Back to GetFilings.com

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 2002

OR

For the transition period from                           to                          

Commission File No. 1-13772

PLANVISTA CORPORATION
(Exact Name of Registrant as Specified in Its Charter)

(813) 353-2300
(Registrant’s Telephone Number, Including Area Code)

Not applicable
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

             Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

             Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 126-2 of the Exchange Act).
Yes o No x

             APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

Total number of shares of common stock outstanding as of November 8, 2002.

Table of Contents

PLANVISTA CORPORATION

Table of Contents

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1.      Financial Statements

PLANVISTA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands except share amounts)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

PLANVISTA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands except per share data)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

PLANVISTA CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
(in thousands except share amounts)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

PLANVISTA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

PLANVISTA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2002

1.       Description of Business and Organization

         PlanVista Corporation (together with its wholly owned subsidiaries, “PlanVista,” “we,” “our,” or “us”), 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, third party administrators (sometimes called TPAs), health maintenance organizations (sometimes called HMOs), and other entities that pay claims on behalf of health plans, and health care services providers, such as 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 and the first quarter of 2002, pursued the restructuring of its remaining debt. On April 12, 2002, we completed the restructuring of our debt, whereby we restructured approximately $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 Series C convertible preferred stock and an additional promissory note in the amount of $184,872.

         The term loan 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 PlanVista), maximum quarterly and annual capital expenditures, a minimum quarterly fixed charge ratio that is based primarily on our 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 term loan agreement). The minimum monthly EBITDA levels for the third quarter of 2002 averaged approximately $808,000. The minimum monthly EBITDA levels for the fourth quarter of 2002 and for the duration of the term loan are approximately $1.0 million. The Series C convertible preferred stock accrues 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 Series C convertible preferred stock or, at our option, in cash. At any time after 18 months from the date of issuance, the Series C convertible preferred stock may be converted into shares of our common stock at an amount determined by formula to equal a minimum of 51% of the outstanding shares of our common stock. In addition, the Series C convertible preferred stockholders are entitled to elect three members to our board of directors. The certificate of designation for the Series C convertible preferred stock also contains provisions that permit the Series C convertible preferred stockholders to immediately elect one additional member to our board of directors to replace one of the board members elected by our common shareholders if we fail to achieve certain minimum cash levels as defined under the certificate of designation or if we fail to make our required principal and interest payments in accordance with the terms of the Agreement, or fail to redeem the Series C convertible preferred stock by the 18-month anniversary of the issue date. The issuance of the Series C convertible 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 (“NYSE”). Stockholders were notified prior to the closing of the transaction of our reliance on such exception. In connection with the issuance of the Series C convertible preferred stock, the senior lenders entered into a Stockholders’ Agreement with us 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 convertible 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 4).

Table of Contents

         In connection with our new credit facility and debt restructuring, we were required to adopt the accounting principles prescribed by Emerging Issues Task Force No. 00-27, Application of Issue No. 98-5 to Certain Convertible Instruments (“EITF 00-27”). In accordance with the accounting requirements of EITF 00-27, we have reflected approximately $31.1 million as an increase to the carrying value of our Series C convertible preferred stock with a comparable reduction to additional paid-in capital. The amount accreted to the Series C convertible preferred stock is calculated based on (a) the difference between the closing price of our common stock on April 12, 2002 and the conversion price per share available to the holders of our Series C convertible preferred stock multiplied by (b) the number of shares of common stock that will be issued if the shares of our Series C convertible preferred stock are ever converted. Such shares are not convertible until October 12, 2003. This amount is accreted over the contractual life of the Series C convertible preferred stock. This non-cash entry did not affect our net income or our cash flow but did impact the net income deemed available to our common stockholders for reporting purposes in the three and nine months ended September 30, 2002. Net income per share available to the holders of our common stock during the three and nine months ended September 30, 2002 was further reduced by a preferred stock dividend totaling $0.7 million and $1.3 million, respectively, paid in shares of our Series C convertible preferred stock to the holders of our Series C convertible preferred stock.

         Prior to June 18, 2001, we maintained two operating units, one of which was our PlanVista Solutions segment that included PlanVista’s managing general underwriter business. The other unit was our third party administration segment, which was operated primarily through our HealthPlan Services, Inc. (“HPS”), American Benefit Plan Administrators, Inc. (“ABPA”), and Southern Nevada Administrators, Inc. (“SNA”) subsidiaries, and which provided marketing, distribution, administration, and 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 third party administration and managing general underwriter business units to HealthPlan Holdings, 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 managing general underwriter business is the Philadelphia based Montgomery Management Corporation. The accompanying unaudited condensed consolidated financial statements have been restated to reflect the operations of these business units described above as discontinued.

         In connection with this non-cash transaction, HealthPlan Holdings 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 HealthPlan Holdings, we issued 709,757 shares of our 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 a letter agreement relating to certain post closing disputes. The purchase agreement contains customary representations, warranties, and cross indemnity provisions.

         In connection with the issuance of these shares, we entered into a Registration Rights Agreement in favor of HealthPlan Holdings 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, HealthPlan Holdings 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) divided by the average closing price of our 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, HealthPlan Holdings made demand for redemption after we failed to get the required registration statement effective. We, however, were not permitted to redeem the shares at that time under the terms of the Credit Agreement with our lenders. As a result, under the terms of the Registration Rights Agreement, we were required to issue 100,000 shares of our 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 HealthPlan Holdings’ 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, we were required to deliver to

Table of Contents

HealthPlan Holdings 10,000 shares of our common stock according to the terms of the Registration Rights Agreement. The limit on these additional shares was 100,000. As of June 30, 2002, we had issued 100,000 shares of common stock, the value of which has been reflected as interest expense.

         We are currently in discussions with HealthPlan Holdings 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. HealthPlan Holdings believes it is due approximately $1.7 million from us related to this transaction, while we believe we have claims against HealthPlan Holdings amounting to approximately $4.5 million (which would be partially offset against other post-closing payments we have agreed to pay, subject to certain limitations). In the event we are unable to resolve these matters directly with HealthPlan Holdings, 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 our financial condition, results of operations, or cash flows.

         Also, as part of the transaction noted above, we leased office space for our Tampa headquarters from HealthPlan Holdings. This lease expired 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 our 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 explore alternatives to reduce its obligations, recapitalize PlanVista, and provide additional liquidity. There can be no assurances that we will be successful in these endeavors.

3.       Significant Accounting Policies

         In the opinion of Management, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for fair presentation of financial position and results of operations for the interim periods presented. Interim results are not necessarily indicative of results for a full year.

         The condensed consolidated financial statements include the accounts of PlanVista Corporation and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

         These condensed consolidated financial statements, including the condensed consolidated balance sheet as of December 31, 2001 (which was derived from audited consolidated financial statements), are presented in accordance with the requirements of Form 10-Q and consequently may not include all disclosures normally required by generally accepted accounting principles or those normally made in an annual report on Form 10-K. The interim condensed consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2001 Annual Report on Form 10-K/A for the year ended December 31, 2001, filed with the Securities and Exchange Commission on April 17, 2002.

         Included in prepaid expenses and other current assets in the condensed consolidated balance sheet are approximately $1.7 million of incremental direct costs associated with the Offering of our common stock (see Note 9). Should our Offering be successful, these costs will be considered a cost of raising capital and will be deducted from the proceeds of the Offering as a charge to additional paid-in capital. If the Offering is unsuccessful or is cancelled, such costs will be expensed in the period that such a determination is made.

Table of Contents

         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. Approximately 1.7 million options are not included in the calculation of diluted loss per share available to our common stockholders for the three and nine months ended September 30, 2002 and 2001, respectively, because they are antidilutive.

         We recognize 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.

         Effective January 1, 2002, a new federal law was enacted allowing corporations to increase the period for which they may obtain refunds on past income taxes paid due to net operating losses (“NOL”). The prior law allowed companies to use their NOLs back to the preceding three fiscal years while the new law allows companies to use their NOLs to the preceding five fiscal years. Consequently, we recognized $0.9 million in income tax benefits in the nine months ended 2002 for refundable income taxes.

         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 are accrued as interest rates change and are 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 an interest rate swap agreement. The agreements, which expired in September 2001 and December 2001, effectively converted $40.0 million of variable rate debt under the Agreement to fixed rate debt at a weighted average rate of 6.18%.

         On June 15, 1998, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 133 (“SFAS No. 133”), “Accounting for Derivative Instruments and Hedging Activities.” PlanVista adopted SFAS No. 133 in the first quarter of 2001. SFAS No. 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 nine months ended September 30, 2001, we recorded a $76,000 expense, net of taxes, as a cumulative effect of change in accounting principle representing the fair value of the interest rate swaps.

         In July 2001, the FASB issued SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). SFAS No. 142 requires the use of a non-amortization approach to account for purchased goodwill and certain intangibles. Under a non-amortization 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. We adopted SFAS No. 142 beginning January 1, 2002. Goodwill is deemed to have an indefinite useful life. Thus we ceased a