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Biotech / Medical : PHP Healthcare -- Ignore unavailable to you. Want to Upgrade?

To: Ontherise who wrote (27)	5/2/1998 6:36:00 PM
From: Jim Mac	Respond to of 136

PHP has plenty of cash and borrowing ability to buy back 3M shares, and then a chunk of preferred. Jan Q balance sheet shows $24M cash, and $30M working capital. PHP just paid about $17M for Robbins' 1M shares, and if they borrow $34M to buy the rest, that will result in no more than $850K more interest per Q. Remember, Jan Q interest expense of $3.4M included $1M - $1.5M of interest from the NationsBank senior credit facility which was paid off by the preferred in late Dec 97/Jan 98, so April Q interest should be back to previous levels of about $1.5M. Add back in $850K from intended borrowings for remaining 2M buyback, and it's clear PHP can EASILY afford to buy back the whole 3M shares, and then go after the preferred. This will result in oustanding diluted shares remaining around 14-15M assuming preferred convert at $17 and debentures convert at $27. A very good deal, with minimal interest load, and good payback.

To: Ontherise who wrote (27)	5/19/1998 7:12:00 PM
From: Jim Mac	Respond to of 136

Screw Smith Barney and Wall Street Journal. Here's what I think will be reported in early June for April Q: Revenues: $145M - $150M (extra 50,000 HIP's and more Chartered; Gross Profit Margin: 12.4% or more, up from previous Q's 11.4%; G/A Expense: $9.4M or less; Interest Expense: $2.0M, thanks to no more NationsBank interest; Tax rate: 40% SEC Fine for April: $2.1M Diluted Shares: 14,266,000 Diluted EPS before deemed dividend on preferred : $0.16 - $0.20, up 100%+ from last year, and flat to up 25% from previous Q's $0.16. Buybacks/preferred redemption for cash will work out, and operating margins will continue to expand. SEC fines will stop in May, and we'll be in the high teen's this summer. $10 or less is cheap.

To: Ontherise who wrote (27)	5/19/1998 7:29:00 PM
From: Jim Mac	Respond to of 136

Kevin, also keep in mind, that Jan Q's $0.16 before deemed div included all that extra NationsBank interest expense. Without that, total interest expense would have been about $2M+/-, putting EPS at $0.20, up big time from consensus, and that's with low gross/operating margins. April Q should benefit from all the cost-cutting they did in Jan Q, higher enrollment in Chartered and HIP (brought online the final 50,000 HIPsters), and the lower interest expense. The only question is how will the SEC fine be accounted for, as extraordinary expense, or "other" before taxes. And when will this SEC thing be resolved. Either way, PPH looks way oversold to me, considering the fundamential outlook hasn't changed, and now it's at a 3-year low, while revenues and operating earnings, at least, are at a 3-year high. Good P/E and P/S ratios too. I'm buying.

To: Ontherise who wrote (27)	5/20/1998 2:30:00 AM
From: Jim Mac	Respond to of 136

PHP is NOT paying a fine to the preferred holders every month that the common is not registered. They're only "incurring" a fine, which they do not intend to pay (read the May 7 8-K/A). In fact, they're seeking a waiver from the preferred holders. Regardless, PHP may likely buy back the preferred, making the point moot. April Q revs may hit $150M, and EPS $0.30 before deemed div, $0.19 after deemed div. All this thanks to expanded HIP and DC programs, lower costs and lower interest. Shorts beware of blowout EPS growth reported in a few weeks.

To: Ontherise who wrote (27)	5/20/1998 1:57:00 PM
From: Jim Mac	Respond to of 136

This is beautiful: PPH is so low, that PHP can buy back the remaining 2M common for only $20M. This leaves another $60M in the new credit facility they can use to buy back most of the preferred. And since they didn't pay any fines in April, and won't pay any going forward, and may indeed get a waiver from preferred holders, April EPS will be blowout vs Jan Q, and year ago. Any interest incurred buying back common and preferred will be offset by lower shares outstanding. Also, float will have reduced to 3M by earnings release time, and EPS of $0.20 - $0.30 will put PPH at fair value of $15 - $20, assuming 30/35 times trailing EPS of $0.50 - $0.60, and forward P/E of 20 on $1.00+. This is like VISX a month ago, and MAX last year after a customer went bankrupt. Everyone freaked out, then came to their senses when earnings were released, and they realized there was no real problem. Both stocks went into bottle rocket mode. Start scoopin'.

To: Ontherise who wrote (27)	5/21/1998 1:13:00 AM
From: Jim Mac	Respond to of 136

Also, keep in mind only 20% of preferred can convert while low trading range of common is at or below $25 during conversion month. Since PPH will likely be at $15 - $20 in June after earnings, only 20% of preferred will be able to convert. That is a severe constraint on conversions. Also, PHP will have reduced the float by 36%, and outstanding by 25%, putting more upward pressure on PPH after blowout earnings released. With additional $60M credit facility remaining after they spend $20M on final 2M common buyback, PHP will easily be able to redeem 20% preferred per month for cash, or buy back outright. Additional interest will be offset by lower shares outstanding, and greater operating margins, which we'll see in a few weeks. 10 times forward earnings now, on 150%/200%+ EPS growth rate all year. What a deal.