sun
Capital Partners believes it is due approximately $1.7 million from the Company
related to the transaction, while the Company believes it is due approximately
$4.5 million from Sun Capital. In the event we are unable to resolve these
matters directly with Sun Capital, we will seek to resolve them through binding
arbitration as provided for in the purchase agreement. We believe the resolution
of this matter will not have a material adverse effect on the financial
condition, results of operations or cash flows of the Company related to these
matters as of December 31, 2001.
The consolidated financial statements included elsewhere in this Form 10-K
have been restated to reflect the operations of the business units sold in 2000
and 2001 described above as discontinued.
During 2001, we continued to pursue the restructure of our senior and
subordinated debt facilities. The majority of this debt matured on August 31,
2001, at which time we defaulted on the maturity payment. Effective September 1,
2001, we entered into a Forbearance Agreement, as amended ("Forbearance
Agreement"), with our lending group that gave the Company until March 29, 2002
to repay or restructure this debt. On April 12, 2002 we completed the
restructuring of our senior debt, amounting to $69.0 million of outstanding
principal and accrued and unpaid interest and bank fees. This indebtedness was
restructured by reducing our term loan with the lenders to $40.0 million with an
annual interest rate of prime plus 1.0% and issuing $29.0 million of convertible
preferred stock, $.01 par value per share (the "Series C Preferred Stock") and
an additional promissory note in the amount of $184,872.00. The terms of this
Series C Preferred Stock and of the restructured facility are discussed in more
detail in the Management Discussion and Analysis section.
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As of December 31, 2001, PlanVista had additional notes totaling
approximately $11.0 million related to a 1993 acquisition, a 1998 acquisition,
and equipment purchases, and related to the HealthPlan Holdings transaction.
These notes included the $5.0 million note related to the HealthPlan Holdings
transaction, which was converted to 813,273 shares of the Company's common stock
upon the effective date of the restructure described in the preceding paragraph.
The number of shares of common stock issued in satisfaction of this note was
based on the average closing price of the Company' common stock for the 10 days
immediately prior to the conversion. Also included in the $11.0 million is $4.0
million of notes payable to CENTRA Benefits, Inc. ("CENTRA") originally
delivered in connection with the 1998 acquisition, which debt was restructured
so that amended and restated notes totaling $4.3 million (representing the
principal under the original notes plus accrued unpaid interest) were issued to
CENTRA under terms including interest at 12% (payable in additional shares of
the Company's stock except under specified circumstances) and a maturity date of
December 1, 2004. In connection with the restructuring of the CENTRA notes, the
Company also issued to CENTRA warrants to purchase an aggregate of 200,000
shares of the Company's common stock at an exercise price of $.25 over the
market price of the stock on the date of the issuance of the restructured notes
(based on the average trading price during the ten trading days preceding such
note restructure), subject to reduction to a price equal to the conversion price
of the Series C Preferred Stock upon the happening of certain events.
As a part of the sale of HPHI to Sun Capital Partners, the Company settled
certain obligations with one of its large carriers by issuing a promissory note.
As of the restructuring of the Company's credit facility, the amount owed on
this note was approximately $1.0 million plus an additional $1.5 million of
other obligations. On March 27, 2002, the Company retired this note by issuing
274,000 shares of its common stock, based on the closing price of the Company's
common stock one day immediately prior to the retirement date of this note, and
by issuing a credit for $950,000 payable with in-kind claims repricing services.
On April 12, 2002, the maturity date of notes totaling $500,000 due to two
members of its board of directors was extended to November 30, 2004. These notes
bear interest which accrues at prime plus 4% per annum, but payment of interest
is subordinated and deferred until all senior obligations are paid.
Our Business
Through our NPPN and PlanVista Solutions brands, we help health plans
reduce costs and enhance plan benefits by providing access to our integrated
nationwide network of health care providers, providing claims repricing and
claims and data management services, and offering other value-added services.
NPPN Network Access
We provide our payer clients with access to a broad national network, NPPN,
that offers deep discounts on healthcare provider services. We provide this
access primarily through our arrangements with regional and national PPO
networks. PlanVista's integrated network includes over 400,000 physicians, 4,000
acute care hospitals, and 55,000 ancillary care providers. We believe that our
network is one of the largest in the United States, based on the number of
participating healthcare providers. Included in the network are over 280,000
specialists, also making NPPN one of the largest specialist network in the
United States.
We believe our established regional PPO network relationships allow us to
offer a broad network with preeminent local providers to payers and their
covered members in each market. Because the majority of our participating
provider arrangements are through local networks, we leverage our long-term
contractual relationships with these networks to maintain provider relationships
and perform recruitment, credentialing, re-credentialing, and provider
relations. Our network contracts generally have renewable terms ranging from one
to two years. Because we value the development of long-term relationships with
these networks, over 80% of the participating providers have been our partners
for more than 3 years.
Electronic Claims Repricing
Our electronic claims repricing services benefit both our payer clients and
our participating providers. A payer or provider submits a claim to us at the
full, undiscounted provider rate, and we electronically "reprice" the claim by
calculating the reduced contractual price based on NPPN's negotiated network
discount. We return the
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repriced claims file to the payer electronically, in most cases within a
guaranteed 72-hour period. We accept claim information from payers and providers
through traditional methods such as paper and faxed claims, as well as by EDI.
In March 2001, we released ClaimPassXL, the fifth version of our Internet
claim repricing system and our most powerful claims repricing and processing
engine to date. Since the release of ClaimPassXL v5.0, our volume of Internet-
repriced claims has increased from approximately 9,000 in February 2001 to
27,000 in December 2001, an increase of 200%. This technology has allowed us to
reduce our processing costs while creating a real-time repricing capability,
enhanced accuracy, and an effective claim control system for our clients.
Currently, we are repricing approximately 35% of our claims over the Internet or
through EDI.
Claims and Provider Network Data Management
We use our technology platform to provide claims management services, such
as utilization reports, data management services, maintenance of fee schedules,
and updating provider directories, for our payer clients. Our utilization
reports generate detailed data regarding savings, including itemization of the
total number of claims incurred, number of claims discounted, and average
discounts. We also prepare reports for payers that capture information regarding
cost management, demographics, case management, provider services, diagnoses,
and procedures. Payers can use this information to better design health plans
that utilize effective cost control measures, yield favorable loss ratios, and
enhance employee benefits. We utilize Cognos reporting software, which permits
our provider and payer clients to quickly access vast quantities of claims data
to produce a variety of analytic reports.
PlanServ and PayerServ
On January 1, 2001, we launched two new business units, PlanServ and
PayerServ, which leverage our existing technology to offer more diverse services
and to pursue new markets for our services. The target customer for our PlanServ
business is any provider network, whether or not we currently maintain an access
arrangement with the network. We offer networks electronic claims repricing,
network database administration, claim flow management, and cost containment
services. We also expect to offer networks the value-added products that we
offer to payers, as well as products specifically designed for healthcare
providers. For example, in June 2000 we entered into a marketing arrangement
with iPhysician Net, a company that offers a unique pharmaceutical communication
system and medical reference tool for physician offices.
Our PayerServ initiative is designed to diversify the services that we
offer our existing payer clients and to make these services available to new
clients that may not have a need for network access. Through PayerServ, we will
focus on diversifying the products and services that we offer our current and
prospective payer clients and on expanding our value-added product offerings.
The additional services we will offer through PayerServ include network
management, electronic claims repricing, and analytic services to health care
payers. During 2001, PlanVista Solutions did not generate any significant
revenues from its PlanServ and PayerServ initiatives.
Other Services
We provide a variety of additional value-added services to payers and
providers including large claim negotiation, catastrophic claim networks,
pharmacy benefit management, and clinical lab cost containment solutions.
Payer and Network Arrangements
We generally enter into agreements with our medical claims payer clients
that require them to pay a percentage of the cost savings realized from our
network discounts with participating providers. These agreements are generally
terminable upon 90 days notice. During 2001, three clients and their affiliates
accounted for an aggregate of 24.6% of our net revenues. The loss of any of
these client groups could have a material adverse effect on the Company's
financial results.
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Since the majority of our provider arrangements are through other networks,
we depend on our contracted networks to maintain provider relationships and
ensure provider compliance with the terms of the network arrangements. Our
network contracts generally have renewable terms ranging from one to two years
and are terminable on short notice.
Information Technology
Our proprietary technology offers clients the benefits of an open
architecture. Using a combination of EDI and Internet systems, clients can
interface with our claims repricing system without incurring significant
incremental capital expenditures for hardware or software or having to adopt a
specific claim format. The open architecture of the system also improves
reliability and connectivity to payer clients and facilitates the cross-selling
of other technology-enabled services, in part because of the following
characteristics:
Scalability. Our systems are designed to take full advantage of the
client/server environment, UNIX operating systems, and Redundant Array Of
Inexpensive Disks, or RAID, technology, allowing our clients to rapidly expand
processing capacity in order to accommodate the growth of their businesses.
Modularity. Our client/server systems have been developed with discrete
functionality that can be replicated and utilized with additional hardware. This
modularity enables us to optimize application and hardware performance, and take
immediate advantage of improvements in hardware and software.
Redundancy. The implementation of a dual site, geographically dispersed On-
Line Transaction Processing, or OLTP, switch (Tampa, Florida and Middletown, New
York) and RAID technology for batch processing significantly reduces the risk of
business interruption. Each site is designed to be entirely self-supporting open
systems. Through the use of open systems architecture, we (and its clients) are
able to add new functions to applications without redesigning our applications
or architecture.
Industry Standards. Through the adoption and active use of pertinent
standards for healthcare EDI processing, we can support payer client and
provider processing requirements and provide standard interfaces to other EDI
processing organizations. In addition, we believe our technology will be fully
compliant with HIPAA and other data privacy standards.
Ease of Use. Our products are either Windows-based or GUI-based and
function in UNIX, Novell and Windows NT operating environments, thereby
enhancing ease of use by PlanVista's clients.
Telecommunication Offerings. PlanVista was an early adopter of emerging
telecommunications systems enabling us to migrate to newer services, such as
ISDN, dial to packet, frame relay, virtual private networks, and Internet
communications. These new offerings provide us with a competitive advantage
through improved service levels and pricing. We have established relationships
with multiple telecommunications vendors to ensure reliable connectivity to our
EDI clients.
We rely on trade secret and copyright laws to protect our proprietary
technologies, but there can be no assurance that such laws will provide
sufficient protection to us, that others will not develop technologies that are
similar or superior to ours, or that third parties will not copy or otherwise
obtain and use our technologies without authorization. In addition, we rely on
some technology licensed from third parties, and may be required to license
additional technology in the future. There can be no assurance that these third
party technology licenses will be available or will continue to be available to
us on acceptable commercial terms. We have filed federal trademark applications
for the mark PlanVista Solutions.
Competition
PPO Network Access. The PPO industry is highly fragmented. Of the more than
1,000 PPOs in the United States, only a few publicly traded companies have
provider networks and claim volumes of meaningful size, such as First Health
Group (NASDAQ: FHCC), BCE Emergis/UP&UP (TSE: IFM), and Corvel (NASDAQ: CRVL).
The remainder of the competitive landscape is diverse, with major insurance
companies and managed care organizations such as Blue Cross Blue Shield, Aetna,
WellPoint, and Cigna also offering proprietary PPO networks and services.
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In addition, the number of independent PPOs has decreased as managed care
organizations and large hospital chains have acquired PPOs to administer their
managed care business and increase enrollment. The market remains extremely
fragmented, and consolidation is expected to continue as the publicly traded
companies in the industry seek to acquire additional volume and access to PPO
contracts in key geographic markets.
Electronic Claims Repricing. Currently, the claims repricing service market
is fragmented. PlanVista's repricing competitors provide some or all of the
services we currently provide. The competitors can be categorized as follows:
. Large managed care organizations and TPAs with in-house claim
processing and repricing systems, such as Blue Cross Blue Shield,
UnitedHealth Group, and Wellpoint;
. Healthcare information technology companies providing enterprise wide
systems to the payer market, such as McKesson/HBOC (NYSE: MCK),
Eclipsys Corp (NASDAQ: ECLP), and Perot Systems (NYSE: PER); and
. Healthcare information software vendors selling claim processing
products to the provider market, such as Trizetto Group (NASDAQ:
TZIX), HealthAxis (NASDAQ: HAXX), and Avidyn/PPO One (NASDAQ: ADYN),
as well as several private companies.
The market for claims repricing services is competitive, rapidly evolving,
and subject to rapid technological change. We believe that competitive
conditions in the healthcare information industry in general will lead to
continued consolidation as larger, more diversified organizations are able to
reduce costs and offer an integrated package of services to payers and
providers.
We also believe that existing and potential clients in the healthcare
market evaluate the services of competing claims repricing providers on the
basis of technology, cost, ease of use, accuracy, and speed.
Our History
PlanVista Corporation was incorporated in Delaware in 1994 and completed
its initial public offering in May 1995 under the name HealthPlan Services
Corporation. We changed our name to PlanVista Corporation in April 2001. The
original core business involved the third party administration of health care
claims for large and small group employers. This business, which we no longer
operate, was founded in 1970, owned by Dun & Bradstreet Corporation from 1978 to
1994, and repurchased by the original founders of our Company in 1994. PlanVista
is headquartered in Tampa, Florida with an operations and technology center in
Middletown, New York. Our mailing address is 4010 Boy Scout Boulevard, Suite
200, Tampa, Florida 33607, and our principal telephone number at our executive
offices is 813-353-2300. Our web site address is www.planvista.com.
Government Regulation
Regulation in the healthcare industry is constantly evolving. Federal,
state, and local governments, as well as other third-party payers, continue
their efforts to reduce the rate of healthcare expenditures. Many of these
policy initiatives have contributed to the complex and time-consuming nature of
obtaining healthcare reimbursement for medical services.
This complex environment is made even more difficult by the blurring of the
historical distinction between providers and payers. The current trend is for
both provider and payer to be accountable for the delivery and the utilization
of healthcare services. Providers must ensure that they are properly reimbursed
by third-party payers for healthcare services rendered in accordance with pre-
established contracts. Likewise, payers must ensure that they are making
payments for only those services for which they are responsible and in the
dollar amounts specified by these pre-established contracts.
Although we cannot predict the nature of future healthcare reforms that
will be adopted by federal, state, and local governments, we believe that this
trend, the consolidation of providers, and the resulting additional
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information management requirements placed on providers and payers should
increase the demand for our offerings, but at the same time it may dramatically
increase our cost of providing services.
We must also comply with regulations pertaining to billing services,
primarily involving recordkeeping requirements and other provisions designed to
prevent fraud. We believe that we operate in a manner consistent with such
regulations as they currently exist but note that the enforcement of these
regulations is increasingly more stringent.
The Health Insurance Portability and Accountability Act of 1996
("HIPAA") set forth provisions of Administrative Simplification which has had,
and will continue to have, a significant effect on developers and users of
healthcare information systems. Most recently, final regulations, applicable to
all providers, payers, and clearinghouses, were enacted relating to patient
information privacy and electronic transactions. The regulations relate to
patient information privacy establish privacy safeguard standards and
implementation procedures that companies will need to follow, including adopting
written privacy procedures and training employees. Companies will need to be in
compliance with these regulations by April, 2003. The regulations related to
electronic transactions provide requirements for electronic transactions and
requirements to adopt standard code sets to be used when describing diseases,
injuries, causes, etc. Compliance with these regulations is required by October
2002. Additionally, there are proposed regulations relating to security of
individual health information and standards for a national employer identifier.
Some of the industry's current projections suggest that it will cost healthcare
providers two to four times the Year 2000 Project expenditures to properly
implement the HIPAA regulatory requirements and many of those healthcare
providers will seek assistance from outside vendors to either facilitate the
implementation and/or provide clearinghouse translation capabilities as a method
to reduce those costs and/or meet the required mandatory implementation dates.
As such, while HIPAA could continue to have an adverse affect on the operations
of providers and payers and consequently reduce our revenue, we believe we
possess technical and managerial knowledge and skills that could benefit
healthcare organizations seeking to establish compliance with HIPAA
requirements. We have analyzed the extent to which we may need to alter our
systems to comply with these regulations and do not believe that there will be
significant costs to us in complying with such regulations and expect to be
compliant when the regulations become effective.
Finally, there has been recent proposed legislation to amend the Public
Health Service Act and the Employee Retirement Income Security Act of 1974 to
protect consumers in managed care plans and other health coverage that could
have an impact on our business. Introduced as the Bipartisan Patient Protection
Act, this bill, if passed, will apply a uniform federal floor of protections to
individuals with private health insurance, thus allowing states to enact more
protective standards, and create a timely review process when individuals are
denied treatment and prompt claims payment. Additionally, the proposed bill will
permit patients to go to court to seek redress for any wrong that causes injury,
subjecting both the plan and the issuer to liability.
As a business participating in the health care industry, our operations
are potentially subject to extensive and increasing regulation by various
governmental entities at the federal, state, and local level. While we believe
our operations are in material compliance with the applicable laws as currently
interpreted, we cannot assure you that the regulatory environment in which we
operate will not change significantly in the future, which could restrict our
existing operations, expansion, financial condition or opportunities for
success.
Employees
At April 3, 2002, we employed 155 persons. Our employees are not
represented by a labor union or a collective bargaining agreement. We regard the
relationships with our employees as good.
Item 2. Properties
We conduct our operations from our headquarters in Tampa, Florida. Our
data processing facility is in Middletown, New York. We lease both of these
facilities. We believe that our facilities are adequate for our present and
anticipated business requirements. In 2002, we moved our Tampa headquarters. We
continue to pay rent to HPHI for our former Tampa location until June 2002.
8
Item 3. Legal Proceedings
In the ordinary course of business, we may be a party to a variety of
legal actions that affect any business, including employment and employment
discrimination-related suits, employee benefit claims, breach of contract
actions, and tort claims. In addition, we entered into indemnification
agreements related to certain of the businesses we sold during 2000 and 2001,
and we could be subject to a variety of legal and other actions related to such
indemnification arrangements. We currently have insurance coverage for some of
these potential liabilities. Other potential liabilities may not be covered by
insurance, insurers may dispute coverage, or the amount of insurance may not
cover the damages awarded. While the ultimate financial effect of these claims
and indemnification agreements cannot be fully determined at this time, in the
opinion of management, they will not have a material adverse effect on our
financial condition, results of operations, or cash flows.
In January 1997, HealthPlan Services, Inc. ("HPS"), a business
previously owned and operated by the Company, began providing marketing and
administrative services for health plans of TMG Life Insurance Company (now
known as Clarica Life Insurance Company), with Connecticut General Life
Insurance Company ("CIGNA Re") acting as the reinsurer. In January 1999,
insureds under this coverage were notified that coverage would be canceled
beginning in July 1999. Substantially all coverage under these policies
terminated on or before December 31, 2000.
In July 1999, Clarica asserted a demand against HPS for claims in excess
of $7 million for breach of contract and related claims, and HPS asserted breach
of contract and various other claims against Clarica. In April 2000, Clarica and
CIGNA Re jointly submitted a demand for consolidated arbitration in connection
with these claims and claims submitted by CIGNA Re for approximately $6 million.
In October 2000, we settled the dispute with Clarica in consideration for our
payment of $400,000. On April 17, 2000, Admiral Insurance Company, our errors
and omissions carrier, filed a complaint for declaratory judgment in the United
States District Court for the Middle District of Florida, naming HPS, Clarica,
and CIGNA Re as defendants. In December 2001, we reached a settlement agreement
related to the CIGNA Re and Admiral claims. Under the terms of this settlement
agreement, we are obligated to pay Cigna Re approximately $150,000 on or before
December 31, 2002.
In January 2002, Paid Prescriptions, LLC initiated a breach of contract
action against HPS seeking $1.6 - $2.0 million in compensation, and the Company
is vigorously defending the action. While the ultimate financial effect of this
claim cannot be determined at this time, in the opinion of management, it will
not have a material adverse effect on our financial condition, results of
operations, or cash flow.
Item 4. Submission of Matters to a Vote of Security Holders
NONE.
9
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Our Common Stock is traded on the New York Stock Exchange under the
symbol PVC. The following table sets forth the high and low sales prices of our
Common Stock for each quarter during 2000 and 2001, as reported by the New York
Stock Exchange for the periods indicated.
2001 HIGH LOW
---- ---- ---
Fourth quarter....................................... $ 5.83 $ 4.14
Third quarter........................................ $ 7.97 $ 4.20
Second quarter....................................... $ 8.35 $ 6.60
First quarter........................................ $ 9.44 $ 6.20
2000 HIGH LOW
---- ---- ---
Fourth quarter....................................... $ 10.19 $ 4.81
Third quarter........................................ $ 5.56 $ 1.88
Second quarter....................................... $ 4.88 $ 1.63
First quarter........................................ $ 8.00 $ 3.50
There were 155 holders of record of our Common Stock as of April 12,
2002. We believe that there is a greater number of beneficial owners that hold
our Common Stock in street name. We paid quarterly dividends on our Common Stock
of 13.75 cents per share (or 55 cents per share on an annualized basis) for the
first, second, and third quarters of 1999. Pursuant to our June 2000 Credit
Agreement with our lenders, we have agreed to refrain from future dividend
payments.
The Company issued shares of its Common Stock to the following entities
during the period covered by this report without registration under the
Securities Act:
a) HealthPlan Holdings, Inc. ("HPHI") -- 910,071 shares, 709,757 of
which were issued on June 18, 2001 in connection with the sale of the Company's
TPA and MGU business units for purposes of offsetting $5 million of the deficit
assumed by HPHI as purchaser in that transaction, an additional 101,969 shares
of which were issued as penalty shares pursuant to the terms of a letter
agreement settling certain post-closing disputes between the parties, and 98,345
shares which were issued in 2001, and an additional 1,655 in 2002, as penalty
shares under the terms of the Registration Rights Agreement in favor of HPHI for
the registration of the shares issued in connection with the referenced
transaction, including any shares issued pursuant to the terms of a $5 million
promissory note issued to HPHI at the closing of such transaction. A
registration statement on Form S-1 has been filed with the Commission covering
the initial 709,757 shares issued to HPHI, but has not been declared effective.
The Company also issued an additional 70,000 shares to HPHI between January 1,
2002 and April 1, 2002, and expects to issue another 30,000 shares as penalty
shares under the penalty provisions of the Registration Rights Agreements;
b) First Union National Bank, as Administrative Agent for the Company's
senior lenders -- 75,000 shares issued on July 3, 2001 for distribution on a pro
rata basis among the senior lenders, in exchange for the senior lenders'
consenting to the transactions contemplated by the post-closing letter agreement
between HPHI and the Company. These shares are also subject to a registration
rights agreement, but no registration statement covering these shares is
currently on file with the Commission; and
10
c) Certain Funds managed by Deprince, Race and Zollo, Inc. - 553,500
shares issued in a private placement transaction for an aggregate purchase price
of $3.8 million.
None of the foregoing transactions involved an underwriter and all such
transactions were exempt from registration under applicable rules of the
Securities Act.
11
Item 6. Selected Financial Data
SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data)
We have derived the following selected historical consolidated
financial data from our audited consolidated financial statements at December
31, 2001 and 2000 and for the years ended December 31, 2001, 2000 and 1999,
which are included in this Form 10-K. The report of PricewaterhouseCoopers LLP,
our independent accountants, on our consolidated financial statements at
December 31, 2001 and 2000 and for the years ended December 31, 2001, 2000 and
1999 appears elsewhere in this Form 10-K. Our selected historical financial data
should be read in conjunction with the related consolidated financial statements
and notes thereto appearing elsewhere in this Form 10-K.
Year Ended December 31,
--------------------------------------------------------------
2001 2000(1) 1999(1) 1998(1)
---- ------- ------- -------
Statement of Income Data:
(In thousands, except per share amounts)
Revenues..................................................... $ 32,918 $ 26,964 $ 18,691 $ 10,024
Agent commissions............................................ 308 295 110 30
Other operating expenses..................................... 25,886 24,035 17,348 12,073
Loss (gain) on sale of investments........................... 2,503 (332) (4,630) (33,240)
Other expenses............................................... 11,923 11,357 7,572 17,461
Loss before provision (benefit) for income taxes,
minority interest, discontinued
operations, extraordinary loss,
and cumulative effect
of change in accounting principle......................... (7,702) (8,391) (1,709) (13,700)
Net (loss) income............................................ (45,221) (104,477) 104 9,698
Basic and diluted net income (loss) per share from
continuing operations before minority
interest, discontinued operations, loss on
sale of assets, extraordinary item, and
cumulative effect of change in
accounting principle...................................... $ (2.37) $ (0.37) $ (0.08) $ 0.55
Basic and diluted net income (loss) per share................ (3.11) (7.64) 0.01 0.67
Dividends declared per share
of common stock............................................ - - 0.4125 -
Average common shares outstanding
Basic..................................................... 14,558 13,679 13,742 14,353
Diluted................................................... 14,558 13,679 13,922 14,584
As of December 31,
--------------------------------------------------------------
Working capital(deficit)..................................... $ (7,901) $(104,859) $ (44,329) $ (93,903)
Total assets................................................. 40,125 104,668 236,683 217,002
Total debt................................................... 76,086 66,038 95,762 96,931
Common stockholders' equity (deficit)........................ (53,290) (20,340) 86,281 91,652
12
(1) We have reclassified the business units sold in 2001 and 2000 as
discontinued operations in the Consolidated Statements of Operations. During
2000, we sold our unemployment compensation, workers' compensation, workers'
compensation managed care organization, and self-funded businesses. In 2001, we
sold our TPA and MGU business units.
13
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward-Looking Statements
PlanVista cautions you that, while forward-looking statements reflect
PlanVista's good faith beliefs, these statements are not guarantees of future
performance. In addition, PlanVista disclaims any obligation to publicly update
or revise any forward-looking statement, whether as a result of new information,
future events or otherwise. See Forward-Looking Statements.
Introduction
The following is a discussion of changes in the consolidated results of
our operations for the years ended December 31, 2001, 2000, and 1999.
We are a leading provider of technology-enabled medical cost management
solutions for the healthcare industry. We provide integrated national PPO
network access, electronic claims repricing, and claims and data management
services to health care payers, such as self-insured employers, medical
insurance carriers, HMOs, third party administrators and other entities that pay
claims on behalf of health plans, and health care services providers, including
individual providers and provider networks.
Recent Events
The Forbearance Agreement extended to us by our lending group gave the
Company until March 29, 2002 to repay or restructure the Company's senior debt
in the amount of $69.0 million of outstanding principal and accrued and unpaid
interest and legal fees. On April 12, 2002 the Company executed the various
agreements documenting the terms of the restructured facility (collectively, the
"Agreement") and closed on the debt restructure transaction. The indebtedness
was restructured by reducing our term loan with the Senior Lenders to $40.0
million with an annual interest rate of prime plus 1.0% and issuing $29.0
million of the Company's Series C Preferred Stock and an additional note in the
amount of $184,872.00. In connection with this restructuring, the Company issued
the lenders 75,000 shares of common stock as a restructuring fee.
The Series C Preferred Stock accrue dividends at 10% per annum during
the first 12 months from issuance and at a rate of 12% per annum thereafter.
Dividends are payable quarterly in additional shares of convertible preferred
stock . At any time after 18 months from the date of issuance, the Series C
Preferred Stock may be converted into shares of the Company's common stock at an
amount determined by formula to equal 51% of the outstanding shares of the
Company's common stock . In addition, the Series C Preferred Stockholders are
entitled to elect three members to the Company's board of directors. The
Certificate of Designation for the Series C Preferred Stock also contains
provisions that permits the preferred stockholders to immediately elect one
additional member to the Company's board of directors to replace one of the
board members elected by the Company's common shareholders if the Company fails
to achieve certain minimum cash levels as defined under the Agreement or the
Company fails to make its required principal and interest payments in accordance
with the terms of the Agreement. The issuance of the Series C Preferred Stock
was not put to stockholder approval in reliance on an applicable exception to
the shareholder approval policy of the New York Stock Exchange. Stockholders
were notified prior to the closing of the transaction of the Company's reliance
on such exception. In connection with the issuance of the Series C Preferred
Stock, the Senior Lenders entered into a Stockholders Agreement with the Company
which provides, among other things, for registration rights in connection with
the sale of any shares of Common Stock which are issued upon conversion of the
Series C Preferred Stock. The registration rights include demand and incidental
registration rights.
14
Results Of Operations
The following table sets forth, for the periods indicated, the
percentages that certain items of income and expense bear to our revenue for
such periods.
For the Year Ended December 31,
-------------------------------
2001 2000 1999
Total revenues...................................................... 100.0% 100.0% 100.0%
Expenses:
Agent commissions................................................. 0.9% 1.1% 0.6%
Personnel expenses................................................ 27.8% 30.8% 43.8%
General and administrative........................................ 45.3% 31.7% 38.7%
Loss on impairment of intangible assets........................... - 20.4% -
Other............................................................. (0.1)% 4.2% -
(Loss) gain on sale of investments, net........................... 7.6% (1.2)% (24.8)%
Depreciation and amortization..................................... 5.6% 6.1% 10.3%
Interest expense.................................................. 36.8% 38.9% 41.4%
Interest income................................................... (0.4)% (0.9)% (2.0)%
Equity in loss of joint ventures.................................. - - 1.1%
---------- ------------ -----------
Total expenses............................................. 123.5% 131.1% 109.1%
---------- ------------ -----------
Loss before provision (benefit) for income taxes,
minority interest, discontinued operations,
extraordinary loss, and cumulative
effect of change in accounting principle......................... (23.5)% (31.1)% (9.1)%
Provision (benefit) for income taxes................................ 81.4% (12.1)% (3.8)%
---------- ------------ ----------
Loss before minority interest, discontinued operations,
loss on sale of assets, extraordinary item, and cumulative
effect of change in accounting principle......................... (104.9)% (19.0)% (5.3)%
========== ============ ===========
Year Ended December 31, 2001 Compared to Year Ended December 31, 2000
Revenues for the year ended December 31, 2001 increased $6.0 million,
or 22.3%, to $32.9 million from $26.9 million in 2000. During 2001, the Company
added over 500 new accounts and generated revenues on these accounts totaling
$6.2 million. Revenues from existing customers were flat in 2001 compared to
2000. Claims volume increased to 2.9 million claims repriced in 2001 compared to
2.1 million claims repriced in 2000, or a 38.1% increase. The percentage
increase in revenues in 2001 is less than the percentage increase in claim
volume due to the Company repricing a higher percentage of generally lower
dollar value physician claims in 2001 compared to 2000, which resulted in a
decrease in average revenue per claim.
Personnel expense for the year ended December 31, 2001 increased $0.8
million, or 9.6%, to $9.1 million from $8.3 million in 2000. Personnel expense
increased as salaries and wages increased to meet the demands of increased
revenues. Personnel expense as a percentage of revenues decreased to 27.8% in
2001 compared to 30.8% in 2000. The Company was able to increase efficiencies in
its claim repricing operations through increased use of its technology, which
allowed the Company to increase the number of claims processed per person in
2001.
General and administrative expense for the year ended December 31, 2001
increased $6.4 million, or 75.3%, to $14.9 million from $8.5 million in 2000.
This increase was primarily attributable to increases in network fees,
electronic imaging, postage, computer software and maintenance costs, and
printing costs supporting our
15
increased revenues. Bad debt expense increased $2.7 million due to the related
increase in revenues, an overall increase in the estimated allowance for
doubtful accounts based on historical collection rates, and a $1.2 million
additional reserve against certain accounts resulting from customer
negotiations. Additionally, the Company incurred increased legal and other costs
associated with our divestiture and credit facilities restructuring activities
during 2001 totaling $0.7 million. During 2000, the Company received proceeds
from a key-man life insurance policy totaling $0.5 million that reduced overall
general and administrative costs during such period.
Other expense for the year ended December 31, 2000 was $1.1 million.
Other income for the year ended December 31, 2001 was immaterial. During the
second quarter of 2000, we recorded legal, financial advisory, and other fees
associated with the termination of our merger agreement with UICI.
Loss on sale of investments for the year ended December 31, 2001 was
$2.5 million compared to a gain on sale of investments for the years ended
December 31, 2000 of $0.3 million. During the second quarter of 2001, we sold
all of our shares of HealthAxis Inc. stock and realized a net pretax loss on the
sale of approximately $2.5 million. During the second quarter of 2000, we sold
all 109,732 shares of our Caredata.com, Inc. stock.
Depreciation and amortization expense for the year ended December 31,
2001 increased $0.1 million to $1.8 million from $1.7 million in 2000. This
increase is primarily attributable to the amortization of internally developed
software costs that were capitalized in 2001 and the depreciation of new
property and equipment acquired in 2001.
Interest expense for the year ended December 31, 2001 increased $1.6
million to $12.1 million from $10.5 million in 2000. This increase resulted from
increased interest rates that increased from prime plus 1.0% (10.50%) on January
1, 2001 to prime plus 6.0% (10.75%) at December 31, 2001. In addition, we
incurred significant bank charges that are included in interest expense
associated with amendments to the credit facility during 2001 and the
Forbearance Agreement, as amended.
Provision for income taxes during 2001 was $26.8 million compared to a
benefit for income taxes of $3.3 million during 2000. During 2001, the Company
was required to establish a $36.5 million valuation allowance on its net
deferred tax assets as a result of cumulative losses in recent years, as
required by SFAS 109.
Loss from discontinued operations, net of taxes and loss on sale of
discontinued operations, net of taxes, totaled $0.6 million and $10.1 million,
respectively in 2001 compared to loss from discontinued operations, net of taxes
and loss on sale of discontinued operations, net of taxes of $58.8 million and
$39.3 million, respectively in 2000. During 2000, these operations were
adversely impacted by the write-off of $80.3 million of goodwill and contract
rights related to the business units sold determined by the selling price of the
unemployment compensation and its workers' compensation, Ohio workers'
compensation managed care organization and self-funded business units sold in
2000, and the definitive agreement signed in April 2001 to sell our TPA segment
and MGU business units. The additional losses in 2001 were incurred based on
actual results of operations and the final terms of the sale, which occurred in
June 2001.
During the second quarter of 2000, we recorded an extraordinary loss of
$1.0 million, net of taxes, related to our credit facility. This loss
represented $1.5 million of pretax non-interest fees and expenses connected with
the prior facility, which were previously subject to amortization over five
years. No such gains or losses were recognized during 2001.
Year Ended December 31, 2000 Compared to Year Ended December 31, 1999
Revenues for the year ended December 31, 2000 increased $8.2 million,
or 43.9%, to $26.9 million from $18.7 million in 1999. Revenues increased
primarily due to the addition of new customers. Claims volume increased to 2.1
million claims repriced in 2000 compared to 1.4 million claims repriced in 1999,
or a 50.0% increase in claim volume.
Personnel expense for the year ended December 31, 2000 increased $0.1
million, or 1.2%, to $8.3 million from $8.2 million in 1999. Personnel expense
as a percentage of revenue was 30.8% in 2000 compared to 43.8% in
16
1999. The Company was able to increase efficiencies in its claim repricing
operations through increased use of technology that allowed the Company to
increase the number of claims processed per person in 2000.
General and administrative expense for the year ended December 31, 2000
increased $1.3 million, or 18.1%, to $8.5 million from $7.2 million in 1999. The
increase was primarily attributable the growth in the Company's business.
Additionally, in 2000, the Company received proceeds from a key-man life
insurance policy totaling $0.5 million that reduced overall general and
administrative costs. General and administrative expenses as a percent of
operating revenues were 31.7% in 2000 compared to 38.7% in 1999. The decrease in
general and administrative expenses as a percent of operating revenues is
primarily due to overall increased efficiencies and the impact of the proceeds
form the key man life insurance policy received in 2000.
Gains on sale of investments for the years ended December 31, 2000 and
1999, was $0.3 million and $4.6 million, respectively. During the second quarter
of 2000, we sold all 109,732 shares of our Caredata.com, Inc. stock. In 1999 we
sold 1,415,000 shares of HealthAxis.com stock.
Depreciation and amortization expense for the year ended December 31,
2000 decreased $0.8 million to $2.4 million from $3.2 million in 1999. This
decrease is primarily attributable to property and equipment that became fully
depreciated in 1999 that were not offset by related acquisitions in 2000.
Interest expense for the year ended December 31, 2000 increased $2.8
million to $10.5 million from $7.7million in 1999. This increase resulted from
an increased average interest rate of 373 basis points on our line of credit due
to the amended terms of our credit facility. This increase was partially offset
by a reduction of $9.2 million in the average outstanding principal balance on
the credit facility.
Benefit for income taxes was $3.3 million and $0.7 million in 2000 and
1999, respectively. The benefit was recognized based on the Company's effective
tax rate during each year presented.
Loss from discontinued operations, net of taxes and loss on sale of
discontinued operations, net of taxes, totaled $58.8 million and $39.3 million,
respectively in 2000. Gain from discontinued operations, net of taxes in 1999
totaled $1.1 million. Loss from discontinued operations, net of taxes in 2000
represented the operating results of the businesses sold by the Company in 2001
and 2000. These operations were adversely impacted by the write-off of $80.3
million of goodwill and contract rights related to the business units sold
determined by the selling price of the unemployment compensation and its
workers' compensation, Ohio workers' compensation managed care organization and
self-funded business units sold in 2000 and the definitive agreement signed in
April 2001 to sell our TPA segment and MGU business units.
During 2000, we recorded an extraordinary loss of $1.0 million, net of
taxes, related to our credit facility. This loss represented $1.5 million of
pretax non-interest fees and expenses connected with the prior facility, which
were previously subject to amortization over five years. No such gains or losses
were recognized during 1999.
Liquidity and Capital Resources
Liquidity is our ability to generate adequate amounts of cash to meet
our financial commitments. Our primary sources of cash are fees generated from
the claims repricing services we provide our customers. Our uses of cash consist
of payments to our networks, operating expenses such as compensation and
benefits, occupancy and related costs, and general and administrative expenses
associated with operating our business, taxes, and debt service obligations. We
had cash and cash equivalents totaling $0.4 million at December 31, 2001. Cash
flow (used in) provided by operating activities was $(9.9) million, $3.2
million, and $13.0 million during 2001, 2000, and 1999, respectively. Excluding,
the effects of the discontinued operations, cash flows provided by operating
activities would have been $5.2 million, during 2001.
As part of its business strategy, the Company has been pursuing the
restructure of its credit facility. The majority of this debt matured on August
31, 2001, at which time we defaulted on the maturity payment. Effective
September 1, 2001 we entered into a Forbearance Agreement, as amended,
("Forbearance Agreement") with our lending group that gave the Company until
March 29, 2002 to repay or restructure this debt. As of December 31, 2001, the
Company had debt outstanding to its lenders totaling approximately $64.7 million
and accrued and unpaid interest and fees totaling approximately $4.2 million. On
April 12, 2002 (the "Effective Date") we closed a
17
transaction to restructure and refinance our existing bank debt . Under the
terms of the Agreement, in exchange for the outstanding principal, accrued and
unpaid interest and fees due to its lenders, the Company entered into a $40.0
million term loan that accrues interest at prime plus 1.0% with interest
payments due monthly. Quarterly principal payments of $50,000 are due beginning
June 30, 2002 and the term loan is due in full on May 31, 2004. The term loan is
collateralized by substantially all of the Company's assets. The restructured
credit facility does not include a line of credit or the ability to borrow an
additional funds. The remainder of the amounts due to the lenders was exchanged
for approximately $29.0 million of the Company's Series C Preferred Stock and an
additional note in the amount of $184,872.00. The terms of the Series C
Preferred Stock are discussed in detail earlier in this section, under "Recent
Events." The Agreement contains certain financial covenants including minimum
monthly EBITDA levels (defined as earnings before interest, taxes, depreciation
and amortization and adjusted for non-cash items deducted in calculating net
income and severance, if any, paid to certain officers of the Company), maximum
quarterly and annual capital expenditures, a minimum quarterly fixed charge
ratio that is based primarily on the Company's operating cash flows, and maximum
quarterly and annual extraordinary expenses (excluding certain pending and
threatened litigation, indemnification agreements and certain other matters as
defined in the Agreement). The amounts due to the lenders as of December 31,
2001 are classified as long-term debt in the accompanying consolidated financial
statements included elsewhere in this Form 10-K.
In connection with the closing of the transactions contemplated by the
Agreement, the Company entered into a letter agreement with the lenders and
Wachovia Bank, National Association, as administrative agent for the lenders and
for the holders of the Series C Preferred Stock, pursuant to which the lenders,
in their capacity as such and as holders of the Series C Preferred Stock,
granted the Company an option, exercisable for 120 days following the Closing,
to consider the entire indebtedness under the Agreement paid in full and to
redeem the Series C Preferred Stock in exchange for the following consideration:
(1) payment of $40,000,000 plus accrued and unpaid interest under the Agreement,
(2) payment of the outstanding principal balance plus accrued interest under an
additional note in the principal amount of $184,872.00, (3) payment of
outstanding fees and expenses of lenders' counsel and consultants incurred in
connection with the Agreement, (4) the issuance of an additional 1,650,000
shares of the Company's Common Stock, and (5) replacement or substitution of the
Letters of Credit provided for under the Agreement. At this time the Company
does not have any commitments for the funds necessary to exercise the option.
Prior to the Company entering into the Agreement, the Company operated
under a Forbearance Agreement, as amended (the "Forbearance Agreement"), with
its lending group. The Forbearance Agreement extended the terms and conditions
of the June 8, 2000, Second Amended and Restated Credit Agreement (the "Credit
Agreement"), which matured on August 31, 2001. Under the terms of the
Forbearance Agreement, as amended, which became effective on September 1, 2001,
the Company had until March 29, 2002 to repay the amounts due under the existing
credit facility or to restructure the credit facility. During the term of the
Forbearance Agreement interest accrued at an annual interest rate equal to prime
plus 6.0%. Interest was payable monthly at prime plus 1.0% per annum. The
difference between the accrual rate of interest and the rate paid was due at the
termination of the Forbearance Agreement and was rolled into the amount
restructured. In addition, the Company was required to repay accrued and unpaid
interest as of August 31, 2001 (totaling approximately $1.0 million) and were
required to achieve minimum cash collection levels and maximum cash
disbursements as defined in the Forbearance Agreement. We were in compliance
with the terms of the Forbearance Agreement, as amended.
In June 2001, Ronald Davi, former principal of NPPN prior to its
acquisition by the Company, drew in full on a letter of credit in his favor in
the amount of $2.0 million. Such amount is included in the obligations owed to
our lending group at December 31, 2001.
On July 2, 2001, the Company executed the Third Amendment and Limited
Waiver to the Credit Agreement (the "Third Amendment") with its bank group and
certain other parties. The Third Amendment provided for, among other things, (a)
permission for the Company to issue Common Stock to certain funds managed by
DePrince, Race and Zollo, Inc. for $3.3 million, (b) permission for the Company
to use those funds to satisfy certain post-closing obligations to HPHI in
connection with the sale of the TPA and MGU Businesses, (c) the postponement of
certain scheduled payments of principal until August 31, 2001, (d) a 100 basis
point increase in the interest rate, and (e) the delivery of 75,000 shares of
Common Stock to the bank group in consideration for their consent to the Third
Amendment.
In connection with the sale of the TPA and MGU business units and the
assumption by HealthPlan Holdings, Inc., of certain liabilities associated
therewith (the "Transaction"), the New England Life Insurance Co. drew in full
on a letter of credit in its favor in the amount of $6,000,000. Under the terms
of the Credit Agreement with First Union National Bank and the other lenders
named therein, any payment under the letter of credit which is not promptly
reimbursed to the lenders by the Company upon notice of such draw constitutes a
payment default. The lenders indefinitely waived this payment default pursuant
to the terms of a Limited Waiver and Extension dated as of June 15, 2001, which
also waived certain additional terms of the Credit Agreement in order to permit
certain terms of the Transaction which were not part of the original Stock
Purchase Agreement of April 1, 2001 but were rather added through the First
Amendment to Stock Purchase Agreement (the "First Amendment"), dated June 18,
2001.
As of December 31, 2001, PlanVista had additional notes totaling
approximately $11.0 million related to a 1993 acquisition, a 1998 acquisition,
and equipment purchases related to the HealthPlan Holdings transaction. As
described below, the $5.0 million note related to the HealthPlan Holdings
transaction converted to 813,273 shares of the Company's common stock. The
number of shares of common stock issued in satisfaction of this note was based
on the average closing price of the Company' common stock for the 10 days
immediately prior to the conversion.
18
On March 27, 2002, the Company retired a subordinated note, including
accrued interest totaling approximately $2.5 million by issuing 274,000 shares
of its common stock, based on the closing price of the Company's common stock
one day immediately prior to the retirement date of this note, and by issuing a
credit for $950,000 payable with in-kind claims repricing services.
On April 12, 2002, the maturity date of notes totaling $500,000 due to
two members of its board of directors was extended to November 30, 2004. These
notes bear interest at prime plus 4% per annum, but payment of interest is
subordinated and deferred until all senior obligations are paid.
As of December 31, 2001, the Company was in default of notes
aggregating $4.0 million payable to CENTRA. These obligations related to a 1998
acquisition by the Company. The default was caused by the failure by PlanVista
to make interest payments due under such notes. On April 12, 2002 the Company
restructured these notes. Under the restructured terms, notes totaling $4.3
million accrue interest at compound rate of 12% per annum, accruing monthly.
Interest is payable on shares of common stock determined on the average trading
price over the last ten (10) trading days of the quarter. Additionally, the
Holder has the right to request interest to be paid in cash if there is
available excess cash flow for such payments as permitted by the Senior Credit
Agreement. These notes mature on December 1, 2004. Interest and principal are
due in full at maturity . At any time after April 12, 2002, CENTRA may convert
some or all of the notes to shares of the Company's common stock, based on the
lesser of $0.25 plus the closing price of the Company's common stock on April
12, 2002, or the average trading price of the common stock for the ten day
period immediately preceding the date the note is converted. This note is
subordinated to the term loan with the Company's lenders.
On June 18, 2001, we completed the sale of our TPA and MGU business
units to HPHI. The TPA business included the small group business operations and
its associated data processing facilities based in Tampa, Florida, as well as
the Taft-Hartley businesses that operated under the names ABPA and SNA, based in
El Monte, California and Las Vegas, Nevada, respectively. The MGU business was
the Philadelphia based Montgomery Management Corporation.
In connection with this non-cash transaction, HPHI assumed
approximately $40.0 million in working capital deficit of the acquired
businesses, $5.0 million of which was offset by a long-term convertible
subordinated note that was converted to common stock on April 12, 2002 in
connection with the restructuring of our credit facilities as described above.
In addition, at the closing of the sale to HPHI, the Company issued 709,757
shares of the Company's common stock to offset an additional $5.0 million of the
assumed deficit. An additional 101,969 shares were issued as penalty shares
pursuant to the terms of the letter agreement settling certain post closing
disputes. The purchase agreement contains customary representations, warranties,
and cross indemnity provisions.
In connection with the issuance of these shares, the Company entered
into a Registration Rights Agreement in favor of HPHI for the registration of
such shares and any shares issuable under the terms of the note. Because the
registration statement we filed with the Securities and Exchange Commission
covering such shares has not been declared effective, pursuant to the terms of
the Registration Rights Agreement, HPHI had the right to redeem for cash a
number of the shares covered by such registration statement equal to one hundred
thousand dollars ($100,000.00) divided by the average closing price of the
Company's Common Stock on the New York Stock Exchange during the ten (10)
trading days immediately preceding the last trading day prior to October 1,
2001. Pursuant to the Registration Rights Agreement, HPHI made demand for
redemption after the Company failed to get the required registration statement
effective. The Company, however, is not permitted to redeem the shares at this
time under the terms of the Credit Agreement with its lenders. As a result,
under the terms of the Registration Rights Agreement, the Company was required
to issue 100,000 shares of the Company's Common Stock, 98,345 of which was
issued in 2001, and the remainder on January 2, 2002, the value of which was
charged to loss on sale of discontinued operations. Such issuances were in lieu
of HPHI's right to redemption. In addition to these issuances, if the shares
were not registered pursuant to an effective registration statement by December
31, 2001, then upon such date and each fifteenth day thereafter until such
shares become registered , the Company is required to deliver to HPHI 10,000
shares of its Common Stock according to the terms of the Registration Rights
Agreement. The total issuable shares as a result of such issuances are limited
to 100,000. As of April 1, 2002, the Company has issued 70,000 shares of common
stock, the value of which will be reflected as interest expense.
19
We are currently in discussions with Sun Capital Partners to finalize
any purchase price adjustments associated with this sale. These adjustments
relate primarily to the amount of accrued liabilities and trade accounts
receivable reserves, and the classification of investments at the transaction
date. In the event we are unable to resolve these matters directly with Sun
Capital, we will seek to resolve them through binding arbitration as provided
for in the purchase agreement. Sun Capital Partners believes it is due
approximately $1.7 million from the Company related to the transaction, while
the Company believes it is due approximately $4.5 million from Sun Capital. We
believe the resolution of this matter will not have a material adverse effect on
the financial condition, results of operations and cash flows of the Company.
On July 6, 2001, the Company completed a $3.8 million private placement
of its common stock at a 15% discount to the 10 day trading average through July
2, 2001. The purchasers of these securities were certain investment funds
managed by DePrince Race and Zollo, Inc., an investment management firm in which
director John Race is one of the principals. The net proceeds from this private
placement were used to satisfy certain pre-closing obligations connected with
the Company's recent divestiture of its TPA and managing general agent
underwriter business units to HPHI. In connection with the placement the Company
issued unregistered shares of its common stock and has agreed to register such
shares within 30 days of the date of the issuance. These shares were included in
the registration statement filed in connection with the shares issued in the
sale to HPHI.
The Company also issued 75,000 shares of its common stock to HPHI in
connection with a letter agreement dated July 2, 2001 between HPHI and the
Company settling certain payment obligations relating to the Closing of the HPHI
transaction and including terms for the payment in full of the pre-closing
liabilities of the Company. Additionally, in connection with extending certain
payment obligations with its lenders which were due June 30 and July 31, the
Company issued 75,000 shares of its common stock to its lenders pursuant to the
terms of a Third Amendment and Limited Waiver amending the Company's credit
facility with its senior lenders. The Company has agreed to promptly register
the shares issued to its lenders and to HPHI. These shares were included in the
registration statement filed in connection with the shares issued in the sale to
HPHI. Such shares have not been registered as of December 31, 2001.
In April 2001, we sold all of our shares of HealthAxis Inc. stock and
used the proceeds of $0.9 million to reduce outstanding debt under our Credit
Agreement. We spent $0.6 million for capital expenditures during the nine months
ended June 30, 2001, including expenditures related to discontinued operations.
We spent $0.1 million, $4.8 million and $8.0 million for capital
expenditures during 2001, 2000 and 1999, respectively.
We believe that all consolidated operating and financing obligations
for the next twelve months will be met from internally generated cash flow from
operations and available cash. Based on available information, management
believes it will be able to maintain compliance with the terms of its
restructured credit facility, including the financial covenants for the
foreseeable future. Our ability to fund our operations, make scheduled payments
of interest and principal on our indebtedness, and maintain compliance with the
terms of its restructured credit facility, including its financial covenants,
depends on our future performance, which is subject to economic, financial,
competitive, and other factors beyond our control. If we are unable to generate
sufficient cash flows from operations to meet our financial obligations and
achieve the restructure debt covenants as required under the restructured credit
facility, there may be a material adverse effect on our business, financial
condition and results of operations, and a significant adverse effect on the
market value of our common stock. Management is continuing to explore strategic
alternatives to reduce its obligations, recapitalize the Company, and provide
additional liquidity. There can be no assurances that the Company will be
successful in these endeavors.
Inflation
We do not believe that inflation had a material effect on our results
of operations for the year ended December 31, 2001 or 2000. There can be no
assurance, however, that our business will not be affected by inflation in the
future.
Critical Accounting Policies
The preparation of our consolidated financial statements requires that
we adopt and follow certain accounting policies. Certain amounts presented in
the consolidated financial statements have been determined in
20
accordance with such policies, based upon estimates and assumptions. Although we
believe that our estimates and assumptions are reasonable, actual results may
differ.
We have included below a discussion of the accounting policies that we
believe are affected by the more significant judgments and estimates used in the
preparation of our consolidated financial statements, how we apply such policies
and how results differing from our estimates and assumptions would affect the
amounts presented in our financial statements. Other accounting policies also
have a significant effect on our consolidated financial statements, and some of
these policies also require the use of estimates and assumptions. Note 3 to the
Consolidated Financial Statements discusses our significant accounting policies.
Revenue Recognition
We earn revenues in the form of fees generated from the repricing of
medical claims. We generally enter into agreements with our health benefit
payers payer clients that require them to pay a percentage of the cost savings
realized from PlanVista's network discounts with participating providers. These
agreements are generally terminable upon 90 days notice. During 2001, three
clients and their affiliates accounted for an aggregate of 24.6% of our net
revenues. The loss of either of these client groups could have a material
adverse effect on the Company's financial results. In 2001, over 92% of our
revenues were generated from percentage of savings contracts with our customers.
Revenues from percentage of savings contract are recognized when claims
processing and administrative services have been performed. Revenues from
customers with certain contingent contractual rights and revenues based on a
percentage of collected cash are not recognized until the corresponding cash is
collected. The remainder of our revenues is generated from customers that pay us
a monthly fee based on eligible employees enrolled in a benefit plan covered by
our health benefits payers clients. Revenues under such agreements are
recognized based when the services are provided.
Accounts Receivable
We generate our revenue and related accounts receivable from services
provided to healthcare payers, such as self-insured employers, medical insurance
carriers, health maintenance organizations (sometimes called HMOs), third party
administrators and other entities that pay claims on behalf of health plans, and
participating health care services providers which include individual providers
and provider networks.
We evaluate the collectibility of our accounts receivable based on a
combination of factors. In circumstances where we are aware of a specific
customer's inability to meet its financial obligations to us, we record a
specific reserve for bad debts against amounts due to reduce the net recognized
receivable to the amount we reasonably believe will be collected. For all other
customers, we recognize reserves for bad debts based on past write-off history,
average percentage of receivables written off historically and the length of
time the receivables are past due. To the extent historical credit experience is
not indicative of future performance or other assumptions used by management do
not prevail, loss experience could differ significantly, resulting in either
higher or lower future provision for losses.
Impairment of Intangible and Long-Lived Assets
As of December 31, 2001 we have goodwill related to the 1998
acquisition of PlanVista Solutions totaling $29.4 million. We evaluate the
carrying value of our goodwill for impairment whenever indicators of impairment
exist. If we determine that such indicators are present, we then prepare an
undiscounted future net cash flow projection for the asset. In preparing this
projection, we must make a number of assumptions concerning such things as, for
example, future booking volume levels, price levels, commission rates, rates of
growth in our online booking businesses, and rates of increase in operating
expenses. If our projection of future net cash flows is in excess of the
carrying value of the recorded asset, no impairment is recorded. If the carrying
value of the asset exceeds the projected undiscounted net cash flows, an
impairment is recorded. The amount of the impairment charge is determined by
discounting the projected net cash flows.
Through the end of 2001, we evaluated goodwill for impairment based on
undiscounted projected future cash flows and determined that no adjustment was
necessary. However, if future actual results do not meet our
21
expectations, we may be required to record an impairment charge, the amount of
which could be material to our results of operations.
Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board (FASB) issued
SFAS No. 141, "Business Combinations" and SFAS No. 142 "Goodwill and Other
Intangible Assets." SFAS No. 141 requires business combinations initiated after
June 30, 2001 to be accounted for using the purchase method of accounting, and
broadens the criteria for recording intangible assets separate from goodwill.
Recorded goodwill and intangibles will be evaluated against this new criteria
and may result in certain intangibles being subsumed into goodwill, or
alternatively, amounts initially recorded as goodwill may be separately
identified and recognized apart from goodwill. SFAS No. 142 requires the use of
a nonamortization approach to account for purchased goodwill and certain
intangibles. Under a nonamortization approach, goodwill and certain intangibles
will not be amortized into results of operations, but instead would be reviewed
for impairment and written down and charged to results of operations only in the
periods in which the recorded value of goodwill and certain intangibles is more
than its fair value. The provisions of each statement which apply to goodwill
and intangible assets acquired prior to June 30, 2001 will be adopted by the
Company on January 1, 2002. These new requirements will impact future period net
income by an amount equal to the discontinued goodwill amortization offset by
goodwill impairment charges, if any, and adjusted for any differences between
the old and new rules for defining intangible assets on future business
combinations. An initial impairment test must be performed as of January 1,
2002. We are evaluating the impact of the adoption of these standards but have
not yet determined the full effect of these recent accounting pronouncements on
our financial position and results of operations. Amortization expense was $1.4
million in 2001.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets that result from the acquisition, construction, development or normal
operations of a long-lived asset. SFAS No. 143 is effective for fiscal years
beginning after June 15, 2002. Management does not believe SFAS No. 143 will
have a significant effect on the financial position, results of operations or
liquidity of the Company.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supersedes and amends
SFAS No. 121 and relevant portions of SFAS No. 30. SFAS No. 144 is required to
be adopted on January 1, 2002. We do not expect the adoption of SFAS No. 144 to
have a significant effect on the financial position, results of operations, or
liquidity of the Company.
Risk Factors
Risks associated with an investment in the Company, and with
achievement of the Company's forward-looking statements in this report, its news
releases, websites, public filings, investor and analyst conferences and
elsewhere include, but are not limited to, the risk factors described below. Any
of the risk factors described below could have a material adverse effect on the
Company's business, financial condition, or results of operations. The Company
may not succeed in addressing these challenges and risks.
Failure to comply with financial covenants will cause default under Term Loan
and, in some cases, may allow Series C Preferred Stockholders to control Board.
We recently completed a restructuring of our credit facilities with our
lenders. We replaced approximately $69.0 million of indebtedness to our lenders,
including outstanding principal and accrued and unpaid interest and bank fees
with a $40.0 million term loan, collateralized by substantially all of the
Company's assets, and $29.0 million of convertible preferred stock. The term
loan requires the Company to achieve financial covenants including minimum
monthly EBITDA levels, maximum quarterly and annual capital expenditures, a
minimum quarterly fixed charge ratio, and maximum quarterly and annual
extraordinary expenses (as defined in the agreements). The convertible preferred
stock agreement contains provisions permitting the preferred stockholders to
elect three members to the Company's board of directors and permitting the
preferred stockholders to immediately elect one additional member to the
Company's board of directors to replace one of the board members elected by the
Company's common shareholders if the there is a default of any of the financial
covenants or Company fails to achieve certain minimum cash levels as defined in
the convertible preferred stock agreement. If the Company does not comply with
the
22
financial covenants in the agreements, or if the convertible preferred stock is
not redeemed within 18 months from its issuance, it can be converted into a
minimum of 51% of the then outstanding common stock of the Company. The
conversion of the convertible preferred stock to common stock will significantly
dilute the ownership percentage of the Company's current common stockholders.
Additionally, failure to comply with the term loan's financial covenants is an
event of default and would permit the lenders to immediately require the Company
to repay the term loan. This may have a material adverse effect on our business,
operating results and financial condition and could require the Company to seek
protection under available bankruptcy laws.
We have contingent obligations from the sale of our TPA and MGU businesses.
In connection with our sale of our TPA businesses and our MGU business,
we incurred indemnity obligations for representations and warranties and for
liabilities arising prior to the sale of these businesses. While we believe that
we have accrued adequate reserves for all estimated liabilities, there may be
unknown liabilities for which no reserves have been established and, if these
liabilities were to occur, we might have to reorganize or liquidate under the
bankruptcy laws in order to discharge them. Additionally, the reserves for
expected liabilities established may not be adequate to handle these
obligations.
Outstanding registration rights, convertible note may depress stock price or be
dilutive.
We granted registration rights covering additional shares which
HealthPlan Holdings received upon converting the $5.0 million promissory note
they received from us in connection with our sale of HealthPlan Services, Inc.
to them and other shares we issued to them in payment of interest due on the
note and in connection with our failure to make specified post-closing payments
under the acquisition agreement. Under the conversion terms of the note,
HealthPlan Holdings is guaranteed the issuance of sufficient shares so as to
give them, on the sale of such securities, $5.0 million in gross proceeds.
Accordingly, any substantial decrease in the price of our common stock would
mean that HealthPlan Holdings would be entitled to a greater number of shares
upon conversion of the note and the issuance of such shares would be dilutive to
existing stockholders. Our registration rights agreement with HealthPlan
Holdings requires that while the HealthPlan Holdings registration rights are
outstanding, no future registration rights may be granted that are superior to
the rights granted to HealthPlan Holdings and restricts our ability to grant
registration rights to others which would allow others to register and sell
their securities when HealthPlan Holdings is selling securities under a demand
registration right.
The existence of these registration rights may have a depressing effect
upon the price of our common stock and may restrict the ability of investors in
our common stock to sell their shares.
We may lack funds for future requirements.
We may not be able to fund expansion, develop or enhance our products
or services, or respond to competitive pressures if we lack adequate funds. This
could hurt our business. We do not currently have an available line of credit
with a lender and we manage our business from existing cash flow. We may need to
raise additional funds in order to fund more rapid expansion, including
acquisitions, to develop new or enhanced services, or to respond to competitive
pressures. If we raise additional funds by issuing equity or convertible debt
securities, the percentage ownership of our stockholders will be diluted. Any
new securities could have rights, preferences and privileges senior to those of
the common stock.
Additionally, our expense levels are based, in part, on our
expectations regarding future revenues, and our expenses are generally fixed,
particularly in the short term. We may be unable to adjust spending in a timely
manner to compensate for unexpected revenue shortfalls. A shortfall in revenues
or a delay in the collection of outstanding accounts receivable, could have a
adverse impact on our ability to meet payment obligations to our lenders and
vendors and could have a material adverse effect on our business, operating
results and financial condition.
We have many competitors.
We face competition from HMOs, PPOs, TPAs and other managed health care
companies. We believe that, as managed care continues to gain acceptance in the
marketplace and technology is adopted, our competition will
23
increase. In addition, legislative reform may intensify competition in the
markets served by us. Many of our current and potential competitors are
significantly larger and have greater financial and marketing resources than we
do. We cannot assure you that we will continue to maintain our existing clients
or our past level of operating performance. We also cannot assure you that we
will be successful with any new products or in any new geographical markets we
may enter.
We may not be able to successfully manage our growth strategy.
Our strategy is to continue internal growth and, as opportunities arise
and resources permit, to consider acquisitions of, or relationships with, other
companies in related lines of business within our core expertise. As a result,
we are subject to certain growth-related risks, including the risk that we will
be unable to retain personnel or acquire the resources necessary to service
growth adequately. Expenses arising from efforts to increase our market
penetration may have a negative impact on operating results. In addition, we
cannot assure you that we will be able to identify suitable opportunities for
acquisitions or relationships or complete these acquisitions. We may not be able
to integrate effectively any acquired business, and we will have to bear the
financial impact of expenses incurred in integrating acquired businesses.
Problems with our computers or other technology could negatively affect our
business.
Aspects of our business depend upon our ability to store, retrieve,
process and manage data and to maintain and upgrade our data processing
capabilities. If our data processing capabilities are interrupted for any
extended length of time, or if we lose stored data, or experience programming
errors or other computer problems arise, we could lose customers and revenues.
We expect that our future growth will depend on our ability to process
and manage claims data more efficiently and to provide more meaningful
healthcare information to clients and payers of healthcare. Our current data
processing capabilities are at 33% of capacity. We believe our current data
processing capabilities are adequate for the foreseeable future. However, we may
not be able to efficiently upgrade our systems to meet future demands, and we
may not be able to develop, license or otherwise acquire software to address
these market demands as well or as timely as our competitors.
Our intellectual property needs constant protection.
We have made significant investments in the development and maintenance
of our proprietary software systems and data. We rely largely on our own
security systems, confidentiality procedures and employee nondisclosure
agreements to maintain the confidentiality and security of our proprietary
information. If third parties gain unauthorized access to our information
systems, or if computer viruses attack our data or software, or if anyone
misappropriates our proprietary information, this may have a material adverse
effect on our business and results of operations.
Government regulations may change and adversely affect our business.
Regulation in the healthcare industry is constantly evolving. We are
unable to predict what additional government regulations affecting our business
may be enacted in the future. Our business may be adversely affected if we fail:
(1) to comply with existing laws and regulations, (2) to obtain necessary
licenses and government approvals or (3) to adapt to new or modified regulatory
requirements. Proposals for healthcare legislative reforms are regularly
considered at the federal and state levels. Currently, the United States
Congress is considering a patient's bill of rights which could impact our
business by making managed care less attractive to employers or by introducing
government regulation which could have the effect of discouraging
employer-provided health care coverage. We are unable to predict whether or not
such legislation will become law and if so, what impact it may have.
Our quarterly operating results may be volatile.
We will have difficulty predicting future revenues because we are
implementing a new business strategy. We will also have difficulty in accurately
forecasting revenues from sales of our services because we don't know the
24
sales cycle involved in selling our new services, and we cannot predict client
claims experience. This makes it difficult to predict the quarter in which sales
will occur. Our expense levels are based, in part, on our expectations regarding
future revenues, and our expenses are generally fixed, particularly in the short
term. We may be unable to adjust spending in a timely manner to compensate for
unexpected revenue shortfalls. Any significant shortfall of revenues in relation
to our expectations could cause significant declines in our quarterly operating
results.
We are highly dependent on our senior management.
PlanVista is highly dependent on its senior management, particularly
chief executive officer Phillip S. Dingle and chief operating officer Jeffrey L.
Markle. The loss of members of our senior management team could harm us and our
prospects significantly.
Consolidation in the healthcare industry may give our customers greater
bargaining power and lead us to reduce our prices.
Many healthcare industry participants are consolidating to create
integrated healthcare delivery systems with greater market power. As provider
networks and managed care organizations consolidate, competition to provide
products and services such as those we provide will become more intense, and the
importance of establishing and maintaining relationships with key industry
participants will become greater. These industry participants may try to use
their market power to negotiate price reductions for our products and services.
If we are forced to reduce our prices, our margins will decrease unless we are
able to achieve corresponding reductions in expenses.
A small number of clients account for a significant portion of our revenue.
The loss of one or more of our significant clients could cause our
business to suffer. Our top three clients accounted for 24.6% of our revenue for
the year ended December 31, 2001. These clients may account for a significant
portion of our revenues in 2002, and we expect that a small number of our
clients will continue to account for a substantial portion of our revenues for
some time. In addition, companies in the healthcare industry generally have been
consolidating, resulting in a limited number of payers and provider networks
controlling an increasing portion of claims. Therefore, we believe that our
revenue will be largely dependent upon product acceptance by a smaller number of
payers and provider networks. If we lose any one of our major clients or receive
less favorable terms from any of our major clients, we will lose revenue that
would adversely impact our financial condition and results of operations.
Many of our products and services are geared for the developing internet and
electronic healthcare information markets.
The Internet and electronic healthcare information markets are in the
early stages of development and are rapidly evolving. A number of market
entrants have introduced or developed products and services that are competitive
with our products and services. We expect that additional companies will
continue to enter these markets. In new and rapidly evolving industries, there
is significant uncertainty and risk as to the demand for, and market acceptance
of, recently introduced products and services. Because the markets for certain
of our products and services are new and evolving, we are not able to predict
the size and growth rate of those markets with any certainty. We cannot assure
you that markets for our products and services will develop or that, if they do,
they will be strong and continue to grow at a sufficient pace. If markets fail
to develop, develop more slowly than expected or become saturated with
competitors, our business prospects will be impaired.
Lack of internet security could discourage users of our services.
The difficulty of securely transmitting confidential information over
the Internet has been a significant barrier to conducting e-commerce and
engaging in sensitive communications over the Internet. Our strategy relies in
part on the use of the Internet to transmit confidential information. We believe
that any well-publicized compromise of Internet security may deter people from
using the Internet to conduct transactions that involve transmitting
confidential healthcare information. It is also possible that third parties
could penetrate our network security or otherwise misappropriate patient
information and other data. If this happens, our operations could be
interrupted, and we could be subject to liability. We may have to devote
significant financial and other resources to protect
25
against security breaches or to alleviate problems caused by breaches. We could
face financial loss, litigation and other liabilities to the extent that our
activities or the activities of third-party contractors involve the storage and
transmission of confidential information like patient records or credit
information. In addition, we could incur additional expenses if new regulations
regarding the use of personal information are introduced.
The terms of our customer contracts provide no guarantee of long-term relations
or payments.
Although contracts with some of our clients are longer-term contracts,
the majority of our contracts can be terminated, with revenues from such
contracts also readily terminable within six months. In addition, the vast
majority of PlanVista's contracts contain payment terms that are based on a
percentage of savings to the client or on the number of claims re-priced. If we
are unable to achieve significant savings for our clients or re-price a
significant number of claims, we will not derive much revenue from our
contracts.
Termination of network contracts would impair our ability to service our
clients.
All of our contracts with provider networks contain provisions allowing
the termination of these contracts with as little as 30 days' notice. The
termination of these contracts by the networks would render us unable to provide
network access to our clients and therefore would remove our ability to reprice
claims and derive revenues. Termination by the provider networks or other
changes within the provider networks may be outside of our control and could
negatively affect our ability to provide services to our clients.
We may be subject to litigation due to the volatility of our stock price.
Our common stock has experienced significant price and volume
fluctuations recently. Our stock price reached a ranged from a high of $9.44 per
share to a low of $4.14 per share during the year ended December 31, 2001. As of
March 31, 2002, our closing stock price was $6.40 per share. These fluctuations
are not necessarily directly related to our operating performance, and our stock
may not continue to trade at the current price level.
The market price for our common stock may continue to fluctuate widely
in response to factors such as the following:
. failure to meet our product development and sales
milestones;
. demand for our common stock;
. technological innovations by competitors or in competing
technologies;
. new product announcements by us or by our competitors;
. timeliness in introduction of new products;
. announcements by us or our competitors of significant
contracts, acquisitions, partnerships, joint ventures or
capital commitments;
. failure to successfully implement our new business strategy;
. revenues and operating results failing to meet the
expectations of securities analysts or investors in any
quarter;
. announcements by third parties of significant claims or
proceedings against PlanVista;
. disclosure of unsuccessful results in our efforts to expand
our ability to manufacture, market, sell and distribute
PlanVista's products or in our ability to enhance
PlanVista's existing products, or develop new products;
. changes in financial estimates by securities analysts;
. investor perception of our industry or its prospects; or
. general technology or economic trends.
In addition, our growth rate is partially attributable to health care
expenditures nationally and the related growth of claims processed by PlanVista.
We may not continue to grow in the future, and if we do grow, it may not be at
or near historical levels.
26
Many of these factors are beyond our control. In addition, the stock
market has in the past experienced price and volume fluctuations that have
particularly affected companies in the health care and managed care markets
resulting in changes in the market price of the stock of many companies which
may not have been directly related to the operating performance of those
companies.
Some companies that have experienced volatility in the market price of
their stock have been sued in securities class action litigation. In light of
the fluctuations in our stock price, it is possible that we may be the subject
of a securities class action litigation in the future. Such litigation often
results in substantial costs and a diversion of management's attention and
resources and could harm our business, prospects, results of operations, or
financial condition.
Our existing stockholders have significant voting control over matters requiring
stockholder approval.
Our executive officers, directors, key employees and their affiliates
beneficially own, in the aggregate, approximately 40.7% of our outstanding
common stock. Our existing 5% or greater stockholders beneficially own, in the
aggregate, approximately 52.8% of our outstanding common stock. Additionally, as
described above, our lenders received $29.0 million of convertible preferred
stock that can trigger voting rights with respect to a minimum of 51% of the
then outstanding shares of our common stock upon the occurrence of certain
events. The convertible preferred stock holders have the right to elect three
members to our board of directors. As a result, these stockholders are able to
exercise significant control over all matters requiring stockholder approval,
including the election of directors and approval of significant corporate
transactions, which may have the effect of delaying or preventing a third party
from acquiring control of us.
Because of anti-takeover provisions under Delaware law and in our Certificate of
Incorporation, takeovers may be more difficult, possibly preventing you from
obtaining optimal share price.
Delaware law and provisions of our Certificate of Incorporation could
make it more difficult for a third party to acquire, or discourage a third party
from attempting to acquire, control of PlanVista. Our Certificate of
Incorporation allows us to issue preferred stock with rights senior to those of
the common stock without any further vote or action by the common stockholders.
In addition, we are subject to the anti-takeover provisions of Section 203 of
the Delaware General Corporation Law, which could have the effect of delaying or
preventing a change in control of PlanVista. These provisions could deprive
stockholders of an opportunity to receive a premium for their common stock as
part of a sale of PlanVista or may otherwise discourage a potential acquiror
from attempting to obtain control of PlanVista. This could have a material
adverse effect on the market price of its common stock. The board of directors
may in the future issue shares of preferred stock or rights to acquire preferred
shares to implement a stockholder rights plan. A stockholder rights plan creates
financial impediments that discourage persons seeking to gain control of a
company by means of a merger, tender offer, proxy contest or otherwise if the
board of directors determines that a change in control is not in the best
interests of stockholders.
PlanVista does not plan to pay dividends on the common stock.
PlanVista has not declared or paid a cash dividend in recent years, and
we do not expect to declare or pay any cash dividends in the foreseeable future.
We intend to retain all earnings, if any, in order to expand our operations and
pay down our debt.
We have a Limited Operating History.
Although we began operating in 1995, the increasing popularity and use
of electronic claims and data processing tools and the Internet has occurred
only recently and, as a result, the focus of our business has changed
significantly. We did not begin our current focus on being a technology-enabled
service provider leveraging our existing network access business until early
2001. As a result, our operating history is not indicative of our future
performance, and our business is difficult to evaluate because we are facing new
risks and challenges. You should evaluate our prospects in light of the risks
and uncertainties encountered by companies in the early stages of development,
particularly companies in new and rapidly evolving markets. These risks include:
27
. unpredictability of operating results and future revenues;
. unproven market acceptance of our new products;
. client concentration;
. dependence on payers, provider networks, strategic
relationships and technology solutions;
. industry consolidation and vertical integration;
. increased competition; and
. general economic and market conditions.
We may not be successful in addressing any or all of these risks. Any
failure to address these risks could have a material adverse effect on our
business, operating results and financial condition.
Our business model is unproven.
We sold several units of our TPA business in 2000, including our
unemployment compensation and workers' compensation units, our Ohio workers'
compensation managed care organization unit, and our self-funded business unit.
We sold the balance of our TPA segment as well as our MGU business in June 2001.
Revenue from these discontinued operations was $210.8 million in 1998, $202.9
million in 1999 and $158.4 million in 2000, which significantly exceeded revenue
from continuing operations in each of those years. Accordingly, our operating
history is not indicative of our future performance under our new business
strategy. In implementing this business strategy, and consistent with the
completed divestitures, we are significantly changing the focus of our business
away from a TPA claim processing operation to our network claims repricing
service. This change in focus also means that our sales and implementation
practices are now characterized by an in-house sales force, as opposed to the
outsourced sales force associated with the divested units, and we have
significantly reduced the size of our management and support operations. While
the network business has historically operated as an independent part of a
larger business, this change in focus will require it to operate with less
support than previously available and this may impact its performance. We are
also facing new risks and challenges, including a lack of meaningful historical
financial data upon which to plan future budgets and other risks described in
this prospectus.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to certain market risks inherent in our financial
instruments. These instruments arise from transactions entered into in the
normal course of business and, in some cases, relate to our acquisitions of
related businesses. We are subject to interest rate risk on our credit facility
and any future financing requirements. Our fixed rate debt consists primarily of
certain equipment notes, and our variable rate debt relates to borrowings under
our Term Loan. See "Liquidity and Capital Resources."
The following table presents the future minimum operating lease
obligations and the future principal payment obligations and weighted-average
interest rates associated with our long-term debt instruments as of December 31,
2001 (in thousands). These amounts have been adjusted to reflect the Company's
restructured debt arrangements:
2002 2003 2004 2005 2006 Thereafter
------------ ------------ ---------- -------- --------- -------------
Operating leases...................... $ 588 $ 278 $ 261 $ 58 $ 38 $ 38
Long-term debt (weighted
average interest rate ranging
from 5.75% to 10.75%)............... $ 308 $ 313 $ 68,957 $ 132 $ 150 $ 6,226
Our primary market risk exposure relates to (i) the interest rate risk
on long-term and short-term borrowings, (ii) the impact of interest rate
movements on its ability to meet interest expense requirements and exceed
financial covenants, and (iii) the impact of interest rate movements on our
ability to obtain adequate financing to fund future acquisitions.
28
During 2001, we managed interest rate risk on our variable rate debt by
using two separate interest rate swap agreements. The agreements, which expired
in September and December 2001, effectively converted $40.0 million of variable
rate debt under the old Line of Credit to fixed rate debt at a weighted average
rate of 6.18%. As of December 31, 2001 we do not have any outstanding interest
rate swap arrangements.
A 1% increase in interest rates due to increased rates nationwide would
result in additional interest of approximately $0.6 million per year.
While we cannot predict our ability to refinance existing debt or the
impact interest rate movements will have on our existing debt, our management
continues to evaluate our financial position on an ongoing basis.
Item 8. Financial Statements and Supplementary Data
The financial statements required by this item are listed in Item
14(a)(1) and are submitted at the end of this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The response to this item will be included in our definitive Proxy
Statement for the Annual Meeting of Stockholders to be held in or around June,
2002, under "Proposal 1: Election of Directors," "Additional Information
Concerning Directors," "Executive Officers," and "Section 16(a) Beneficial
Ownership Reporting Compliance," and is incorporated herein by reference.
Item 11. Executive Compensation
The response to this item will be included in our definitive Proxy
Statement for the Annual Meeting of Stockholders to be held in or around June,
2002, under "Compensation of Executive Officers," "Compensation Committee
Interlocks and Insider Participation," and "Additional Information Concerning
Directors," and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The response to this item will be included in our definitive Proxy
Statement for the Annual Meeting of Stockholders to be held in or around June,
2002, under "Security Ownership of Certain Beneficial Owners and Management,"
and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The response to this item will be included in our definitive Proxy
Statement for the Annual Meeting of Stockholders to be held in or around June,
2002, under "Compensation Committee Interlocks and Insider Participation" and
"Certain Relationships and Related Transactions," and is incorporated herein by
reference.
29
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) (1) The following consolidated financial statements of PlanVista
Corporation and its subsidiaries are filed as part of this Form
10-K starting at page F-1:
Report of Independent Certified Public Accountants
Consolidated Balance Sheets - December 31, 2001 and 2000
Consolidated Statements of Operations - Years ended December 31,
2001, 2000, and 1999
Consolidated Statements of Changes in Stockholders' Equity -
Years ended December 31, 2001, 2000, and 1999
Consolidated Statements of Cash Flows - Years ended December 31,
2001, 2000, and 1999
Notes to Consolidated Financial Statements
(2) Report of Independent Accountants on Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts for each of the
Years ended December 31, 2001, 2000, and 1999
(3) Exhibits included or incorporated herein:
Exhibit
Number Description Of Exhibits
- ------ -----------------------
2.1 Amended and Restated Acquisition Agreement, dated August 31,
1995, by and among HealthPlan Services, Inc., Millennium
HealthCare, Inc., and Third Party Claims Management, Inc.
(incorporated by reference to the HealthPlan Services Corporation
Form 8-K Current Report filed on September 15, 1995).
2.6 Stock Purchase Agreement dated December 18, 1996 by and among
Noel Group, Inc., Automatic Data Processing, Inc., and HealthPlan
Services Corporation (incorporated by reference to the Noel
Group, Inc.'s Current Report on Form 8-K dated February 7, 1997).
2.7 Shareholder Agreement by and among Sykes Enterprises,
Incorporated and HealthPlan Services Corporation dated December
18, 1997, and Amendment to Shareholder Agreement dated February
28, 1998 (incorporated by reference to Exhibit 2.7 to the
HealthPlan Services Corporation 1997 Annual Report on Form 10-K
filed on March 30, 1998).
2.8 Amended and Restated Acquisition Agreement dated May 15, 1998 by
and among HealthPlan Services Corporation, National Preferred
Provider Network, Inc., and other parties named therein
(incorporated by reference to Exhibit 2.8 to the HealthPlan
Services Corporation Annual Report on Form 10-K filed on March
30, 1999).
2.9 Subscription and Asset Contribution Agreement dated June 16, 1998
by and between CENTRA HealthPlan LLC, and its prospective
members: HealthPlan Services, Inc., and CENTRA Benefit Services,
Inc. (incorporated by reference to Exhibit 2.8 to the HealthPlan
Services Corporation 1998 Annual Report and Form 10-K filed on
March 30, 1999).
30
2.10 Stock Purchase Agreement dated September 1, 1998 among Sykes
Enterprises, Incorporated, HealthPlan Services Corporation,
and Sykes HealthPlan Services, Inc. (incorporated by reference
to Exhibit 2.8 to the HealthPlan Services Corporation 1998
Annual Report and Form 10-K filed on March 30, 1999).
2.11 (a) Agreement and Plan of Merger dated October 5, 1999 by
and among UICI and HealthPlan Services Corporation
(incorporated by reference to Exhibit 99.2 to the
HealthPlan Services Corporation Current Report on
Form 8-K filed on October 7, 1999); Amended and
Restated Agreement and Plan of Merger between UICI,
UICI Acquisition Co., UICI Capital Trust I, and
HealthPlan Services Corporation dated February 18,
2000 (incorporated by reference to Exhibit 99.2 to
the HealthPlan Services Corporation Form 8-K filed on
February 23, 2000).
(b) Amendment to Amended and Restated Agreement and Plan
of Merger dated March 23, 2000 by and among UICI and
HealthPlan Services Corporation (incorporated by
reference to Exhibit 2.11(b) to the HealthPlan
Services Corporation Annual Report on Form 10-K,
filed on April 14, 2000).
(c) Termination Agreement, dated April 13, 2000, by and
among UICI and HealthPlan Services Corporation
(incorporated by reference to Exhibit 2.11(c) to the
HealthPlan Services Corporation Annual Report on Form
10-K, filed on April 14, 2000).
2.12 Asset Purchase Agreement effective July 5, 2000, by and
between HealthPlan Services, Inc. and Sheakley-Uniservice,
Inc. (incorporated by reference to Exhibit 2.12 to the
PlanVista Corporation Annual Report on Form 10-K/A, filed on
April 20, 2001).
2.13 Asset Purchase Agreement dated as of August 28, 2000, by and
between Trewit, Inc., HealthPlan Services, Inc., Montgomery
Management Corporation, and HealthPlan Services Corporation;
Amendment to Asset Purchase Agreement effective as of October
25, 2000, by and between HealthPlan Services, Inc., Montgomery
Management Corporation, HealthPlan Services Corporation,
Trewit, Inc., and Harrington Benefit Services, Inc.; Post-
Closing Amendment to Asset Purchase Agreement and Escrow
Agreement dated as of January 12, 2001, by and between
HealthPlan Services, Inc., HealthPlan Services Corporation,
Trewit, Inc., and Harrington Benefit Services, Inc., and for
purposes of the Escrow Agreement Amendment, Wells Fargo Bank
Minnesota (incorporated by reference to Exhibit 2.13 to the
PlanVista Corporation Annual Report on Form 10-K/A, filed on
April 20, 2001).
2.14 Asset Purchase Agreement dated September 15, 2000, by and
among ProHealth, Inc., Sheakley Unicomp, Inc., and HealthPlan
Services, Inc. (incorporated by reference to Exhibit 2.14 to
the PlanVista Corporation Annual Report on Form 10-K/A, filed
on April 20, 2001).
2.15 Stock Purchase Agreement dated as of April 1, 2001, by and
between HealthPlan Holdings, Inc. and HealthPlan Services
Corporation (incorporated by reference to Exhibit 2.15 to the
PlanVista Corporation Annual Report on Form 10-K/A, filed on
April 20, 2001).
3.1 Certificate of Incorporation, as amended (incorporated by
reference to Exhibit 4.1 to the HealthPlan Services
Corporation Form S-8 Registration Statement #333-07631 filed
with respect to the HealthPlan Services Corporation 1996
Employee Stock Option Plan on July 3, 1996).
3.2 By-laws, as amended (incorporated by reference to Exhibit 3.2
to the HealthPlan Services Corporation 1996 Annual Report on
Form 10-K, filed on March 31, 1997).
4.1 Excerpts from the Certificate of Incorporation, as amended
(included in Exhibit 3.1).
4.2 Excerpts from the By-laws, as amended (included in Exhibit
3.2).
31
4.3 Specimen stock certificate (incorporated by reference to
Exhibit 4.3 to the HealthPlan Services Corporation Form S-1
Registration Statement #33-90472, filed on May 18, 1995).
10.1 Agreement between New England Mutual Life Insurance Company of
Boston and HealthPlan Services Corporation effective as of
June 1, 1987, as amended by Memorandum dated January 17, 1992
and Memorandum dated February 4, 1994 (incorporated by
reference to Exhibit 10.3 to the HealthPlan Services
Corporation Form S-1 Registration Statement #33-90472, filed
on May 18, 1995).
10.2 Agreements relating to MetraHealth business (originally
written with The Travelers Insurance Company) (incorporated by
reference to Exhibit 10.4 to the HealthPlan Services
Corporation 1996 Annual Report on Form 10-K, filed on March
31, 1997):
(a) Administrative Services Agreement dated November 1,
1989 between The Travelers Insurance Company and
Consolidated Group, Inc.
(b) Claims Administration Agreement dated November 1,
1989 between The Travelers Insurance Company and
Consolidated Group Claims, Inc.
10.3 HealthPlan Services Corporation 1996 Employee Stock Option
Plan (compensatory plan) (incorporated by reference to Exhibit
10.6 to the HealthPlan Services Corporation 1996 Annual Report
on Form 10-K, filed on March 31, 1997).
10.4 Amended and Restated HealthPlan Services Corporation 1996
Employee Stock Option Plan (compensatory plan) (incorporated
by reference to Exhibit 4.3 to the HealthPlan Services
Corporation Form S-8 Registration Statement #333-31913, filed
on July 23, 1997).
10.5 HealthPlan Services Corporation 1995 Incentive Equity Plan
(compensatory plan) (incorporated by reference to Exhibit 10.7
to the HealthPlan Services Corporation Form S-1 Registration
Statement #33-90472, filed on May 18, 1995).
10.6 1995 HealthPlan Services Corporation Directors Stock Option
Plan (compensatory plan) (incorporated by reference to Exhibit
10.10 to the HealthPlan Services Corporation Form S-1
Registration Statement #33-90472, filed on May 18, 1995);
Amendment adopted as of October 10, 2000 (incorporated by
reference to Exhibit 10.6 to the PlanVista Corporation Annual
Report on Form 10-K/A, filed on April 20, 2001).
10.7 Restricted Stock Agreements between HealthPlan Services
Corporation and Claudia N. Griffiths (incorporated by
reference to Exhibit 10.10 to the HealthPlan Services
Corporation Form S-1 Registration Statement #33-90472, filed
on May 18, 1995). The same agreement was executed with Steven
V. Hulslander, Gary L. Raeckers, Craig H. Cassady, Richard M.
Bresee, Nola H. Moon, and George E. Lucco.
10.8 Subscription Agreement dated as of September 30, 1994 among
HealthPlan Services Corporation, James K. Murray, Jr., Trevor
G. Smith, and Charles H. Guy, Jr. (incorporated by reference
to Exhibit 10.11 to the HealthPlan Services Corporation Form
S-1 Registration Statement #33-90472, filed on May 18, 1995).
10.9 Stock Purchase Agreement dated as of October 5, 1994 among
HealthPlan Services Corporation, Noel Group, Inc., Trinity
Side-by-Side Fund I, L.P., Trinity Ventures II, L.P., and
Trinity Ventures III, L.P. (incorporated by reference to
Exhibit 10.12 to the HealthPlan Services Corporation Form S-1
Registration Statement #33-90472, filed on May 18, 1995).
32
10.10 Form of Stock Purchase Agreement dated as of December 15, 1994
among HealthPlan Services Corporation, Noel Group, Inc., and
each of the signatories listed on the signature pages thereto
(incorporated by reference to Exhibit 10.13 to the HealthPlan
Services Corporation Form S-1 Registration Statement
#33-90472, filed on May 18, 1995).
10.11 (a) Lease Agreement between HealthPlan Services
Corporation and Paragon Group, Inc. (as agent for
Airport Southeast Associates, Ltd.), dated January
26, 1982, as amended on June 18, 1987 by agreement
between HealthPlan Services Corporation and Concourse
Associates Venture (successor in interest to Airport
Southeast Associates) (Concourse Center I, Tampa,
Florida) (incorporated by reference to Exhibit
10.14(a) to the HealthPlan Services Corporation Form
S-1 Registration Statement #33-90472, filed on May
18, 1995).
(b) Lease Agreement between HealthPlan Services
Corporation and Paragon Group, Inc. (as agent for
Airport Southeast Associates, Ltd.), dated January
26, 1982, as amended on October 13, 1983, April 3,
1984 by a Supplement to Amendment of Lease, and as
further amended on June 18, 1987 by agreement between
HealthPlan Services Corporation and Concourse
Associates Venture (successor in interest to Airport
Southeast Associates) (Concourse Center II, Tampa,
Florida) (incorporated by reference to Exhibit
10.14(b) to the HealthPlan Services Corporation Form
S-1 Registration Statement #33-90472, filed on May
18, 1995).
(c) Second Amendment to Leases dated April 30, 1995
between Concourse Center Associates Limited
Partnership and HealthPlan Services Corporation
(Concourse Centers I and II, Tampa, Florida)
(incorporated by reference to Exhibit 10.13(g) to the
HealthPlan Services Corporation Annual Report on Form
10-K, filed on March 29, 1996).
(d) Amended, Consolidated and Restated Lease dated
January 1, 1987 between Consolidated Group, Inc. and
Consolidated Group Service Company Limited
Partnership, as amended by First Amendment dated May
23, 1990, and by Second Amendment dated March 27,
1996 (incorporated by reference to Exhibit 10.14(d)
to the HealthPlan Services Corporation 1996 Annual
Report on Form 10-K, filed on March 31, 1997).
10.12 (a) Amended and Restated Credit Agreement dated as of May
1, 1998 by and among HealthPlan Services Corporation,
First Union National Bank, and other lenders named
therein, as amended by: the First Amendment thereto
dated June 23, 1998; and Second Amendment and Waiver
dated December 15, 1998 (incorporated by reference to
Exhibit 10.12 to the HealthPlan Services Corporation
Annual Report on Form 10-K, filed March 30, 1999).
(b) Third Amendment and Waiver dated November 15, 1999;
and the Nonwaiver and Standstill Agreements dated
February 11, 2000; Waiver and Consent dated March 1,
2000 (incorporated by reference to Exhibit 10.12(b)
to the HealthPlan Services Corporation Annual Report
on Form 10-K, filed on April 14, 2000).
(c) Second Extension of Nonwaiver and Standstill
Agreement, dated April 13, 2000 (incorporated by
reference to Exhibit 10.12(c) to the HealthPlan
Services Corporation Amended Annual Report on Form
10-K, filed on April 14, 2000).
(d) Second Amended and Restated Credit Agreement dated as
of June 8, 2000, by and among HealthPlan Services
Corporation, First Union National Bank, and other
lenders named therein; Security and Second Amended
and Restated Pledge Agreement dated as of June 8,
2000, by and among HealthPlan Services Corporation
and its subsidiaries named therein, and First Union
National Bank; Limited Waiver and Consent dated as of
June 29, 2000; Limited Waiver and Consent dated as of
September 12, 2000; Limited Waiver
33
dated as of September 19, 2000; Limited Waiver and
Consent dated as of September 19, 2000; Limited
Waiver and Consent dated as of October 19, 2000;
Limited Waiver dated as of December 8, 2000; First
Amendment and Limited Waiver and Consent dated as of
March 29, 2001 (incorporated by reference to Exhibit
10.12(d) to the PlanVista Corporation Annual Report
on Form 10-KA, filed on April 20, 2001).
(e) Second Amendment and Limited Waiver and Consent by
and among HealthPlan Services Corporation, First
Union National Bank, and other lenders named therein
dated as of April 16, 2001; Limited Waiver and
Consent by and among HealthPlan Services Corporation,
First Union National Bank, and other lenders named
therein, dated as of April 30, 2001; Limited Waiver
and Consent by and among HealthPlan Services
Corporation, First Union National Bank, and other
lenders named therein, dated as of May 4, 2001;
Limited Waiver and Extension by and among PlanVista
Corporation (f/k/a HealthPlan Services Corporation),
First Union National Bank, and other lenders named
therein, dated as of June 15, 2001; Third Amendment
and Limited Waiver Extension by and among PlanVista
Corporation (f/k/a HealthPlan Services Corporation),
First Union National Bank, and other lenders named
therein, dated as of July 2, 2001.
(f) Forbearance Agreement dated as of September 1, 2001
by and among PlanVista Corporation, First Union
National Bank, and other lenders named therein
(incorporated by reference to the PlanVista
Corporation Form 8-K, filed on September 17, 2001).
(g) First Amendment to Forbearance Agreement dated as of
September 30, 2001, by and among PlanVista
Corporation, First Union National Bank, and other
lenders named therein; Second Amendment and Limited
Waiver to Forbearance Agreement dated as of October
19, 2001, by and among PlanVista Corporation, First
Union National Bank, and other lenders named therein;
Third Amendment and Limited Waiver to Forbearance
Agreement dated as of November 11, 2001, by and among
PlanVista Corporation, First Union National Bank, and
other lenders named therein (incorporated by
reference to Exhibit (a) to the PlanVista Corporation
Quarterly Report on Form 10-QA, filed on November 14,
2001).
(h) Fourth Amendment and Limited Waiver to Forbearance
Agreement dated as of December 14, 2001, by and among
PlanVista Corporation, First Union National Bank, and
other lenders named therein; Fifth Amendment and
Limited Waiver to Forbearance Agreement dated as of
January 31, 2002, by and among PlanVista Corporation,
First Union National Bank, and other lenders named
therein; Sixth Amendment to Forbearance Agreement
dated as of March 15, 2002, by and among PlanVista
Corporation, First Union National Bank, and other
lenders named therein.
(i) Third Amended and Restated Credit Agreement dated as
of April 12, 2002, by and among PlanVista
Corporation, Wachovia National Association (f/k/a
First Union National Bank), and other lenders named
therein.
(j) Series C Convertible Preferred Stock Issuance and
Restructuring Agreement dated as of April 12, 2002,
by and among PlanVista Corporation, Wachovia National
Association, as administrative agent, and other
lenders named therein.
(k) Stockholders Agreement dated as of April 12, 2002, by
and among PlanVista Corporation and the Series C
Stockholders named therein.
(l) Certificate of Designation of Series and
Determination of Rights and Preferences of Series C
Convertible Preferred Stock of PlanVista Corporation
as filed with the Secretary of State of Delaware on
April 8,2002.
(m) Letter Agreement dated April 12, 2002 by and among
PlanVista Corporation, Wachovia National Association,
as administrative agent, and other lenders named
therein.
34
10.14 Deferred Compensation Agreement between R.E. Harrington, Inc.
and Robert R. Parker dated May 15, 1987 (compensatory plan)
(incorporated by reference to Exhibit 10.17 to the HealthPlan
Services Corporation 1997 Annual Report on Form 10-K filed on
March 30, 1998).
10.15 Employment and Noncompetition Agreement, dated July 1, 1996 by
and between Consolidated Group, Inc. and Timothy T. Clifford
(management contract) (incorporated by reference to Exhibit
10.20 to the HealthPlan Services Corporation 1996 Annual
Report on Form 10-K filed on March 31, 1997).
10.16 Amended and Restated HealthPlan Services Corporation 1997
Directors Equity Plan (compensatory plan) (incorporated by
reference to Exhibit 4.3 to the HealthPlan Services
Corporation Form S-8 Registration Statement #333-31915, filed
on July 23, 1997).
10.17 HealthPlan Services Corporation 1998 Officer Bonus Plan
Summary (compensatory plan) (substantially similar to 1999 and
2000 plans).
10.18 Administrative Services and Business Transfer Agreement
between the HealthPlan Services Corporation and TMG Life
Insurance Company, dated December 4, 1996 (incorporated by
reference to Exhibit 10.21 to the HealthPlan Services
Corporation 1997 Annual Report on Form 10-K filed on March 30,
1998).
10.19 Deferred Compensation Plan of R.E. Harrington, Inc. dated
January 1, 1998 (compensatory plan) (incorporated by reference
to Exhibit 10.19 to the HealthPlan Services Corporation 1998
Annual Report and Form 10-K filed on March 30, 1999).
10.20 Management Agreement dated February 28, 1998 among Midwestern
United Life Insurance Company, HealthPlan Services, Inc., and
Connecticut General Life Insurance Company (incorporated by
reference to Exhibit 10.20 to the HealthPlan Services
Corporation 1998 Annual Report and Form 10-K filed on March
30, 1999).
10.21 Administration Services Agreement dated July 1, 1997 between
Seaboard Life Insurance Company and HealthPlan Services, Inc.
(incorporated by reference to Exhibit 10.21 to the HealthPlan
Services Corporation 1998 Annual Report and Form 10-K filed on
March 30, 1999).
10.22 Services Agreement effective February 1, 1998 by and among
Provident Indemnity Life Insurance Company, and Provident
American Life and Health Insurance Company, HealthPlan
Services Corporation, and HealthPlan Services, Inc.
(incorporated by reference to Exhibit 10.22 to the HealthPlan
Services Corporation 1998 Annual Report and Form 10-K filed on
March 30, 1999).
10.23 Administration Services Agreement dated as of July 29, 1999,
by and between United Benefit Life Insurance Company and
HealthPlan Services, Inc. [Do we still need this?]
10.24 Employment and Noncompetition Agreement dated as of June 1,
2000, by and between HealthPlan Services Corporation and
Phillip S. Dingle, including Amendment thereto dated January
30, 2001 (management contract) (incorporated by reference to
Exhibit 10.24 to the PlanVista Corporation Annual Report on
Form 10-KA, filed on April 20, 2001).
[Do we need to add Jeff's?]
10.25 Agreement dated January 6, 2001, between HealthPlan Services
Corporation, Tatum CFO Partners, LLP, and Reid Johnson
(management contract) (incorporated by reference to Exhibit
10.25 to the PlanVista Corporation Annual Report on Form 10-
KA, filed on April 20, 2001).
11.1 Statement regarding computation of per share earnings: not
required because the relevant computations can be clearly
determined from the material contained in the financial
statements included herein.
35
21.1 Subsidiaries of the registrant (incorporated by reference to
Exhibit 21.1 to the PlanVista Corporation Annual Report on
Form 10-KA, filed on April 20, 2001).
23.1 Consent of PricewaterhouseCoopers LLP.
(b) We filed the following Current Report on Form 8-K during the
twelve months ended December 31, 2001:
Form 8-K Current Report, filed on April 4, 2001, regarding the
Stock Purchase Agreement with HealthPlan Holdings, Inc.,
effective April 1, 2001.
Form 8-K Current Report, filed on April 20, 2001, regarding
the Company's name change and trading symbol change effective
April 19, 2001.
Form 8-K Current Report, filed on July 3, 2001, regarding the
sale of the Company's third party administration and managing
general agent underwriter business units, effective June 18,
2001.
Form 8-K Current Report, filed on July 9, 2001, regarding the
Third Amendment and Limited Waiver dated July 2, 2001.
Form 8-K Current Report, filed on September 17, 2001,
regarding the Forbearance Agreement dated September 1, 2001.
Form 8-K Current Report, filed on January 25, 2002, regarding
the agreement with its lenders on the Key Terms and Conditions
for Restructured Credit Facilities.
36
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, PlanVista Corporation has duly caused this Annual Report
on Form 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Tampa, State of Florida, on the 15th day of April,
2002.
PLANVISTA CORPORATION
By: /s/ Phillip S. Dingle
------------------------------------
Phillip S. Dingle
Chairman and Chief Executive Officer
(Principal Executive Officer)
By: /s/ Donald W. Schmeling
------------------------------------
Donald W. Schmeling
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints William L. Bennett, Phillip S. Dingle,
and Donald W. Schmeling his or her true and lawful attorneys-in-fact and agents,
each acting alone, with full power of substitution and resubstitution, for him
or her in his or her name, place, and stead, in any and all capacities, to sign
any or all amendments to this Annual Report on Form 10-K, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, and hereby
ratifies and confirms all that said attorneys-in-fact and agents, each acting
alone, or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report on Form 10-K has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Phillip S. Dingle Chairman of the Board and Chief April 15, 2002
- --------------------------- Executive Officer
Phillip S. Dingle
/s/ William L. Bennett Vice Chairman of the Board April 15, 2002
- ---------------------------
William L. Bennett
/s/ Martin L. Garcia Director April 15, 2002
- ---------------------------
Martin L. Garcia
/s/ John D. Race Director April 15, 2002
- ---------------------------
John D. Race
37
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
and Stockholders of
PlanVista Corporation
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in stockholders' equity
(deficit) and comprehensive income and of cash flows present fairly, in all
material respects, the financial position of PlanVista Corporation and its
subsidiaries (PlanVista or the Company) at December 31, 2001 and 2000, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of PlanVista's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As further described in Note 2, the Company signed an agreement on April 12,
2002, with its lenders to restructure principally all of its outstanding debt,
including the conversion of $ 29 million of debt into preferred stock. The new
credit facility matures in two years and contains restrictive financial
covenants relating the Company's operations.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
April 15, 2002
Tampa, Florida
F-1
PLANVISTA CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands except share amounts)
December 31,
--------------------------------------
2001 2000
----------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents................................................... $ 395 $ 482
Accounts receivable, net of allowance for doubtful Accounts of $6,236 and
$3,300, respectively...................................................... 7,319 6,854
Prepaid expenses and other current assets................................... 327 971
Refundable income taxes..................................................... 608 2,251
Deferred taxes.............................................................. - 3,523
----------------- -----------------
Total current assets................................................ 8,649 14,081
Property and equipment, net................................................... 1,804 2,160
Other assets, net............................................................. 267 1,870
Deferred taxes................................................................ - 25,895
Investments................................................................... - 2,411
Intangible assets, net........................................................ 29,405 30,783
Net noncurrent assets associated with discontinued operations................. - 27,468
----------------- -----------------
Total assets........................................................ $ 40,125 $ 104,668
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable............................................................ $ 3,308 $ 1,056
Accrued liabilities......................................................... 12,934 13,165
Current portion of long-term debt........................................... 308 61,133
Net current liabilities associated with discontinued operations............... - 43,586
----------------- -----------------
Total current liabilities........................................... 16,550 118,940
Long-term debt and notes payable.............................................. 75,778 4,905
Other long-term liabilities................................................... 1,087 1,163
----------------- -----------------
Total liabilities................................................... 93,415 125,008
----------------- -----------------
Stockholders' equity (deficit):
Common stock, $0.01 par value, 100,000,000 authorized, 15,445,880 shares
issued at December 31, 2001 and,
15,205,984 at December 31, 2000.......................................... 154 152
Additional paid-in capital.................................................. 92,335 110,417
Treasury stock at cost, 13,597 shares at December 31, 2001
and 1,519,400 at December 31, 2000......................................... (265) (30,006)
Deficit..................................................................... (145,514) (100,293)
Unrealized depreciation on investments
available for sale, net of tax............................................. - (610)
----------------- -----------------
Total stockholders' equity (deficit)................................ (53,290) (20,340)
----------------- -----------------
Total liabilities and stockholders' equity.......................... $ 40,125 $ 104,668
================= =================
The accompanying notes are an integral part of these consolidated
financial statements.
F-2
PLANVISTA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
Year Ended December 31,
---------------------------------------------------------
2001 2000 1999
---------------- --------------- ----------------
Operating revenues................................................... $ 32,918 $ 26,964 $ 18,691
---------------- --------------- ----------------
Expenses:
Agent commissions.................................................. 308 295 110
Personnel expenses................................................. 9,137 8,301 8,189
General and administrative expenses:
Network access fees............................................. 5,343 3,896 2,521
Bad debt expense................................................ 3,348 649 624
Other general and administrative................................ 6,213 3,993 4,087
Loss on impairment of intangible assets............................ - 5,513 -
Other (income) expenses............................................ (47) 1,120 -
Loss (gain) on sale of investments, net............................ 2,503 (332) (4,630)
Depreciation and amortization...................................... 1,845 1,683 1,927
Interest expense................................................... 12,098 10,489 7,737
Interest income.................................................... (128) (252) (373)
Equity in loss of joint ventures................................... - - 208
---------------- --------------- ----------------
Total expenses................................................ 40,620 35,355 20,400
---------------- --------------- ----------------
Loss before provision (benefit) for income taxes, minority interest,
discontinued operations, extraordinary loss, and
cumulative effect of change in accounting principle............... (7,702) (8,391) (1,709)
Provision (benefit) for income taxes................................. 26,811 (3,263) (718)
---------------- --------------- ----------------
Loss before minority interest, discontinued operations,
loss on sale of assets, extraordinary item and cumulative
effect of change in accounting principle.......................... (34,513) (5,128) (991)
Minority interest.................................................... - - 50
---------------- --------------- ----------------
Loss before discontinued operations, loss on sale of
assets, extraordinary item and cumulative effect of
change in accounting principle.................................... (34,513) (5,128) (1,041)
Gain (loss) from discontinued operations, net of taxes............... (555) (58,804) 1,145
Loss on sale of discontinued operations, net of taxes................ (10,077) (39,333) -
Extraordinary loss, net of taxes..................................... - (954) -
Cumulative effect of change in accounting principle,
net of taxes...................................................... (76) (258) -
---------------- --------------- ----------------
Net (loss) income.................................................... $ (45,221) $ (104,477) $ 104
================ =============== ================
Basic (loss) earnings per share of Common Stock:
Loss from continuing operations................................... $ (2.37) $ (0.37) $ (0.08)
(Loss) earnings from discontinued operations...................... (0.04) (4.30) 0.09
Loss from sale of discontinued operations......................... (0.70) (2.88) -
Extraordinary loss................................................ - (0.07) -
Cumulative effect of change in accounting principle............... - (0.02) -
---------------- --------------- ----------------
Net (loss) earnings............................................... $ (3.11) $ (7.64) $ 0.01
================ =============== ================
Basic weighted average number of shares outstanding................... 14,558 13,679 13,742
================ =============== ================
Diluted (loss) earnings per share of Common Stock:
Loss from continuing operations................................... $ (2.37) $ (0.37) $ (0.08)
(Loss) earnings from discontinued operations...................... (0.04) (4.30) 0.09
Loss from sale of discontinued operations......................... (0.70) (2.88) -
Extraordinary loss................................................ - (0.07) -
Cumulative effect of change in accounting principle............... - (0.02) -
---------------- --------------- ----------------
Net (loss) earnings............................................... $ (3.11) $ (7.64) $ 0.01
================ =============== ================
Diluted weighted average number of shares outstanding................ 14,558 13,679 13,922
================ =============== ================
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
PLANVISTA CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) AND
COMPREHENSIVE INCOME
(in thousands except share amounts)
Unrealized
Appreciation
on
Voting Additional Retained Investments
Comprehensive Common Paid-in Treasury Earnings Available
Income Stock Capital Stock (Deficit) for Sale Total
------------- --------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 1998........... $ 152 $109,887 $(28,088) $ 9,736 $ (35) $ 91,652
Refund of overpayment in connection
with stock option plan.............. - (13) - - - (13)
Issuance of 16,143 shares in
connection with the employee
stock purchase plan................. - 81 - - - 81
Cash dividends declared................ - - - (5,656) - (5,656)
Purchase of 242,700 treasury shares.... - - (1,918) - - (1,918)
Tax benefit on exercise of shares in
connection with stock option plans.. - 402 - - - 402
Net income............................. $ 104 - - - 104 - 104
Unrealized appreciation on investment
available for sale.................. 1,629 - - - - 1,629 1,629
-------------
Comprehensive income................... $ 1,733
============= --------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 1999........... 152 110,357 (30,006) 4,184 1,594 86,281
Issuance of 1,718 shares in
connection with the directors'
compensation plan................... - 20 - - - 20
Issuance of 12,708 shares in
connection with the employee
stock purchase plan................. - 37 - - - 37
Issuance of 1,100 shares in connection
with stock option plans............. - 3 - - - 3
Net loss............................... $ (104,477) - - - (104,477) - (104,477)
Unrealized depreciation on
investment available for sale....... (2,204) - - - - (2,204) (2,204)
-------------
Comprehensive loss..................... $ (106,681)
============= --------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 2000........... 152 110,417 (30,006) (100,293) (610) (20,340)
Issuance of 8,725 shares in
connection with the directors'
compensation plan................... - 57 - - - 57
Issuance of 2,051 shares in
connection with the employee
stock purchase plan................. - 22 - - - 22
Issuance of 189,301 shares in
connection with stock option plans.. 2 480 - - - 482
Issuance of 1,011,071 shares
in connection with the sale of
businesses.......................... - (11,905) 19,205 - - 7,300
Issuance of 533,500 shares in
connection with a private placement
with a related party................ - (6,736) 10,536 - - 3,800
Net loss............................... $ (45,221) - - - (45,221) - (45,221)
Unrealized depreciation on investment
available for sale.................. 610 - - - - 610 610
-------------
Comprehensive loss..................... $ (44,611)
============= --------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 2001........... $ 154 $ 92,335 $ (265) $145,514) $ - $ (53,290)
========= ========== ========== ========== ========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
PLANVISTA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Year Ended December 31,
---------------------------------
2001 2000 1999
---------- -------- -------
Cash flows from operating activities:
Net (loss) income ............................................. $ (45,221) $(104,477) $ 104
Losses from discontinued operations ........................... 10,632 -- --
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Depreciation ................................................ 467 5,179 7,512
Amortization ................................................ 1,378 9,623 9,235
Loss on impairment of goodwill .............................. -- 80,250 --
Loss (gain) on sale of investments .......................... 2,503 (332) (4,630)
Write-off of internally developed software .................. -- 7,702 --
Loss on sale of assets ...................................... -- 41,967 --
Equity in loss of joint ventures ............................ -- -- 208
Minority interest ........................................... -- -- 245
Deferred taxes .............................................. 29,418 (26,483) (3)
Changes in assets and liabilities:
Restricted cash ............................................. -- 3 11,369
Accounts receivable ......................................... (465) 3,285 (2,025)
Refundable income taxes ..................................... 1,643 -- --
Prepaid expenses and other current assets ................... 644 438 (531)
Other assets ................................................ 1,603 (2,926) (79)
Cash overdraft .............................................. -- (1,188) 1,188
Accounts payable ............................................ 2,252 (1,608) (9,540)
Premiums payable to carriers ................................ -- 10,256 (4,216)
Commissions payable ......................................... -- (1,539) (370)
Deferred revenue ............................................ -- (995) (1,944)
Accrued liabilities ......................................... (14,681) (14,322) 7,925
Income taxes payable ........................................ -- (1,584) (1,429)
Other long-term liabilities ................................. (76) -- --
--------- --------- ---------
Net cash (used in) provided by operating activities....... (9,903) 3,249 13,019
--------- --------- ---------
Cash flows from investing activities:
Purchases of property and equipment ......................... (111) (4,789) (7,996)
Cash paid for acquisitions, net of cash acquired ............ -- (3,054) (8,674)
Proceeds from sale of business units ........................ -- 33,656 --
Proceeds from sale of investments ........................... 518 936 8,013
Purchases of investments .................................... -- -- (919)
Receivable from sale of investment, net ..................... -- -- (375)
Proceeds from notes receivable .............................. -- -- 3,498
--------- --------- ---------
Net cash provided by (used in) investing activities....... 407 26,749 (6,453)
--------- --------- ---------
Cash flows from financing activities:
Net borrowings (payments) under line of credit .............. 6,143 (29,101) (1,000)
Net payments on other debt .................................. (1,095) (455) (732)
Cash dividends paid ......................................... -- -- (7,566)
Repurchase of common stock .................................. -- -- (1,918)
Proceeds from common stock issued ........................... 4,361 40 68
--------- --------- ---------
Net cash provided by (used in) financing activities....... 9,409 (29,516) (11,148)
--------- --------- ---------
Net (decrease) increase in cash and cash equivalents .......... (87) 482 (4,582)
Cash and cash equivalents at beginning of year ................ 482 -- 4,582
--------- --------- ---------
Cash and cash equivalents at end of year ...................... $ 395 $ 482 $ --
========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid for interest ...................................... $ 4,550 $ 9,544 $ 7,140
========= ========= =========
Net (refunds received) cash paid for income taxes............ $ (2,607) $ (1,728) $ 3,575
========= ========= =========
Noncash investing and financing activities
Sale of business units:
Notes issued ................................................ $ 5,000 $ -- $ --
Common stock issued ......................................... $ 7,300 $ -- $ --
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
PLANVISTA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
1. Description of Business
PlanVista Corporation, formerly known as HealthPlan Services
Corporation (together with its wholly owned subsidiaries, "PlanVista" or
"Company"), is a leading provider of technology-enabled medical cost management
solutions for the healthcare industry. We provide integrated national Preferred
Provider Organization (sometimes called PPO) network access, electronic claims
repricing, and claims and data management services to health care payers, such
as self-insured employers, medical insurance carriers, health maintenance
organizations (sometimes called HMOs), third party administrators and other
entities that pay claims on behalf of health plans, and health care services
providers, including individual providers and provider networks.
2. Bank Restructure, Reorganization, and Related Subsequent Events
In June 2000, PlanVista initiated a plan of reorganization designed to
divest certain of its underperforming and non-growth businesses and to reduce
and refinance its credit facility. Effective June 18, 2001, PlanVista sold the
last of these non-strategic businesses (as further described below) and during
2001 pursued the restructuring of its remaining debt. The majority of this debt
matured on August 31, 2001, at which time we defaulted on the maturity payment.
Effective September 1, 2001 we entered into a Forbearance Agreement, as amended
("Forbearance Agreement"), with our lending group that gave the Company until
March 29, 2002 to repay or restructure this debt. On April 12, 2002, we
completed the restructuring of our debt, whereby we restructured $69.0 million
of outstanding indebtedness to our lenders, including outstanding principal and
accrued and unpaid interest and bank fees. This indebtedness was restructured
with our current lenders whereby we entered into a $40.0 million term loan with
an annual interest rate of prime plus 1.0% and issued $29.0 million of
convertible preferred stock and an additional promissory note in the amount of
$184,872.00.
The term loan agreement contains certain financial covenants including
minimum monthly EBITDA levels, maximum quarterly and annual capital
expenditures, a minimum quarterly fixed charge ratio, and maximum quarterly and
annual extraordinary expenses (as defined in the term loan agreement). The
Series C Preferred Stock accrue dividends at 10% per annum during the first 12
months from issuance and at a rate of 12% per annum thereafter. Dividends are
payable quarterly in additional shares of convertible preferred stock. At any
time after 18 months from the date of issuance, the Series C Preferred Stock may
be converted into shares of the Company's common stock at an amount determined
by formula to equal 51% of the outstanding shares of the Company's common stock.
In addition, the Series C Preferred Stockholders are entitled to elect three
members to the Company's board of directors. The Certificate of Designation for
the Series C Preferred Stock also contains provisions that permits the
Convertible Preferred Stockholders to immediately elect one additional member to
the Company's board of directors to replace one of the board members elected by
the Company's common shareholders if the Company fails to achieve certain
minimum cash levels as defined under the Agreement or the Company fails to make
its required principal and interest payments in accordance with the terms of the
Agreement. The issuance of the Series C Preferred Stock was not put to
stockholder approval in reliance on an applicable exception to the shareholder
approval policy of the New York Stock Exchange. Stockholders were notified prior
to the closing of the transaction of the Company's reliance on such exception.
In connection with the issuance of the Series C Preferred Stock, the Senior
Lenders entered into a Stockholders Agreement with the Company which provides,
among other things, for registration rights in connection with the sale of any
shares of Common Stock which are issued upon conversion of the Series C
Preferred Stock. The registration rights include demand and incidental
registration rights. In addition, as described below, $5.0 million of
subordinated debt was converted to common stock, we extended the maturity date
of $4.0 million of subordinated debt by over two years, and approximately $2.5
million of obligations was converted to $1.5 million of common stock and a
$950,000 credit for in-kind services (see Note 10).
Prior to June 18, 2001, the Company maintained two operating units, one
of which was our PlanVista Solutions segment that included PlanVista's MGU
business. The other unit was our TPA segment, which was operated primarily
through our HealthPlan Services, Inc. ("HPS"), American Benefit Plan
Administrators, Inc. ("ABPA"), and Southern Nevada Administrators, Inc. ("SNA")
subsidiaries, provided marketing, distribution, administration, and
F-6
technology platform services for health care plans and other benefit programs.
PlanVista functions solely as a service provider generating fee-based income and
does not assume any underwriting risk.
On June 18, 2001, we completed the sale of our TPA and managing general
underwriter business units to HealthPlan Holdings, Inc. ("HPHI"), an
affiliate of Sun Capital Partners, Inc. The TPA business includes the Small
Group Business operations and its associated data processing facilities based in
Tampa, Florida, as well as the Taft-Hartley businesses that operate under the
names ABPA and SNA, based in El Monte, California and Las Vegas Nevada,
respectively. The MGU business is the Philadelphia based Montgomery Management
Corporation. The accompanying financial statements have been restated to reflect
the operations of the business units described above as discontinued.
In connection with this non-cash transaction, HPHI assumed
approximately $40 million in working capital deficit of the acquired businesses,
$5 million of which was offset by a long-term convertible subordinated note that
was converted to common stock on April 12, 2002 in connection with the
restructuring of our credit facilities as described above. In addition, at the
closing of the sale to HPHI, the Company issued 709,757 shares of the Company's
common stock to offset an additional $5 million of the assumed deficit. An
additional 101,969 shares were issued as penalty shares pursuant to the terms of
a letter agreement settling certain post closing disputes. The purchase
agreement contains customary representations, warranties, and cross indemnity
provisions.
In connection with the issuance of these shares, the Company entered
into a Registration Rights Agreement in favor of HPHI for the registration of
such shares and any shares issuable under the terms of the note. Because the
registration statement we filed with the Securities and Exchange Commission
covering such shares has not been declared effective, pursuant to the terms of
the Registration Rights Agreement, HPHI had the right to redeem for cash a
number of the shares covered by such registration statement equal to one hundred
thousand dollars ($100,000.00) divided by the average closing price of the
Company's Common Stock on the New York Stock Exchange during the ten (10)
trading days immediately preceding the last trading day prior to October 1,
2001. Pursuant to the Registration Rights Agreement, HPHI made demand for
redemption after the Company failed to get the required registration statement
effective. The Company, however, is not permitted to redeem the shares at this
time under the terms of the Credit Agreement with its lenders. As a result,
under the terms of the Registration Rights Agreement, the Company was required
to issue 100,000 shares of the Company's Common Stock, 98,345 of which was
issued in 2001, and the remainder was issued on January 2, 2002, the value of
which was charged to loss on sale of discontinued operations. Such issuances
were in lieu of HPHI's right to redemption. In addition to these issuances, if
the shares were not registered pursuant to an effective registration statement
by December 31, 2001, then upon such date and each fifteenth day thereafter
until such shares become registered , the Company is required to deliver to HPHI
10,000 shares of its Common Stock according to the terms of the Registration
Rights Agreement. The total issuable shares as a result of such issuances are
limited to 100,000. As of April 1, 2002, the Company has issued 70,000 shares of
common stock, the value of which will be reflected as interest expense.
We are currently in discussions with Sun Capital Partners to finalize
any purchase price adjustments associated with this sale. These adjustments
relate primarily to the amount of accrued liabilities and trade accounts
receivable reserves, and the classification of investments at the transaction
date. Sun Capital Partners believes it is due approximately $1.7 million from
the Company related to this transaction, while the Company believes it is due
approximately $4.5 million from Sun Capital. In the event we are unable to
resolve these matters directly with Sun Capital, we will seek to resolve them
through binding arbitration as provided for in the purchase agreement. We
believe the resolution of this matter will not have a material adverse effect on
the financial condition, results of operations or cash flows of the Company.
Also, as part of the transaction noted above, the Company is leasing
office space in its Tampa headquarters from Sun Capital Partners. This lease
expires in June 2002.
We believe that all consolidated operating and financing obligations
for the next twelve months will be met from internally generated cash flow from
operations and available cash. Based on available information, management
believes it will be able to maintain compliance with the terms of its
restructured credit facility, including the financial covenants for the
foreseeable future. Our ability to fund our operations, make scheduled payments
of interest and principal on our indebtedness, and maintain compliance with the
terms of its restructured credit facility, including its financial covenants,
depends on our future performance, which is subject to economic, financial,
competitive, and other factors beyond our control. If we are unable to generate
sufficient cash flows from operations to meet our financial obligations and
achieve the restrictive debt covenants as required under the restructured credit
facility, there may be a material adverse effect on our business, financial
condition and results of operations, and a significant adverse effect on the
market value of our common stock. Management is continuing to
F-7
explore alternatives to reduce its obligations, recapitalize the Company, and
provide additional liquidity. There can be no assurances that the Company will
be successful in these endeavors.
3. Summary of Significant Accounting Policies
Use of Estimates
PlanVista Corporation prepares its consolidated financial statements in
conformity with generally accepted accounting principles. These principles
require management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of PlanVista
Corporation and its subsidiaries. All intercompany transactions and balances
have been eliminated in consolidation.
Revenue Recognition
We earn revenues in the form of fees generated from the repricing of
medical claims. We generally enter into agreements with our health benefit
payers payer clients that require them to pay a percentage of the cost savings
realized from PlanVista's network discounts with participating providers. These
agreements are generally terminable upon 90 days notice. During 2001, three
clients and their affiliates accounted for an aggregate of 24.6% of our net
revenues. The loss of any of these client groups could have a material adverse
effect on the segment's financial results. In 2001 over 92% of our revenues were
generated from percentage of savings contracts with our customers. Revenues from
percentage of savings contract are recognized when claims processing and
administrative services have been performed. Revenues from customers with
certain contingent contractual rights and revenues based on a percentage of
collected cash are not recognized until the corresponding cash is collected. The
remainder of our revenues is generated from customers that pay us a monthly fee
based on eligible employees enrolled in a benefit plan covered by our health
benefits payers clients. Revenues under such agreements are recognized based
when the services are provided.
Cash and cash equivalents
Cash and cash equivalents are defined as highly liquid investments that
have original maturities of three months or less.
Accounts Receivable
We generate our revenue and related accounts receivable from services
provided to healthcare payers, such as self-insured employers, medical insurance
carriers, health maintenance organizations (sometimes called HMOs), third party
administrators and other entities that pay claims on behalf of health plans, and
participating health care services providers which include individual providers
and provider networks.
We evaluate the collectibility of our accounts receivable based on a
combination of factors. In circumstances where we are aware of a specific
customer's inability to meet its financial obligations to us, we record a
specific reserve for bad debts against amounts due to reduce the net recognized
receivable to the amount we reasonably believe will be collected. For all other
customers, we recognize reserves for bad debts based on past write-off history,
average percentage of receivables written off historically and the length of
time the receivables are past due. To the extent historical credit experience is
not indicative of future performance or other assumptions used by management do
not prevail, loss experience could differ significantly, resulting in either
higher or lower future provision for losses.
F-8
Prepaid expenses and other current assets
Prepaid expenses and other current assets consist primarily of prepaid
insurance, postage, repair and maintenance contracts and debt restructuring
costs.
Impairment of Long-Lived Assets
The excess of cost over the fair value of net assets acquired is
recorded as goodwill and amortized on a straight-line basis over 25 years.
We evaluate the carrying value of our goodwill for impairment whenever
indicators of impairment exist. If we determine that such indicators are
present, we then prepare an undiscounted future net cash flow projection for the
asset. In preparing this projection, we must make a number of assumptions
concerning such things as, for example, future booking volume levels, price
levels, commission rates, rates of growth in our online booking businesses and
rates of increase in operating expenses. If our projection of future net cash
flows is in excess of the carrying value of the recorded asset, no impairment is
recorded. If the carrying value of the asset exceeds the projected undiscounted
net cash flows, an impairment is recorded. The amount of the impairment charge
is determined by discounting the projected net cash flows.
In 2000, PlanVista recorded a $5.5 million impairment of goodwill.
Through the end of 2001, we evaluated goodwill for impairment based on
undiscounted projected future cash flows. If the carrying value of the goodwill
is less than the undiscounted projected future cash flows, no impairment would
be recognized.
Property and equipment
Property and equipment is stated at cost. Costs of the assets acquired
have been recorded at their respective fair values at the date of acquisition.
Expenditures for maintenance and repairs and research and development costs are
expensed as incurred. Major improvements that increase the estimated useful life
of an asset are capitalized. Depreciation is computed using the straight-line
method over the following estimated useful lives the related assets:
Years
-----
Furniture and fixtures 3-10
Computers and equipment 2-5
Computer software 3 or expected life
Leasehold improvements Lease term
Stock-based compensation
PlanVista applies the intrinsic value method currently prescribed by
Accounting Principles Board Opinion No. 25 ("APB 25") and discloses the pro
forma effects of the fair value based method, as prescribed by Statement of
Financial Accounting Standards No. 123.
Income taxes
The Company recognizes deferred assets and liabilities for the expected
future tax consequences of temporary differences between the carrying amounts
and the tax bases of assets and liabilities. A valuation allowance is provided
when it is more likely than not that some portion of the deferred tax asset will
not be realized.
F-9
Earnings per share
Basic earnings per share is calculated by dividing the income or loss
available to common stockholders by the weighted average number of shares
outstanding for the period, without consideration for common stock equivalents.
The calculation of diluted earnings per share reflects the effect of outstanding
options and warrants using the treasury stock method, unless antidilutive.
Estimated fair value of financial instruments
Statement of Financial Accounting Standards No. 107, "Disclosure about
Fair Value of Financial Instruments," requires the disclosure of the fair value
of financial instruments, including assets and liabilities recognized and not
recognized in the consolidated statements of financial condition.
Management estimates that the aggregate net fair value of other
financial instruments recognized on the consolidated statements of financial
condition (including cash and cash equivalents, receivables and payables and
short-term borrowings) approximates their carrying value, as such financial
instruments are short-term in nature, bear interest at current market rates or
are subject to repricing.
Derivative financial instruments
During 2001 PlanVista used derivative financial instruments including
interest rate swaps principally in the management of its interest rate
exposures. Amounts to be paid or received under interest rate swap agreements
were accrued as interest rates change and were recognized over the life of the
swap agreements as an adjustment to interest expense.
We managed interest rate risk on our variable rate debt by using
interest rate swap agreements. The agreements, which expired in September 2001
and December 2001, effectively converted $40.0 million of variable rate debt
under the Credit Agreement to fixed rate debt at a weighted average rate of
6.18%.
On June 15, 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." PlanVista adopted SFAS 133 in the first
quarter of 2001. SFAS 133 requires that all derivative instruments be recorded
on the balance sheet at their fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designated as part of a hedge
transaction and, if it is, the type of hedge transaction. During the twelve
months ended December 31, 2001, PlanVista recorded a $47,000 pretax change in
the market value of the interest rate swaps from December 31, 2000. It also
recorded a $47,000 expense, net of taxes, as a cumulative effect of change in
accounting principle representing the fair value of the interest rate swaps at
January 1, 2001.
New accounting pronouncements
In July 2001, the Financial Accounting Standards Board (FASB) issued
SFAS No. 141, "Business Combinations" and SFAS No. 142 "Goodwill and Other
Intangible Assets." SFAS No. 141 requires business combinations initiated after
June 30, 2001 to be accounted for using the purchase method of accounting, and
broadens the criteria for recording intangible assets separate from goodwill.
Recorded goodwill and intangibles will be evaluated against this new criteria
and may result in certain intangibles being subsumed into goodwill, or
alternatively, amounts initially recorded as goodwill may be separately
identified and recognized apart from goodwill. SFAS No. 142 requires the use of
a nonamortization approach to account for purchased goodwill and certain
intangibles. Under a nonamortization approach, goodwill and certain intangibles
will not be amortized into results of operations, but instead would be reviewed
for impairment and written down and charged to results of operations only in the
periods in which the recorded value of goodwill and certain intangibles is more
than its fair value. The provisions of each statement, apply to goodwill and
intangible assets acquired prior to June 30, 2001. These new requirements will
impact future period net income by an amount equal to the discontinued goodwill
amortization offset by goodwill impairment charges, if any, and adjusted for any
differences between the old and new rules for defining intangible assets on
future business combinations. An initial impairment test must be
F-10
performed in 2002 as of January 1, 2002. We are evaluating the impact of the
adoption of these standards but have not yet determined the full effect of these
recent accounting pronouncements on our financial position and results of
operations. Amortization expense was $1.4 million in 2001.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets that result from the acquisition, construction, development or normal
operations of a long-lived asset. SFAS No. 143 is effective for fiscal years
beginning after June 15, 2002. Management does not believe SFAS No. 143 will
have a significant effect on the financial position, results of operations or
liquidity of the Company.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supersedes and amends
SFAS No. 121 and relevant portions of SFAS No. 30. SFAS No. 144 is required to
be adopted on January 1, 2002. We do not expect the adoption of SFAS No. 144 to
have a significant effect on the financial position, results of operations, or
liquidity of the Company.
Reclassifications
On June 18, 2001, PlanVista sold its third party administrative and MGU
business units. PlanVista has reclassified these business units as discontinued
operations in the accompanying financial statements, excluding the consolidated
statements of cash flows.
4. Sale of Assets and Discontinued Operations
On June 18, 2001, PlanVista completed the sale of the TPA and MGU
business units to HealthPlan Holdings, Inc., an affiliate of Sun Capital
Partners, Inc. The TPA business includes the small group business operations and
its associated data processing facilities located in Tampa, FL, as well as the
Taft-Hartley businesses that operate under the name ABPA and SNA, based in EL
Monte, CA and Las Vegas, NV, respectively. The managing general underwriter
business is the Philadelphia based Montgomery Management Corporation. As a
result of the transaction, PlanVista recognized a pretax loss of $9.3 million.
The accompanying financial statements have been restated to reflect the business
units sold as discontinued operations.
In 2000, the Company recorded an $80.3 million impairment of goodwill
and contract rights related to its TPA segment and MGU business.
On October 26, 2000, PlanVista sold its self-funded business unit for
approximately $13.6 million, consisting of $12.1 million cash and the assumption
of additional current liabilities in the amount of $1.5 million. The unit was
headquartered in Columbus, Ohio and operated primarily under the names
Harrington Benefit Services and CENTRA HealthPlan. PlanVista used the net cash
proceeds from the sale to reduce its bank debt by $8.7 million. As a result of
the transaction, PlanVista recognized a pretax loss of $52.5 million. PlanVista
settled contingencies during the fourth quarter of 2000 and recorded an
additional loss of $4.8 million. PlanVista does not believe that there are any
additional material contingencies.
On September 15, 2000, PlanVista sold its Ohio workers' compensation
managed care organization unit for approximately $3.5 million cash. The unit was
part of PlanVista's acquisition of Columbus, Ohio-based Harrington Services
Corporation in 1996. PlanVista used the net cash proceeds from the sale to
reduce its bank debt by $2.8 million. As a result of the transaction, PlanVista
recognized a pretax gain of $3.2 million.
On July 5, 2000, PlanVista sold its unemployment compensation and its
workers' compensation units for approximately $19.1 million cash. PlanVista's
unemployment compensation business operated under the name R.E. Harrington, and
its workers' compensation unit conducted business as Harrington Benefit Services
Workers' Compensation Division. Both units were part of PlanVista's acquisition
of Columbus, Ohio-based Harrington Services Corporation in 1996. PlanVista used
the net cash proceeds from the sale to reduce its bank debt by $18.0 million. As
a result of the transaction, PlanVista recognized a pretax gain of $7.3 million.
F-11
On April 14, 2000, PlanVista agreed to terminate its merger agreement
with UICI. As a result, it expensed $1.1 million of costs including legal,
financial advisory and other fees, associated with this transaction in the
second quarter 2000.
Summarized financial position and operating results of the discontinued
business units for the years ended December 31, 2001, 2000 and 1999 are as
follows:
Year Ended December 31,
2001 2000 1999
-------- ---------- ----------
Net revenues ................................ $ 36,427 $ 157,867 $ 202,919
======== ========== ==========
(Loss) income from discontinued operations
before income tax (benefit) expense ....... $ (509) $ (82,586) $ 4,006
Income tax (expense) benefit ................ (46) 23,782 (2,861)
-------- ---------- ----------
Income (loss) from discontinued operations .. $ (555) $ (58,804) $ 1,145
======== ========== ==========
Loss on sale of discontinued operations
before income tax expense ................. $ (9,288) $ (42,741) $ --
Income tax (expense) benefit ................ (789) 3,408 --
-------- ---------- -----------
Loss on sale of discontinued operations ..... $(10,077) $ (39,333) $ --
======== ========== ===========
As of December 31,
2000
-----------------
Net assets associated with discontinued operations:
Property and equipment, net .................................... $ 11,038
Other assets ................................................... 2,714
Intangible assets, net of amortization of $3,238 ............... 14,989
Other long-term liabilities .................................... (1,273)
--------------
Net noncurrent assets associated with
discontinued operations ...................................... $ 27,468
==============
Net current liabilities associated with discontinued operations:
Accounts receivable, net of allowance of doubtful
accounts of $2,623 ........................................... $ 7,817
Prepaid expenses ............................................... 1,972
Cash overdraft ................................................. --
Accounts payable ............................................... (1,214)
Premiums payable to carriers ................................... (43,519)
Commissions payable ............................................ (3,124)
Deferred revenue ............................................... (744)
Accrued liabilities ............................................ (4,774)
Current portion of long-term debt .............................. --
--------------
Net current liabilities associated with
discontinued operations ...................................... $ (43,586)
==============
F-12
5. Concentration of Customers
PlanVista is a party to a variety of contracts to provide claims
repricing and other value added services. For the years ended December 31, 2001,
2000 and 1999, Plan Vista's three largest customers accounted for approximately
24.6%, 33.0% and 29.1%, respectively, of total revenues.
6. Property and Equipment
Property and equipment consists of the following (in thousands):
December 31,
----------------------------
2001 2000
------------- -------------
Furniture and fixtures $ 603 $ 525
Computers and equipment 1,039 1,248
Computer software 1,635 1,393
------------- -------------
3,277 3,166
Less accumulated depreciation (1,473) (1,006)
------------- -------------
$ 1,804 $ 2,160
============= =============
PlanVista capitalizes purchased software which is ready for service and
software development costs incurred from the time technological feasibility of
the software is established until the software is ready for use. Costs
associated with the Year 2000 compliance (not associated with other software
modifications), and other computer software maintenance costs related to
software development were expensed as incurred. Software development costs and
costs of purchased software are amortized using the straight-line method over a
maximum of three years or the expected life of the product.
PlanVista regularly reviews the carrying value of capitalized software
assets, and a loss is recognized when the net realizable value falls below the
unamortized cost. In the fourth quarter of 2000, PlanVista wrote off $7.7
million of internally developed software connected with PlanVista's TPA segment
that was previously capitalized. The charge related to client server technology
and other functionality that was programmed for former customers. PlanVista
decided to abandon the client server technology and no longer provides
administration that formed the basis of other programming.
7. Investments
On January 29, 2001, HealthAxis Inc. and HealthAxis.com, Inc. announced
a merger of the two companies effective January 26, 2001. PlanVista owned
1,367,787 shares of the combined companies. In April 2001, PlanVista sold all of
its shares of HealthAxis Inc. stock and realized a net pretax loss on the sale
of approximately $2.5 million.
During 2000, PlanVista sold its remaining shares of Caredata.com and
recorded a pre-tax gain on sale of approximately $0.3 million.
F-13
8. Intangible Assets
On April 1, 2001, PlanVista entered into a definitive agreement to sell its
TPA and MGU business units. Based upon the consideration PlanVista expected to
receive at closing, PlanVista's goodwill and contract rights related to the
business units sold became impaired and PlanVista recorded an $80.3 million
charge for the impairment of intangible assets for the year ended December 31,
2000. This charge included $4.1 million of goodwill related to the 1998
acquisition of Montgomery Management Corporation, $49.0 million of goodwill
related to the 1996 acquisition of Consolidated Group, Inc., $21.1 million of
goodwill related to the 1996 acquisition of American Benefit Plan
Administrators, Inc. which was a part of PlanVista's acquisition of Harrington
Services Corporation, $5.5 million of goodwill related to the 1994 acquisition
of HealthPlan Services, Inc. from the Dun and Bradstreet Corporation, and $0.6
million of contract rights related to the purchase of contract rights related to
blocks of business purchased for the small group business unit.
Intangible assets resulting from the excess of cost over the fair value of
the respective net assets acquired was as follows (in thousands):
December 31,
------------------------------
2001 2000
------------- -------------
PlanVista goodwill $ 34,021 $ 34,021
Less accumulated amortization (4,616) (3,238)
------------- -------------
$ 29,405 $ 30,783
============= =============
9. Accrued Liabilities
Accrued liabilities consist of the following (in thousands):
December 31,
------------------------------
2001 2000
------------ ------------
Accrued interest and fees $ 6,115 $ 148
Accrued compensation and benefits 1,138 1,022
Accrued divestiture reserves 1,918 2,750
Accrued legal and related reserves 2,037 3,928
Accrued restructuring costs 467 1,594
Other 1,259 3,723
------------ ------------
$ 12,934 $ 13,165
============ ============
Accrued restructuring charges consist primarily of accrued severance and
related costs and accrued office closures costs. The Company established
restructuring charges of $0.5 million and $2.2 million in 2001 and 2000,
respectively. The Company paid amounts relating to such restructuring charges
totaling $1.1 million and $0.6 million in 2001 and 2000, respectively.
10. Notes Payable and Credit Facilities
As part of its business strategy, the Company has been pursuing the
restructure of its credit facility. As of December 31, 2001, the Company had
debt outstanding to its lenders totaling approximately $64.7 million and accrued
and unpaid interest and fees totaling approximately $4.2 million. On April 12,
2002 (the "Effective Date"), we closed a transaction for the restructure and
refinancing of our existing bank debt. Under the terms of the Agreement, in
exchange for the outstanding principal, accrued and unpaid interest and fees due
to its lenders, the Company entered into a $40.0 million term loan that accrues
interest at prime plus 1.0% with interest payments due monthly. Quarterly
principal payments of $50,000 are due beginning June 30, 2002 and the term loan
is due in full on May 31, 2004. The term loan is collateralized by substantially
all of the Company's assets. The restructured credit facility does not include a
line of credit or the ability to borrow additional funds. The remainder of the
F-14
amounts due to the lenders was exchanged for approximately $29.0 million of the
Company's Series C Preferred Stock and an additional promissory note in the
amount of $184,872.00. The terms of the Series C Preferred Stock are disclosed
in Note 2. The Agreement contains certain financial covenants including minimum
monthly EBITDA levels, maximum quarterly and annual capital expenditures, a
minimum quarterly fixed charge ratio, and maximum quarterly and annual
extraordinary expenses (as defined in the Agreement). As a result of the
restructuring, the amounts due to the lenders as of December 31, 2001 are
classified as long-term debt in the accompanying consolidated financial
statements.
Prior to the Company entering into the Agreement, the Company operated
under a Forbearance Agreement, as amended (the "Forbearance Agreement"), with
its lending group. The Forbearance Agreement extended the terms and conditions
of the June 8, 2000, Second Amended and Restated Credit Agreement (the "Credit
Agreement"), which matured on August 31, 2001. Under the terms of the
Forbearance Agreement, as amended, which became effective on September 1, 2001,
the Company had until March 29, 2002 to repay the amounts due under the existing
credit facility or to restructure the credit facility. During the term of the
Forbearance Agreement interest accrued at an annual interest rate equal to prime
plus 6.0%. Interest was payable monthly at prime plus 1.0% per annum. The
difference between the accrual rate of interest and the rate paid was due at the
termination of the Forbearance Agreement and was rolled into the amount
restructured. In addition, the Company was required to repay accrued and unpaid
interest as of August 31, 2001 (totaling approximately $1.0 million) and were
required to achieve minimum cash collection levels and maximum cash
disbursements as defined in the Forbearance Agreement. We were in compliance
with the terms of the Forbearance Agreement, as amended.
The Credit Agreement originally provided for a $73.8 million term loan
facility, a $25.0 million revolving credit facility, and a letter of credit
facility of up to $16.0 million available for current letters of credit. Under
the term loan facility, a payment of $250,000 was required at closing and
monthly for a two-month period commencing June 30, 2000. Repayments of $500,000
were required each month thereafter with additional repayments of $15.0 million
on January 31 and July 31, 2001, and a final payment on August 31, 2001.
Interest rates vary from the higher of (a) the Prime Rate or (b) the Federal
Funds rate plus 1/2 of 1%, plus a margin of 1.5% to 3%. The Credit Agreement
required an initial payment of 1.0% of the maximum amount of the facility, plus
certain administrative fees and an annual commitment fee of .25% for letters of
credit and unused commitments. PlanVista capitalized approximately $1.4 million
of bank fees related to the Credit Agreement. Under the loan terms, PlanVista
must maintain certain financial covenants for revenue and EBITDA as defined in
the Credit Agreement. PlanVista is also restricted in capital expenditures and
is subject to repayment with proceeds of certain future activities such as sale
of certain assets and public offerings. As of December 31, 2001, the balance
outstanding under the Credit Agreement was $64.7 million plus accrued and unpaid
interest and fees of $4.5 million. During 2001, PlanVista paid interest of $3.7
million and principal of $2.0 million on the Credit Agreement. On June 29, 2000,
September 12, 2000, September 29, 2000, October 19, 2000, and December 8, 2000,
PlanVista signed Limited Waivers and Consents related to the disposition of
assets and certain payment and other covenant requirements.
As of March 29, 2001, PlanVista signed a First Amendment and Limited
Waiver and Consent ("the First Amendment") to the Credit Agreement. The First
Amendment became effective upon the satisfaction of certain conditions,
including the written confirmation from one of PlanVista's small group carriers
in support of the sale of our TPA and MGU businesses. PlanVista obtained this
written confirmation prior to the closing of such sale. Under the terms of the
First Amendment, the commitment of banks which are signers to the Credit
Agreement ("the Bank Group") on the revolving credit facility was frozen at the
$14.9 million outstanding balance upon the signing of the First Amendment. The
repayments of $500,000 due on March 31, 2001 and April 30, 2001 were waived and
certain other repayments which had been previously deferred were waived. In
addition a repayment of $1.5 million was due and paid in April 2001, the monthly
repayment was increased from $500,000 to $750,000 beginning on May 31, 2001, and
the unpaid additional payment of $4.5 million due on July 31, 2001 was waived to
the maturity date.
The First Amendment required certain prepayments upon the receipt of
tax refunds, debt refinancing proceeds or the proceeds of new equity issuances
and also revises various other provisions relating to covenants and
F-15
defined defaults. Additionally, the First Amendment required PlanVista to retain
the services of an investment banker by April 30, 2001 to assist PlanVista with
refinancing, and the First Amendment also required that in the event the TPA
business was not sold or otherwise disposed of before May 30, 2001, PlanVista
was to prepare and submit by June 6, 2001 for approval of the Lenders a detailed
plan for the alternate disposition of such business. These businesses were sold
effective June 18, 2001.
As of April 16, 2001, PlanVista signed a Second Amendment and Limited
Waiver and Consent ("the Second Amendment"), which removed from the Credit
Agreement certain requirements that could have affected PlanVista's ability to
draw on the revolving credit facility at the level to which it was frozen in the
First Amendment. The Second Amendment became effective concurrently with the
First Amendment.
In June 2001, Ronald Davi, former principal of NPPN prior to its
acquisition by the Company, drew in full on a letter of credit in his favor in
the amount of $2.0 million. Such amount is included in the obligations owed to
our lending group at December 31, 2001.
On July 2, 2001, the Company executed the Third Amendment and Limited
Waiver to the Credit Agreement (the "Third Amendment") with its bank group and
certain other parties. The Third Amendment provided for, among other things, (a)
permission for the Company to issue Common Stock to the DePrince, Race & Zollo,
Inc. for $3.8 million, (b) permission for the Company to use those funds to
satisfy certain post-closing obligations to HPHI in connection with the sale of
the TPA and MGU Businesses, (c) the postponement of certain scheduled payments
of principal until August 31, 2001, (d) a 100 basis point increase in the
interest rate, and (e) the delivery of 75,000 shares of Common Stock to the bank
group in consideration for their consent to the Third Amendment.
In connection with the sale of the TPA and managing general underwriter
business units and the assumption by HealthPlan Holdings, Inc., of certain
liabilities associated therewith (the "Transaction"), the New England Life
Insurance Co. drew in full on a letter of credit in its favor in the amount of
$6,000,000. Under the terms of the Credit Agreement with First Union National
Bank and the other lenders named therein, any payment under the letter of credit
which is not promptly reimbursed to the lenders by the Company upon notice of
such draw constitutes a payment default. The lenders indefinitely waived this
payment default pursuant to the terms of a Limited Waiver and Extension dated as
of June 15, 2001, which also waived certain additional terms of the Credit
Agreement in order to permit certain terms of the Transaction which were not
part of the original Stock Purchase Agreement of April 1, 2001 but were rather
added through the First Amendment to Stock Purchase Agreement (the "First
Amendment"), dated June 18, 2001.
As of December 31, 2001, PlanVista had additional notes totaling
approximately $11.0 million related to a 1993 acquisition, a 1998 acquisition,
and equipment purchases, and related to the HealthPlan Holdings transaction. As
described in Note 2, of this $11.0 million in notes, a $5.0 million note related
to the HealthPlan Holdings transaction converted to 813,273 shares of the
Company's common stock upon the Effective Date. The number of shares of common
stock issued in satisfaction of this note was based on the average closing price
of the Company' common stock for the 10 days immediately prior to the
conversion. Also, $4.0 million of notes payable to CENTRA Benefits, Inc.
("CENTRA") originally delivered in connection with the 1998 acquisition was
restructured so that amended and restated notes totaling $4.3 million
(representing the principal under the original notes plus accrued unpaid
interest) were issued to CENTRA under terms including interest at 12% (payable
in additional shares of the Company's stock, except under specified
circumstances) and a maturity date of December 1, 2004. In connection with the
restructuring of the CENTRA notes the Company also issued to CENTRA warrants to
purchase an aggregate of 200,000 shares of the Company's common stock at an
exercise price of $0.25 over the market price of the stock on the date of the
issuance of the restructured notes (based on the average trading price during
the ten trading days preceding such note restructure), subject to reduction to a
price equal to the conversion price of the Series C Preferred Stock upon the
happening of certain events.
As a part of the sale of HPHI to Sun Capital Partners, the Company
settled certain obligations with one of its large carriers by issuing a
promissory note. As of the restructuring of the Company's credit facility, the
amount owed on this note was approximately $1.0 million plus $1.5 million of
other obligations. On March 27, 2002, the Company retired this note by issuing
274,000 shares of its common stock, based on the closing price of the Company's
common stock one day
F-16
immediately prior to the retirement date of this note, and by issuing a credit
for $950,000 payable with in-kind claims repricing services.
On April 12, 2002, the Company extended the maturity date of notes
totaling $500,000 due to two members of its board of directors to November 30,
2004. These notes bear interest which accrues at prime plus 4% per annum, but
payment of interest is subordinated and deferred until all senior obligations
are paid.
The balances outstanding on the above debt instruments are as follows
(in thousands):
December 31,
---------------------------------------
2001 2000
---------------- ---------------
Line of Credit $ 64,681 $ 60,899
CAL/GROUP Note 848 944
Sun Capital Note 5,000 -
PlanVista Equipment Notes 57 195
CENTRA Note 4,000 4,000
NEF Note 1,000 -
Board of Directors Notes -- Related Party 500 -
---------------- ---------------
76,086 66,038
Less current portion (308) (61,133)
---------------- ---------------
Long-term debt $ 75,778 $ 4,905
================ ===============
Future minimum principal payments for all notes as of December 31, 2001
are as follows (in thousands). These amounts have been adjusted to reflect the
Company's restructured debt arrangement as discussed above.
2002 $ 308
2003 313
2004 68,957
2005 132
2006 150
Thereafter 6,226
--------------
$ 76,086
==============
11. Employee Benefit Plans
Defined contribution plan
PlanVista has a defined contribution employee benefit plan established
pursuant to Section 401(k) of the Internal Revenue Code covering substantially
all employees. PlanVista matches one-third of employee contributions limited to
6% of the employee's salary. Under the provisions of the plan, participants'
rights to employer contributions vest 40% after completion of three years of
qualified service and increase by 20% for each additional year of qualified
service completed thereafter. Expense in connection with this plan for the year
ended December 31, 2001 was approximately $0.2 million per year and for the
years ended December 31, 2000 and 1999 was approximately $0.7 million per year.
Post-retirement benefit plan
PlanVista provides medical and term life insurance benefits to certain
retired employees. PlanVista funds the benefit costs on a current basis because
there are no plan assets. At December 31, 2001, accrued post-retirement
liability of $0.1 million was included in the balance in accrued liabilities.
F-17
Deferred compensation plan
PlanVista has a deferred compensation plan with two former officers.
The deferred compensation, which together with accumulated interest is accrued
but unfunded, is distributable in cash after retirement or termination of
employment, and amounted to approximately $0.9 million at December 31, 2001 and
2000. Both participants began receiving such deferred amounts, together with
interest at 12% annually, at age 65.
12. Commitments and Contingencies
Lease commitments
PlanVista rents office space and equipment under non-cancelable
operating leases. Rental expense under the leases approximated $0.6 million for
the years ended December 31, 2001 and 2000, respectively and approximated $0.7
million for the years ended December 31, 1999. Future minimum rental payments
under these leases are as follows (in thousands):
2002 $ 588
2003 278
2004 261
2005 58
2006 38
Thereafter 38
------
$1,261
======
Litigation
In the ordinary course of business, we may be a party to a variety of
legal actions that affect any business, including employment and employment
discrimination-related suits, employee benefit claims, breach of contract
actions, and tort claims. In addition we entered into indemnification agreements
related to certain of the businesses we sold during 2000 and 2001 and we could
be subject to a variety of legal and other actions related to such
indemnification arrangements. We currently have insurance coverage for some of
these potential liabilities. Other potential liabilities may not be covered by
insurance, insurers may dispute coverage, or the amount of insurance may not
cover the damages awarded. While the ultimate financial effect of these claims
and indemnification agreements cannot be fully determined at this time, in the
opinion of management, they will not have a material adverse effect on our
financial condition, results of operations, or cash flows.
In January 1997, our subsidiary HealthPlan Services, Inc. ("HPS") began
providing marketing and administrative services for health plans of TMG Life
Insurance Company (now known as Clarica Life Insurance Company), with
Connecticut General Life Insurance Company ("CIGNA Re") acting as the reinsurer.
In January 1999, insureds under this coverage were notified that coverage would
be canceled beginning in July 1999. Substantially all coverage under these
policies terminated on or before December 31, 2000.
In July 1999, Clarica asserted a demand against HPS for claims in
excess of $7 million for breach of contract and related claims, and HPS asserted
breach of contract and various other claims against Clarica. In April 2000,
Clarica and CIGNA Re jointly submitted a demand for consolidated arbitration in
connection with these claims and claims submitted by CIGNA Re for approximately
$6 million. On or around October 23, 2000, we settled the dispute with Clarica
in consideration for our payment of $400,000.
F-18
On April 17, 2000, Admiral Insurance Company, our errors and omissions
carrier, filed a complaint for declaratory judgment in the United States
District Court for the Middle District of Florida, naming HPS, Clarica, and
CIGNA Re as defendants.
During 2001 we reached a settlement agreement related to the CIGNA Re
and Admiral claims. Under the terms of this settlement agreement, we are
obligated to pay Cigna Re approximately $150,000 on or before December 31, 2002.
In January 2002, Paid Prescriptions, LLC initiated a breach of contract
action against HPS seeking $1.6 - $2.0 million in compensation, and the Company
is vigorously defending this action. While the ultimate financial effect of this
claim cannot be determined at this time, in the opinion of management, it will
not have a material adverse effect on our financial condition, results of
operations, or cash flow.
13. Income Taxes
The provision (benefit) for income taxes is as follows (in thousands):
For the Year Ended December 31,
-----------------------------------------------------------------------
2001 2000 1999
-------------------- ---------------- -----------------
Current
Federal $ - $ - $ -
State - - -
-------------------- ---------------- -----------------
- - -
-------------------- ---------------- -----------------
Deferred
Federal 23,989 (2,844) (626)
State 2,822 (419) (92)
-------------------- ---------------- -----------------
26,811 (3,263) (718)
-------------------- ---------------- -----------------
Provision (benefit) for
income taxes $ 26,811 $ (3,263) $ (718)
==================== ================ =================
F-19
The components of deferred taxes recognized in the accompanying
financial statements are as follows (in thousands):
December 31,
---------------------------------------------
2001 2000
------------------- --------------------
Accrued expenses not currently deductible $ 1,026 $ 3,523
Deferred compensation - 453
Post-retirement benefits - 497
Net operating loss 36,538 -
Depreciation (224) 619
Intangibles (875) 24,061
Equity in loss of joint venture - (93)
Unrealized loss on investments available for sale - 358
------------------- --------------------
36,465 29,418
Valuation allowance (36,465) -
------------------- --------------------
$ - $ 29,418
=================== ====================
The Company had a $0.0 million and $3.5 million current provision for
income taxes in 2001 and 2000, respectively.
The deferred tax asset resulting from intangibles relates to certain
intangible assets acquired by the Company that are amortizable for tax purposes.
The Company recognizes deferred assets and liabilities for the expected
future tax consequences of temporary differences between the carrying amounts
and the tax bases of assets and liabilities. A valuation allowance is provided
when it is more likely than not that some portion of the deferred tax asset will
not be realized. Due to cumulative losses in recent years, the Company recorded
a valuation allowance of $36 million on net deferred tax assets. No valuation
allowance was required in 2000 and 1999, based on the Company's expectations of
future taxable income. The Company has net operating loss carryforwards of
approximately $90 million that expire in 2021. If there are certain substantial
changes in ownership of the Company, there may be limitations on the utilization
of the net operating losses.
The provision (benefit) for income taxes varies from the federal
statutory income tax rates due to the following:
2001 2000 1999
-------------- -------------- -------------
Federal statutory rate applied to pretax income (34.0)% 34.0 % 34.0 %
State income taxes net of federal tax benefit (6.0)% 5.0 % 5.0 %
Other non-deductible items 2.0 % (0.1)% 3.0 %
Valuation allowance 386.0 % - -
-------------- -------------- -------------
Effective tax rate 348.0 % 38.9 % 42.0 %
============== ============== =============
F-20
14. Earnings Per Common Share
Basic earnings per share, which is based on the weighted-average number
of common shares outstanding, and Diluted earnings per share, which includes all
dilutive potential common shares outstanding is as follows.
Net (Loss)
Income
Attributable to
Common Stock Shares Per Share
(in thousands) (in thousands) Amount
----------------- -------------- ---------------
2001
Earnings (loss) per share of common stock-basic $ (45,221) 14,558 $ (3.11)
Effect of dilutive securities: - - -
----------------- -------------- ---------------
Earnings (loss) per share of common stock--
assuming dilution $ (45,221) 14,558 $ (3.11)
================= ============== ===============
2000
Earnings (loss) per share of common stock-basic $ (104,477) 13,679 $ (7.64)
Effect of dilutive securities: - - -
----------------- -------------- ---------------
Earnings (loss) per share of common stock--
assuming dilution $ (104,477) 13,679 $ (7.64)
================= ============== ===============
1999
Earnings per share of common stock-basic $ 104 13,742 $ 0.01
Effect of dilutive securities:
CENTRA convertible notes - 180 -
----------------- -------------- ---------------
Earnings per share of common stock--
assuming dilution $ 104 13,922 $ 0.01
================= ============== ===============
Approximately 1.0 million, 1.7 million and 2.0 million options are not
included in the calculation of earnings (loss) per shares because they are
antidilutive.
15. Stock Option Plans and Employee Stock Purchase Plans
Stock option plans
PlanVista stock option plans authorize the granting of both incentive
and non-incentive stock options for a total of 2,710,000 shares of Common Stock
to key executives, management, consultants, and, with respect to 360,000 shares,
to directors. Under the plans, all options have been granted at prices not less
than market value on the date of grant. Certain non-qualified incentive stock
options may be granted at less than market value.
Options generally vest over a four-year period from the date of grant,
with 20% of the options becoming exercisable on the date of the grant and 20%
becoming exercisable on each of the next four anniversaries of the date of the
grant.
F-21
A summary of option transactions during each of the three years ended
December 31, 2001 is shown below:
Number Weighted
of Average
Shares Option Price
-------------------- -----------------
Under option, December 31, 1998
(922,800 exercisable) 1,760,500 18.23
Granted 551,000 10.45
Exercised - -
Canceled (346,050) 15.75
--------------------
Under option, December 31, 1999 1,965,450
(1,247,000 exercisable)
Granted 836,000 2.62
Exercised (1,100) 2.50
Canceled (1,084,050) 15.23
--------------------
Under option, December 31, 2000 1,716,300
(915,906 exercisable)
Granted 645,000 8.82
Exercised (199,300) 2.54
Canceled (1,184,600) 11.73
--------------------
Under option, December 31, 2001
(600,466 exercisable) 977,400
====================
There were 1,732,600 and 993,700 shares available for the granting of
options at December 31, 2001 and 2000, respectively.
The following table summarizes the stock options outstanding at
December 31, 2001:
Range Number Weighted Average Weighted
of Outstanding at Remaining Average
Exercise Prices December 31, 2001 Contractual Life Exercise Price
- -------------------------- ------------------------ ----------------------- ---------------------
$ 2.50 - $ 9.19 684,400 4 years $ 6.12
11.00 - 25.50 293,000 4 years 17.65
F-22
Measurement of fair value
PlanVista applies APB 25 and related interpretations in accounting for
its stock option plans and employee stock purchase plan. Accordingly, no
compensation cost has been recognized related to these plans. Had compensation
cost for PlanVista's' stock option and employee stock purchase plans been
determined based on the fair value at the grant dates, as prescribed in SFAS
123, the Company's net income (loss) and net income (loss) per share would have
been as follows:
Year Ended December 31,
-------------------------------------------------------
2001 2000 1999
--------------- --------------- --------------
Net income (loss) attributable to
common stock (in thousands):
As reported $ (45,221) $ (104,477) $ 104
Pro forma (46,269) (105,352) (223)
Net income (loss) per share:
Basic as reported $ (3.11) $ (7.64) $ 0.01
Basic pro forma (3.18) (7.70) (0.02)
Diluted as reported (3.11) (7.64) 0.01
Diluted pro forma (3.18) (7.70) (0.02)
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following assumptions used
for grants during the applicable year: dividend yield of 0.00% for the years
ended December 31, 2001, 2000 and 1999; expected volatility of 30% for each of
the years ended December 31, 2001, 2000 and 1999; risk-free interest rates of
4.64% to 4.93% for options granted during the year ended December 31, 2001,
6.38% to 6.47% for options granted during the year ended December 31, 2000, and
6.47% to 6.53% for options granted during the year ended December 31, 1999, and
a weighted average expected option term of four years for all three years.
Employee stock purchase plan
Under the 1996 Employee Stock Purchase Plan ("Employee Plan"),
PlanVista is authorized to issue up to 250,000 shares of Common Stock to its
employees who have completed one year of service. The Employee Plan is intended
to provide a method whereby employees have an opportunity to acquire shares of
Common Stock of PlanVista.
Under the terms of the Employee Plan, an employee may authorize a
payroll deduction of a specified dollar amount per pay period. The proceeds of
that deduction are used to acquire shares of PlanVista's Common Stock on the
offering date. The number of shares acquired is determined based on 85% of the
closing price of PlanVista's Common Stock on the New York Stock Exchange on the
offering date.
PlanVista sold 2,051 shares in 2001, 12,708 shares in 2000 and 16,143
shares in 1999 to employees under the Employee Plan.
F-23
16. Quarterly Financial Information (unaudited; in thousands except per
share data)
The following quarterly statements have revised to give effect of the
discontinued operations.
Fourth Third Second First
Quarter Quarter Quarter Quarter
------ ------- ------- -------
Year ended December 31, 2001:
Revenues $ 8,125 $ 7,886 $ 8,924 $ 7,983
Income (loss) from continuing operations
before minority interest, discontinued
operations, loss on sale of assets,
extraordinary item, and cumulative effect
of change in accounting principle 179 (33,086) (1,338) (268)
Net Loss (5,693) (34,912) (3,957) (659)
Basic and diluted earnings (loss) from
continuing operations per common share $ 0.01 $ (2.27) $ (0.09) $ (0.02)
Basic and diluted net (loss) earnings
per common share $ (.39) $ (2.40) $ (.27) $ (0.05)
Fourth Third Second First
Quarter Quarter Quarter Quarter
------ ------- ------- -------
Year ended December 31, 2000:
Revenues $ 6,953 $ 7,127 $ 6,730 $ 6,154
Loss from continuing operations
before minority interest, discontinued
operations, loss on sale of assets,
extraordinary item, and cumulative effect
of change in accounting principle (2,346) (495) (1,687) (600)
Net Loss (66,760) (35,483) (2,029) (205)
Basic and diluted loss from continuing
operations per common share $ (0.17) $ (0.04) $ (0.12) $ (0.04)
Basic and diluted Net loss
per common share $ (4.88) $ (2.60) $ (.15) $ (.01)
F-24
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors
and Shareholders of
PlanVista Corporation
Our audits of the consolidated financial statements referred to in our report
dated April 15, 2002 appearing on page F-1 of this Form 10-K of PlanVista
Corporation also included an audit of the Financial Statement Schedule listed in
Item 14 of this Form 10-K. In our opinion, this Financial Statement Schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
April 15, 2002
PLANVISTA CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
Additions
-------------------------------
Beginning Bad Debt Sales Ending
Description Balance Expense Allowances Deductions (1) Balance
- ------------------------------------------------------------------------------------------------------------------------------------
Allowance for Doubtful Accounts
December 31, 2001 $ 3,300 $ 3,348 $ 1,131 $ 1,543 $ 6,236
Allowance for Doubtful Accounts
December 31, 2000 (2) 3,211 1,199 425 1,535 3,300
Allowance for Doubtful Accounts
December 31, 1999 (2) 1,689 2,146 1,081 1,705 3,211
(1) Reflects direct write-off of accounts, net of recoveries.
(2) Amounts have not been revised to reflect the impact of discontinued
operations.