FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1997
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-23832
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PHYSICIAN SALES & SERVICE, INC.
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(Exact name of registrant as specified in its charter)
FLORIDA 59-2280364
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(State or other jurisdiction (IRS employer
of incorporation) identification number)
4345 Southpoint Boulevard
Jacksonville, Florida 32216
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(Address of principal (Zip code)
executive offices)
Registrant's telephone number (904) 332-3000
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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 shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[ X ] Yes [ ] No
As of August 13, 1997 a total of 38,252,524 shares of common stock, par
value $.01 per share, of the registrant were outstanding.
PHYSICIAN SALES & SERVICE, INC. & SUBSIDIARIES
JUNE 30, 1997
INDEX
PART I FINANCIAL INFORMATION PAGE NUMBER
-----------
Condensed Consolidated Balance Sheets -
June 30, 1997 and March 28, 1997 3
Condensed Consolidated Statements of Operations -
Three Months Ended June 30, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended June 30, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II OTHER INFORMATION
Item 2. Changes in Securities 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 15
-2-
PHYSICIAN SALES & SERVICE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 MARCH 28, 1997
------------- --------------
(Unaudited) *
ASSETS
Current Assets:
Cash and cash equivalents $ 48,172,411 $ 28,740,123
Marketable securities 520,313 15,045,482
Accounts receivable, net 121,592,786 119,292,896
Inventories 68,477,128 67,895,154
Prepaid expenses and other 20,502,143 21,971,847
------------- ------------
Total current assets 259,264,781 252,945,502
Property and equipment, net 21,317,785 18,811,691
Other Assets:
Intangibles, net 22,248,053 21,616,893
Other 5,370,737 4,911,501
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Total assets $308,201,356 $298,285,587
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 69,699,998 $ 64,063,501
Accrued expenses 13,763,967 18,263,097
Other 7,684,222 5,164,751
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Total current liabilities 91,148,187 87,491,349
Long-Term debt and capital lease, net 1,609,166 559,764
Other 5,063,687 4,634,291
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Total liabilities 97,821,040 92,685,404
============ ============
Shareholders' Equity:
Preferred stock, $.01 par value;
1,000,000 shares authorized,
no shares issued and
outstanding - -
Common stock, $.01 par value;
60,000,000 shares authorized,
37,345,515 and 37,061,615 shares
issued and outstanding at June
30, 1997 and March 28, 1997,
respectively 373,455 370,616
Additional paid-in capital 207,651,115 207,509,342
Retained earnings (deficit) 2,015,769 (2,372,463)
Cumulative foreign currency
translation adjustment 339,977 92,688
------------ ------------
Total shareholders' equity 210,380,316 205,600,183
============ ============
Total liabilities and
shareholders' equity $308,201,536 $298,285,587
============ ============
* Condensed from audited financial statements.
The accompanying notes are an integral part of these
condensed consolidated statements.
-3-
PHYSICIAN SALES & SERVICE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1996
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Net Sales $203,542,635 $151,567,551
Cost of Goods Sold 148,099,587 109,732,401
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Gross Profit 55,443,048 41,835,150
General and Administrative Expenses 32,090,286 22,857,157
Selling Expenses 16,821,599 15,055,949
Merger Costs and Expenses - 6,934,000
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Income (Loss) From Operations 6,531,163 (3,011,956)
Other Income:
Interest income 248,145 528,153
Other income 581,839 404,275
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829,984 932,428
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Income (Loss) before provision for
income taxes 7,361,147 (2,079,528)
Income Tax (provision) benefit (2,991,054) 540,000
------------ ------------
Net Income (Loss) $ 4,370,093 $ (1,539,528)
============ ============
Net Income (Loss) per common and
common equivalent share $ 0.12 $ (0.04)
============ ============
Proforma tax adjustment on pooled
S-corporation income (142,000)
Proforma net loss $ (1,681,528)
============
Proforma tax adjustment per
common and common equivalent
share on pooled S-corporation
income $ (0.01)
============
Proforma net loss per common and
common equivalent share $ (0.05)
============
Weighted Average number of
Shares outstanding 37,502,000 35,189,000
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The accompanying notes are an integral part of these
condensed consolidated statements.
-4-
PHYSICIAN SALES & SERVICE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1996
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Cash Flows From Operating Activities:
Net income (loss) $ 4,370,093 $ (1,539,528)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Depreciation and amortization 2,034,408 987,148
Provision for doubtful accounts 492,778 347,697
Merger costs and expenses - 6,469,506
Foreign currency translation 247,289 (2,189)
Changes in operating assets and
liabilities, net of effects
from business acquisitions:
Increase in accounts receivable (1,300,197) (858,178)
Decrease (increase) in inventories 406,802 (3,236,991)
Decrease in prepaid expenses
and other current assets 1,478,273 1,924,557
Increase in other assets (1,298,501) (3,548,013)
Increase (decrease) in
accounts payable, accrued
expenses and other liabilities 3,879,666 (3,141,719)
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Net cash provided by (used
in) operating activities 10,310,611 (2,597,710)
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Cash Flows From Investing Activities:
Net proceeds from sales of marketable
securities 14,525,169 -
Capital expenditures (3,473,293) (1,437,689)
Payment for purchases of net assets
from business acquisitions (350,000) (4,572,740)
Payments on noncompete agreements (1,083,379) (376,486)
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Net cash provided by (used in)
investing activities 9,618,497 (6,386,915)
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Cash Flows From Financing Activities:
Net repayments of long-term debt (645,661) (8,662,437)
Net proceeds from issuance of
common stock 148,841 880,370
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Net cash used in financing activities (496,820) (7,782,067)
------------ ------------
Net increase (decrease) in cash
and cash equivalents 19,432,288 (16,766,692)
Cash and cash equivalents, beginning
of period 28,740,123 86,333,789
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Cash and cash equivalents, end
of period $ 48,172,411 $ 69,567,097
============ ============
The accompanying notes are an integral part of these
condensed consolidated statements.
-5-
PHYSICIAN SALES & SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The condensed consolidated financial statements of Physician Sales &
Service, Inc. ("PSS" or "the Company") reflect, in the opinion of management,
all adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position and results of operations for the periods
indicated. The adjustments include the retroactive adjustment to reflect the
merger with X-Ray Corporation of Georgia ("X-ray GA") effective December 20,
1996, accounted for under the pooling-of-interests method.
The accompanying condensed consolidated financial statements should be read
in conjunction with the financial statements and related notes in the Company's
1997 Annual Report to Shareholders. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the Securities and
Exchange Commission rules and regulations.
Financial statements for the Company's subsidiary outside the United States
are translated into U.S. dollars at quarter-end exchange rates for assets and
liabilities and weighted average exchange rates for income and expenses. The
resulting translation adjustments are recorded as a separate component of
shareholders' equity.
The results of operations for the interim periods covered by this report
may not necessarily be indicative of operating results for the full fiscal year.
Certain items have been reclassified to conform to the current year
presentation.
NOTE 2 - BUSINESS ACQUISITIONS
During the three months ended June 30, 1997, the Company acquired a
radiology and imaging distributor in a stock-for-stock merger accounted for
under the pooling-of-interests method by issuing 167,311 shares of common stock.
The acquired company reported $17 million in revenue for the twelve months prior
to acquisition by the Company. The accompanying consolidated financial
statements have not been restated for periods prior to the pooling due to
immateriality. Accordingly, the results of operations of have been reflected in
the consolidated financial statements prospectively from the acquisition date in
June of 1997.
Additionally, during the three months ended June 30, 1997, the Company
acquired the stock of a medical supply and equipment distributor for cash and
the assets of another medical supply and equipment distributor for cash.
Proforma financial information related to these acquisitions is not presented
due to immateriality.
-6-
PHYSICIAN SALES & SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Following is separate company data of PSS and X-Ray GA for the period
prior to the Merger. X-ray GA was a Subchapter S Corporation for income tax
purposes and, therefore, did not pay U.S. federal income taxes. The table
includes unaudited proforma net (loss) and net (loss) per share
amounts which reflect proforma adjustments to present income taxes of X-ray GA
on the basis on which they will be reported in future periods.
Three Months Ended
June 30, 1996
(in thousands)
------------------
Net Sales
PSS $139,703
X-ray GA 11,865
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Total $151,568
Net Income (Loss)
PSS $ (1,914)
X-ray GA 374
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Net Loss as Reported (1,540)
Proforma Tax Provision for X-ray GA (142)
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Proforma Net Loss (1,682)
========
Net Loss Per Share
As Reported $ (0.4)
Proforma $ (0.5)
--------
NOTE 3 SUBSEQUENT EVENTS
On July 20, 1997, the Company acquired an imaging distributor for an
aggregate purchase price of approximately $18.2 million comprised of 868,364
shares of common stock and cash of approximately $2.5 million to be accounted
for as a purchase. The acquired company distributes radiology and imaging
equipment, chemicals and supplies, and provides technical service to the acute
and alternate site markets through seven locations in seven states in the
Midwest. The acquired company reported $76 million in revenues for the latest
twelve month period.
On August 12, 1997, the Company signed a definitive agreement to merge with
S&W X-Ray, Inc. ("S&W"). The Company intends to acquire S&W in a stock-for-
stock merger, to be accounted for as a pooling-of-interests. S&W reported $73
million in revenues for the latest twelve month period.
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PHYSICIAN SALES & SERVICE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company is a leading distributor of medical supplies, equipment and
pharmaceuticals to primary care and other office-based physicians. The Company
currently operates 61 physician office medical supply distribution ("Physician
Supply Division") service centers distributing to approximately 103,000
physician office sites in all 50 states. The Company's primary market is the
approximately 399,000 physicians who practice medicine in approximately 198,000
office sites throughout the United States. For fiscal 1997, the Company
generated net revenues of $691.0 million.
The Company, through its wholly-owned subsidiary, Diagnostic Imaging
("DI" or "Imaging Division"), distributes medical diagnostic imaging supplies,
chemicals, equipment and service to the acute care and alternate care market.
DI currently operates 20 imaging service centers in ten states in the Southeast
and Midwest.
The Company also distributes medical supplies and equipment in Belgium,
France, Germany, and the Netherlands through its WorldMed International, Inc.
subsidiary ("International Division"). The Company currently has three
International Division service centers distributing to the acute and alternate
care markets.
The Company's primary objectives are to be capable of servicing the medical
equipment and supply needs of every office-based physician in the United States,
to create a national diagnostic imaging distribution company, and to expand its
presence in the European medical equipment and supply market. To achieve these
objectives and increase profitability, the Company intends to (i) continue to
acquire core business medical supply and equipment distributors, especially in
existing markets where it can leverage its distribution infrastructure and gain
market share, (ii) acquire diagnostic imaging distributors to expand its
geographic coverage and leverage its existing infrastructure, (iii) increase
sales of existing service centers by adding additional sales representatives and
providing superior service, competitive pricing and a broad product line,
including sophisticated diagnostic equipment, (iv) expand operating margins, (v)
open new service centers in selected markets where acquisition opportunities are
not available, and (vi) invest in sophisticated information systems that bring
efficiency to the Company and its subsidiaries.
INDUSTRY
According to industry estimates, the medical supply and equipment segment
of the health care industry represents a $30.2 billion market, of which $6.6
billion represents the primary care and other office-based physicians. The
medical supply and equipment industry is estimated to be growing at an annual
rate of 6% to 8%. The Company has historically grown faster than the overall
market. The Company estimates that approximately 300 companies supply medical
products to the office-based physician sector.
The diagnostic imaging industry represents a $4.1 billion market,
representing the sale and service of diagnostic imaging equipment and supplies
to the acute care market, imaging centers and physician offices. Approximately
$2.3 billion of the diagnostic imaging market is sold through independent
distributors and the remainder is sold directly by manufacturers. The diagnostic
imaging industry is highly fragmented with unconsolidated distributors
representing approximately 70% of the market.
COMPANY GROWTH
Since its inception in 1983, the Company has achieved significant growth in
the number of service center locations, geographic area of operation, net sales,
and profitability. During the fiscal years 1992 through 1997, the Company and
its subsidiaries' net sales, excluding the retroactive effect of mergers, grew
at a compound annual rate of approximately 49%, and giving retroactive effect of
mergers, the Company's net sales grew at a compound annual rate of approximately
27%. The number of company service centers has grown from two at the end of
fiscal 1984 to 84 currently, including 61 Physician Supply Division service
centers, 20 Imaging Division services centers and three International Division
service centers. In order of priority, the Company's growth has been
accomplished through (i) acquiring regional and local physician supply companies
-8-
PHYSICIAN SALES & SERVICE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(CONTINUED)
(ii) acquiring local and regional imaging companies, (iii) increasing sales from
existing Physician Supply Division service centers, and (iv) opening start-up
Physician Supply Division service centers.
RESULTS OF OPERATIONS
The following is management's discussion and analysis of the results of
operations for the three months ended June 30, 1997 and 1996:
THREE MONTHS ENDED JUNE 30, 1997 AND 1996
NET SALES. Net sales for the three months ended June 30, 1997 totaled
$203.5 million, an increase of $52.0 million or 34.3% over net sales of $151.6
million for the three months ended June 30, 1996. The sales from the Imaging
Division increased to $44.9 million for the three months ended June 30, 1997
from $11.9 million for the three months ended June 30, 1996. In order of
contribution to the increase, net sales increased as the result of (i) net sales
of the Imaging Division centers acquired during the last nine months of fiscal
1997, (ii) internal sales growth of Physician Supply Division centers operating
at least two years, and (iii) net sales of Physician Supply Division centers
recently acquired.
The Company's Physician Supply Division service centers operating for at
least 24 consecutive months as of fiscal year ended 1998 generated same center
sales growth of 13% for the three months ended June 30, 1997. The sales growth
resulted from the continued development of PSS's sales force, further market
penetration, increased emphasis on diagnostic equipment and supplies, and
expansion of existing territories served by individual service centers.
GROSS PROFIT. Gross profit for the three months ended June 30, 1997 totaled
$55.4 million, an increase of $13.6 million or 32.5% over the three months ended
June 30, 1996 total of $41.8 million. Gross profit as a percentage of net sales
decreased to 27.2% for the three months ended June 30, 1997 from 27.6% for the
three months ended June 30, 1996. The decrease in gross profit percentage is
attributable to lower margins of the recently acquired Imaging Division
operations, which had an average gross profit of 20.5% for the three months
ended June 30, 1997. The Company is currently in the third year of a five year
exclusive distributorship agreement with Abbott Laboratories. For the three
months ended June 30, 1997 and 1996, gross profit on sales of Abbott products
were 22.0% and 20.8%, respectively.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the three months ended June 30, 1997 totaled $32.1 million, an increase of
$9.2 million or 40.4% over the three months ended June 30, 1996 total of $22.9
million. As a percentage of sales, general and administrative expenses increased
to 15.8% for the three months ended June 30, 1997 from 15.1% for the three
months ended June 30, 1996. Contributing to the increase in general and
administrative expenses as a percentage of net sales was the Company's strategy
to focus its Physician Supply Division sales efforts on penetration of more
profitable areas of the market, which resulted in lower but more profitable
growth in sales. The increase in general and administrative expenses is also
attributable to continuing investment in resources to respond to a changing
health care market. The Company has increased its focus on sales of diagnostic
equipment to office based physicians and on penetration of the managed care
market segment. Since inception, the Company has maintained a comprehensive and
consultative sales approach with an emphasis on diagnostic products, which
includes sophisticated diagnostic equipment and supplies related to the use of
such equipment. At the beginning of fiscal 1996, the Company created a
diagnostic team to train and educate newly hired or acquired sales
representatives about the diagnostic equipment sales process. As a result, the
Company has been able to maintain its diagnostic products sales at approximately
20% of total net sales. Sales of diagnostic equipment, while generally lower in
gross margin than supplies, require the reordering of diagnostic reagents which
generally yield higher margins.
-9-
PHYSICIAN SALES & SERVICE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(CONTINUED)
The Company continued to increase its emphasis on national customer
accounts, including large physician group practices, physician practice
management companies, physician-hospital organizations, physician management
service organizations and group purchasing organizations through the expansion
of its national accounts team.
SELLING EXPENSES. Selling expenses for the three months ended June 30, 1997
totaled $16.8 million, an increase of $1.8 million or 11.7% over the three
months ended June 30, 1996 total of $15.1 million. As a percentage of sales,
selling expenses decreased to 8.2% for the three months ended June 30, 1997 from
9.9% for the three months ended June 30, 1996. The decrease in selling expense
as a percentage of sales was primarily a result of the operations of the new
Imaging Division which incurs significantly lower selling expense as a
percentage of net sales than the Physician Supply Division.
MERGER COSTS AND EXPENSES. During the three months ended June 30, 1997, the
Company did not incur any non-recurring merger costs and expenses related to the
acquisitions. During the three months ended June 30, 1996, the Company recorded
non-recurring merger costs and expenses of approximately $6.9 million associated
with the mergers of PSS and four medical supply and equipment distributors. Such
costs included direct merger costs primarily consisting of investment banking,
legal, accounting and filing fees as well as consolidation costs from the
closing of duplicate service center locations and reducing personnel.
OPERATING INCOME (LOSS). The Company recorded operating income of $6.5
million for the three months ended June 30, 1997 as compared to an operating
loss of $3.0 million for the three months ended June 30, 1996. The operating
results for the three months ended June 30, 1996 include non-recurring merger
costs and expenses of approximately $6.9 million. Excluding the effect of these
non-recurring costs, operating income increased $2.6 million or 67% to $6.5
million for the three months ended June 30, 1997 from $3.9 million for the three
months ended June 30, 1996.
INTEREST INCOME. The Company recorded interest income from short-term
investments of approximately $ 320,000 during the three months ended June 30,
1997. Interest expense for the three months ended June 30, 1997 was
approximately $70,000. Interest expense was related to debt of companies
acquired which was repaid upon acquisition.
OTHER INCOME. The Company's other income totaled $0.6 million and $0.4
million, an increase of $0.2 million or 43.9%, for the three months ended June
30, 1997 and 1996, respectively. Other income primarily represents finance
charges on customer accounts.
(PROVISION) BENEFIT FOR INCOME TAXES. The income tax provision totaled $3.0
million for the three months ended June 30, 1997 as compared to the income tax
benefit of $0.5 million for the three months ended June 30, 1996. The income tax
computation is affected by the non-deductible nature of certain non-recurring
merger costs and expenses in the period in which they were incurred.
-10-
PHYSICIAN SALES & SERVICE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(CONTINUED)
NET INCOME (LOSS). Net income totaled $4.4 million for the three months
ended June 30, 1997 as compared to a net loss of $1.5 million for the three
months ended June 30, 1996. The net loss for the three months ended June 30,
1996 includes approximately $6.9 million of non-recurring merger costs and
expenses. The following table shows net income (loss) and net income (loss) per
share for the three months ended June 30, 1997 as compared to the three months
ended June 30, 1996 as reported and the pro-forma effect on net income per share
excluding these non-recurring merger costs and expenses and the related tax
effects.
Pro-forma excluding non-
recurring merger costs and expenses As reported
Three Months Ended Three Months Ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
------------- ------------- ------------- -------------
Net income (loss) (in thousands) $ 4,370 $ 3,135 $ 4,370 $ (1,540)
Net income (loss)
per share $ 0.12 $ 0.09 $ 0.12 $ (0.04)
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $168.1 million and $165.4 million as of
June 30, 1997 and March 28, 1997, respectively. Accounts receivable (net of
allowances) were $121.6 million and $119.3 million as of June 30, 1997 and March
28, 1997, respectively. The average number of days sales in accounts receivable
was approximately 53 days for the three months ended June 30, 1997 and 56 days
for the year ended March 28, 1997, respectively. Inventories were $68.5 million
and $67.9 million as of June 30, 1997 and March 28, 1997, respectively. The
Company had annual inventory turnover of 8.7 times for the three months ended
June 30, 1997 and 8.1 times for the year ended March 28, 1997.
Net cash provided by operating activities was $10.3 million for the three
months ended June 30, 1997 compared to net cash used in operating activities of
$2.6 million for the three months ended June 30, 1996. The improvement resulted
from improved operating results for the three months ended June 30, 1997. For
the three months ended June 30, 1996, a significant portion of these funds were
utilized to consolidate the closing of duplicate service center locations,
realigning regional and corporate functions, consolidating information systems
and reducing personnel in conjunction with mergers.
Net cash provided by investing activities for the three months ended June
30, 1997 consisted primarily of the proceeds from sales of marketable securities
offset by capital expenditures and the payments on noncompete agreements. Net
cash used in investing activities for the three months ended June 30, 1996
consisted primarily of payments for purchases of net assets of businesses
acquired. Net cash used in financing activities was $0.5 million for the three
months ended June 30, 1996. Net cash used in financing activities of $7.8
million for the three months ended June 30, 1996 consisted primarily of
repayments of outstanding debt of companies acquired.
The Company has historically financed its liquidity needs for expansion
through lines of credit provided by banks and the private and public offering of
stock. The Company has no debt outstanding on its $60 million credit facility.
-11-
PHYSICIAN SALES & SERVICE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(CONTINUED)
The Company believes that its current cash and cash equivalent balances
combined with the expected cash flows from operations, available credit
facility, capital markets, and vendor credit will be sufficient to fund its
liquidity needs for its existing operations and for service center expansion for
at least the next two years.
All statements contained herein that are not historical facts, including,
but not limited to, statements regarding anticipated growth in revenue, gross
margins and earnings, statements regarding the Company's current business
strategy, the Company's projected sources and uses of cash, and the Company's
plans for future development and operations, are based upon current
expectations. These statements are forward-looking in nature and involve a
number of risks and uncertainties. Actual results may differ materially. Among
the factors that could cause results to differ materially are the following: the
availability of sufficient capital to finance the Company's business plans on
terms satisfactory to the Company; competitive factors; the ability of the
Company to adequately defend or reach a settlement of outstanding litigations
and investigations involving the Company or its management; changes in labor,
equipment and capital costs; changes in regulations affecting the Company's
business; future acquisitions or strategic partnerships; general business and
economic conditions; and other factors described from time to time in the
Company's reports filed with the Securities and Exchange Commission. The Company
wishes to caution readers not to place undue reliance on any such forward-
looking statements, which statements are made pursuant to the Private Litigation
Reform Act of 1995 and, as such, speak only as of the date made.
-12-
PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
(a) Not applicable.
(b) Not applicable.
(c) On March 20, 1997, the Company issued 407,317 shares of common stock,
including 31,339 shares which are being held in escrow pending the
resolution of potential indemnifiable claims, to the former
shareholder of Rad-Tech X-Ray, Inc. in exchange for all of the shares
of Rad-Tech X-Ray, Inc. common stock. The issuance of the securities
was made in reliance on the exemption from registration provided under
Section 4(2) of the Securities Act of 1933, as a transaction by an
issuer not involving a public offering. All of the securities were
acquired by the recipient for investment and with no view toward the
public resale or distribution thereof without registration. The
recipient qualified as an accredited investor, the offers and sales
were made without any public solicitation, and the stock certificates
bear restrictive legends.
On June 2, 1997, the Company issued 167,311 shares of common stock,
including 22,214 shares which are being held in escrow pending the
resolution of potential indemnifiable claims, to the former
shareholders of Thompco Medical, Inc. common stock. The issuance of
the securities was made in reliance on the exemption from registration
provided under Section 4(2) of the Securities Act of 1933, as a
transaction by an issuer not involving a public offering. All of the
securities were acquired by the recipients for investment and with no
view toward the public resale or distribution thereof without
registration. The recipients were accredited investors or
sophisticated investors the offers and sales were made without any
public solicitation and the stock certificates bear restrictive
legends.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.1 Amended and Restated Articles of Incorporation dated March 15,
1994. (1)
3.2 Amended and Restated Bylaws dated March 15, 1994. (1)
10.1 Financing and Security Agreement between the Company and
NationsBank of Georgia, N.A. (as successor to NCNB National Bank of
Florida), dated as of September 26, 1991, as amended. (2)
10.2 Registration Rights Agreement between the Company and Tullis-
Dickerson Capital Focus, LP, dated as of March 16, 1994. (2)
10.3 Employment Contract, as amended, for Patrick C. Kelly. (2)
10.4 Incentive Stock Option Plan dated May 14, 1986. (2)
10.5 Shareholders Agreement dated March 26, 1986, between the Company,
the Charthouse Co., Underwood, Santioni and Dunaway. (2)
10.6 Shareholders Agreement dated April 10, 1986, between the Company
and Clyde Young. (2)
10.7 Shareholders Agreement between the Company and John D. Barrow. (2)
10.8 Amended and Restated Directors Stock Plan. (7)
10.9 Amended and Restated 1994 Long Term Incentive Plan. (7)
10.10 Amended and Restated 1994 Long Term Stock Plan. (7)
10.11 1994 Employee Stock Purchase Plan (3)
10.12 1994 Amended Incentive Stock Option Plan (2)
10.13 Amended and Restated Loan and Security Agreement between the
Company and NationsBank of Georgia, N.A. dated December 21, 1994
(4)
10.14 Distributorship Agreement between Abbott Laboratories and Physician
Sales & Service, Inc. (Portions omitted as confidential -Separately
filed with Commission). (5)
10.15 Stock Purchase Agreement between Abbott Laboratories and Physician
Sales & Service, Inc. (5)
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EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.16 Amendment to Employee Stock Ownership Plan. (7)
10.16a Amendment and Restatement of the Physician Sales and Service, Inc.
Employee Stock Ownership and Savings Plan.
10.16b First Amendment to the Physician Sales and Service Inc. Employee
Stock Ownership and Savings Plan.
10.17 Third Amended and Restated Agreement and Plan of Merger By and
Among Taylor Medical, Inc. and Physician Sales & Service, Inc.
(including exhibits thereto) (6)
10.18 Agreement and Plan of Merger by and Among Physician Sales &
Service, Inc., PSS Merger Corp. and and Treadway Enterprises, Inc.
(8)
27 Financial Data Schedule (for SEC use only)
- -----------
(1) Incorporated by Reference to the Company's Registration Statement on Form
S-3, Registration No. 33-97524.
(2) Incorporated by Reference to the Company's Registration Statement on Form
S-1, Registration No. 33-76580.
(3) Incorporated by Reference to the Company's Registration Statement on Form
S-8, filed October 7, 1994
(4) Incorporated by Reference to the Company's Report on Form 10-Q for the
quarterly period ended December 31, 1994.
(5) Incorporated by Reference to the Company's Report on Form 10-K for the
fiscal year ended March 30, 1995.
(6) Incorporated by Reference to the Company's Report on Form 10-K for the
fiscal year ended March 30, 1996.
(7) Incorporated by Reference to the Company's Report on Form 10-Q for the
quarterly period ended June 30, 1996
(8) Incorporated by Reference to the Company's Current Report on Form 8-K,
filed January 3, 1997.
(B) REPORTS ON FORM 8-K
None
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OTHER INFORMATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on August 14, 1997.
PHYSICIAN SALES & SERVICE, INC.
/s/ David A. Smith
-------------------------------
David A. Smith
Executive Vice President and
Chief Financial Officer
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